
Sweden Has a 70 Percent Tax Rate and It Is Fine - smacktoward
https://www.peoplespolicyproject.org/2019/01/05/sweden-has-a-70-percent-tax-rate-and-it-is-fine/
======
mogadsheu
Former Scandinavia resident here (Oslo).

There are some very strong reasons why this works in the region and not
elsewhere.

1) The country has a small and closely connected population. Policy makers
have a very close dialogue with their populace. It helps ensure that people
see the benefit of their taxes.

2) They’re socially and similarly well educated and adjusted. When people are
raised with similar values, it’s much easier for them to come to consensus, in
this example, on how to spend tax revenue.

3) The wealthy upper class don’t need much salary, they’re already rich and
taxed more on capital gains. So a 70% income tax actually helps protect their
place in society.

The ‘Sweden has it, we should too’ is really weak honestly. We can learn a lot
from them but ours is a very different situation.

~~~
jayd16
It doesn't really follow that tax policy should be different because a diverse
population disagrees more. With the exception of point 3 (which actually does
apply to the US as well) you could make this argument about any policy.

~~~
rayiner
> It doesn't really follow that tax policy should be different because a
> diverse population disagrees more.

I don't think it's much of a stretch to say that people are more okay with
giving the government more control of their money in societies where people
tend to be similarly situated and have similar values.

~~~
hoaw
I wouldn't overestimate homogeneity as a reason for the Swedish welfare state.
The strong Swedish state probably goes back to the nationalization, and later
decreased influence, of the Swedish church. That standing was later used by
the Social Democrats (among others) to reform Sweden to a welfare state.
Today, as those ideas are becoming less popular it is relatively apparent that
Swedes don't give a shit about each other more than anyone else. The political
parties can't even form a government since the last election.

------
jacknews
It seems strange to me that so much focus of tax is on labor (directly taking
a chunk of what people 'earn' by actually working), vs tax on capital gains
and profits (what some people 'earn' simply by doing nothing).

I use the term 'earn' loosely, because IMHO, the amount of money people manage
to direct their way is a result of a complex 'business model', and many other
factors - I think it's way too simplistic to say that someone's gross income
is 'theirs', and that taxes are taking 'their' money.

~~~
davidivadavid
What's more surprising is that so little is on consumption.

~~~
jayd16
Like sales tax or some other form? They're usually regressive taxes.

~~~
davidivadavid
Nope, they're usually flat taxes.

~~~
jayd16
Flat taxes are regressive.

------
thestephen
As a Swede, it is interesting to see people using Sweden's tax policies for
arguments without fully following the studies on our tax policies. There are
studies showing that the highest margin taxes in Sweden actually lose more
money than they make, due to dynamic effects. In other words, Sweden is far to
the right on the Laffer curve.

Even low and medium income people – for example, assistant nurses straight out
of school – pay half of their wages in tax – even at the 2000 USD post-tax a
month range.

And since the 20% margin tax on top of that kicks in already at the equivalent
of ~50k USD a year »pre-tax«, this creates a situation where it is very hard
to build capital just by working. Basically, you can only get wealthy by:

* Earning money with money (tax on capital is a flat 30% - or potentially even way less, if you use a special savings account),

* Founding the next iZettle or creating the next Minecraft,

* Or have bought real estate when it was 50-90% cheaper (that is, 5+ years ago).

In practice, this creates a system which hampers class mobility in Sweden.
Even if you are in top 1% of wages, it will take decades for you to catch up
to the capital gains of someone who bought an apartment close to Stockholm
five years ago.

So perhaps it's safer to say that Sweden is fine _despite_ our 70% tax.

~~~
hoaw
What you are saying is fairly correct, but I don't agree with your
conclusions.

> There are studies showing that the highest margin taxes in Sweden actually
> lose more money than they make, due to dynamic effects. In other words,
> Sweden is far to the right on the Laffer curve.

