As a consequences the sustainable tax implies a substantial pre-funding with a
substantial wealth accumulation in the public sector.
Figure 6: Sustainable tax vs. PAYG-tax
Source: Velfærdskommissionen (2005d)
The paths for public debt implied by the various strategies are seen from
figure 7. The PAYG-tax keeps debt at the initial level,and the sustainable tax
leads to an initial accumulation of substantial wealth in the public sector. This
wealth is used to finance net-expenditures in the far future.
Figure 7: Public net-wealth: No reform, PAYG-tax
and Sustainable tax
18