Progressive taxation isn't merely about tax revenue, but income equality. You
can't have a welfare state without much of the population being in "the
middle".

> And since the 20% margin tax on top of that kicks in already at the
> equivalent of ~50k USD a year »pre-tax«, this creates a situation where it
> is very hard to build capital just by working.

That is true, but ignores the fact that it is simply also hard to make a lot
of money. It wouldn't be unreasonable to be able to save €30k a year as a high
income earner in Sweden. That isn't rich rich, but certainly wealthy.

> Earning money with money (tax on capital is a flat 30% - or potentially even
> way less [...] Or have bought real estate when it was 50-90% cheaper (that
> is, 5+ years ago). [...] In practice, this creates a system which hampers
> class mobility in Sweden. Even if you are in top 1% of wages, it will take
> decades for you to catch up to the capital gains of someone who bought an
> apartment close to Stockholm five years ago.

I agree that this is a huge problem. But I find it very unlikely that you
would solve this by lowering the top tax rate. Most people who make money from
capital would already be, or put themselves, in such a position. I would
support lowering taxes on work in general and increasing taxes on capital,
inheritance, loans etc. But that is unlikely to happen.

Basically I don't think the tax rate is unreasonable, but the low taxes on and
high cost of e.g. housing definitely is. This is just a problem a problem with
earning as much as someone who bought an apartment 5+ years ago, but if you
don't own an apartment (or got into the housing market later) you will be
paying 2x-3x what they are doing for housing while you are trying to catch up.

I would move from Sweden for this reason if it wasn't for wanting to be close
to my family.

(And personally I wouldn't call Sweden fine from a wealth equality
perspective).

------
geomark
Recent discussion about a software developer's take on living in Sweden
[https://news.ycombinator.com/item?id=18799643](https://news.ycombinator.com/item?id=18799643)
and one Swedes opinion of the high tax rate
[https://news.ycombinator.com/item?id=18800067](https://news.ycombinator.com/item?id=18800067).

That discussion was mostly focused on taxpayer funded healthcare, but a few
Swedes estimate that half the population feels that the high tax rate is not
fine.

~~~
deogeo
> a few Swedes estimate that half the population feels that the high tax rate
> is not fine.

So the tax rate is the median of the tax rates that people find fine? A
perfect balance!

------
bluedevil2k
When I was taking a tour in Sweden, they showed me a neighborhood in Stockholm
(I forget the name) and said “that’s the apartments of the richest Swedes, but
they don’t live there, all the richest Swedes live outside Sweden”.

~~~
steerpike
Which is an anecdote that means exactly nothing. For example all the richest
apartments and houses in London and Sydney are often owned by people who live
outside the respective country. There's nothing in your story that indicates
tax rate is the reason for the behaviour.

~~~
thaumasiotes
To nitpick a bit, it is true that the richest apartments in London and Sydney
are often owned by people who live outside England or Australia. But that is
not evidence that "the richest Britons" live outside England; it can easily be
the case that the richest Britons are happy to stay in Britain and the richest
apartments are owned by a class of foreigners richer than the richest Britons.

Whereas, if all the richest Swedes live outside Sweden, that does tend to
suggest that something made them move. (And doesn't suggest that the
apartments they maintain _in absentia_ are the richest apartments.) The
default for Swedes is to live in Sweden.

~~~
hoaw
> Whereas, if all the richest Swedes live outside Sweden, that does tend to
> suggest that something made them move.

Not really, at least not in the way I assume you are thinking. In a small
country, of course someone who has international success if going to be
wealthier than someone who only has domestic success a lot of the time.

~~~
thaumasiotes
So what? Someone with international success can still only live in one place.

------
swedethrow
Born in Sweden and I am not fine with it. There are some good things like free
education and healthcare - especially compared to healthcare in US - but
there’s enormous waste on maintaining the welfare state.

I recently moved away, partly due to taxes and partly for other reasons. I
doubt most people with high incomes are fine with it, but the price for exit
is expensive.

For me it was only doable because I spent most of my time abroad anyway, my
work is international and I am young and flexible.

If you are a Swede considering moving, make sure you don’t have significant
economic ties with Sweden after moving out. For example, I had to liquidate my
Swedish LLC to prove that I had no significant business in Sweden anymore
(which was already the case, but IRS can be rather...precise).

A tax lawyer can easily help with this, and it is easily worth the one time
cost if you are on a high income.

~~~
hoaw
I have made that calculation and it hasn't really been that convincing for me.
If you are moving for opportunities, including say career or housing, that is
one thing. But in pure tax, the difference really isn't that big between
similar countries. Even in a properly low tax country, your additional income
might increase €20k a year. Is that worth giving up everything you know for?
Probably not in isolation.

Maybe I will move someday, but it won't be because of taxes.

~~~
swedethrow
You are right, it doesn’t make sense if you want to live in Sweden. For me, I
had already spent years living abroad in various places, so effectively it
wasn’t that big of a deal.

FWIW it ended up being a lot more than 20k/y for me, but YMMW.

~~~
hoaw
Presumably you are able to charge more than the average high income earner.
Because usually an employer would pay maybe 70k SEK a month and the employee
would get half of that after taxes, but that also includes pension. So in a
low tax country you might pay 10% tax and then 15% in pension which leaves you
with ~15k SEK more a month. Which could certainly pay for a nice life, but
isn't mind blowing.

On the other hand if I lived abroad I wouldn't "pay" 15k SEK a month to live
in Sweden. In fact, I probably wouldn't move back to Sweden at all because of
the increasing lack of quality of life. Which ironically makes it even harder
to move in the first place, since I would have to commit to living abroad.

------
okl
Notably, tax records are also kind of public:

> In Sweden, a single anonymous telephone call to the tax authority is enough
> to find out what someone has paid. Almost all income tax details are public
> and Swedish tabloids often publish lists of the highest earners in different
> neighborhoods, and who paid the most tax each year.

[https://www.reuters.com/article/us-panama-tax-nordics-
idUSKC...](https://www.reuters.com/article/us-panama-tax-nordics-
idUSKCN0X91QE)

------
lr4444lr
Interesting, but the article begs the question without answering it: if
employer-side payroll taxes should count as part of the employee's tax rate
(and I agree that it should), what is America's real rate? Also, unrelated,
how do our utility and estate taxes compare? Sales and VAT? Regulatory costs
passed along into the final price of consumer goods? Capital gains paid on
retirement savings? There are a lot of variables, and if we're going to
acknowledge complexity in making comparisons, we should try to really ferret
out all of them.

~~~
AndrewDucker
[https://en.m.wikipedia.org/wiki/List_of_countries_by_tax_rev...](https://en.m.wikipedia.org/wiki/List_of_countries_by_tax_revenue_to_GDP_ratio?wprov=sfla1)

Sweden is 49.8% the US is 26%

------
henrikschroder
Another fact worth pointing out in this discussion is that Sweden is doing
great as a country, which makes it easier to maintain a high tax rate.

The blue graph is inflation-adjusted disposable household income from 1950 to
2017:

[https://www.ekonomifakta.se/fakta/ekonomi/hushallens-
ekonomi...](https://www.ekonomifakta.se/fakta/ekonomi/hushallens-
ekonomi/hushallens-inkomster/)

Note that the disposable income _doubled_ between 1997 and 2017. Also note
that it is _median_ income, which means that the outlier richest 1% don't
distort the numbers very much. The _average_ Swede doubled their disposable
income in twenty years' time.

Compare those numbers to the US, where the same graph is pretty much flat,
because the only people getting richer in the past few decades has been the
1%.

------
sologoub
If we were talking about generating similar level of services from taxes, it
could be discussed.

Just to name two big ones, Sweden has free top rate healthcare and education.
Imagine wiping out all student debt and health payments?!

------
booleandilemma
I feel like even if we had a 70% tax rate here in the US, our government
services (nyc subways, for one) would still be deplorable. Maybe the Swedes
could run our country better? :)

~~~
lr4444lr
This was brought to light in that excellent NY Times piece several months
back[0] about the relative cost of train line infrastructure in other
countries. Even the ones with strong unions and first class living standards
were able to get it done for a fraction of NYC estimates on even older urban
topologies. Something is seriously rotten in American govt. spending, both in
the public sector union agreements and private contracting oversight for why
we seem to get so little for paying so much.

[0] [https://www.nytimes.com/2017/12/28/nyregion/new-york-
subway-...](https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-
construction-costs.html)

~~~
eschaton
Two competing factors:

(1) Organized crime is heavily involved in large scale construction and
doesn’t even have the ethos of doing a good job at it like in some other parts
of the world. All it’s about is funneling money from the municipality or state
to the criminal enterprise, and only minimal effort is put forth for the
ostensible purpose of a project.

(2) There has been an almost century long propaganda campaign in the United
States specifically to make people believe Government cannot actually work in
any meaningful capacity, by interests that ultimately want to dismantle it and
distribute the spoils among themselves.

This intensified massively starting in the 1990s after the American right wing
saw what happened to the Soviet Union’s infrastructure during privatization.
By systematically discrediting Government, they want to have the same thing
happen via privatization.

------
andreygrehov
Have they ever had a lower tax rate? I mean, what if things would go much
better have they 30% rate?

------
skywhopper
If you include payroll tax and employer payroll tax (as this example does),
then the US has been quite close to a 70% rate in recent years. When the top
marginal income tax rate was 39.6, once you add the FICA and Medicare on both
sides of about 15%, you are within reach.

Meanwhile, actually rich people are not paying FICA, or Medicare, or even
income tax. Capital gains and dividends are taxed at far far lower rates.

~~~
scarface74
You only pay FICA up to $127K currently....

~~~
votepaunchy
Medicare is uncapped and adds 0.9% above 200K.

------
DennisP
I'd feel more accepting of Sweden-level taxes if we spent the money like
Sweden does, instead of spending trillions on questionable wars.

------
rayiner
The comparison between Ocasio-Cortez's proposal and Sweden's tax structure is
misleading. As far as I know, Ocasio-Cortez is not espousing other key
features of Sweden's tax system:

1) Top marginal rates that kick in at just $98,000, so the upper middle class
bears a significant portion of the tax burden.

2) A 25% VAT, so that the middle class carriers a significant portion of the
text burden. (The net result of this is that the average effective tax rate is
effectively flat through the income spectrum.)

3) Low corporate taxes, almost the same as the U.S.'s after Trump's tax cuts
(22% in Sweden, 21% in the U.S.).

------
dogma1138
The heights marginal income tax rate in Sweden is 56% where the hell are they
getting 70% from?

If they include things like VAT then yes, but a 20%> VAT is pretty much
universal in Europe.

~~~
TheChaplain
The tax mentioned in the title is the overall tax, not income tax only. The
actual tax is actually closer to 90% per generated coin if you include the
VAT.

~~~
dogma1138
Still seem to contradict OECD data [https://read.oecd-
ilibrary.org/taxation/taxing-wages-2018_ta...](https://read.oecd-
ilibrary.org/taxation/taxing-wages-2018_tax_wages-2018-en#page21)

~~~
TheChaplain
Looking at the Sweden IRS pages, the tax on income is ~31%. Taxes (or "fees"
as they call it) paid by the employer for each employee is also ~31%. Then add
the VAT of 25%.

------
tlear
And how many actually pay that rate?

Vs how many would if it was 40 or something non ridiculous?

In that income bracket you can live anywhere in the world. Could buy suite in
Paris just on tax savings.

~~~
cra
Well, if you read closely, the 70 rate is cutting to the sum above the
threshold value. So if your salary is X + Y + Z, where X, Y, and Z are,
respectably, the lower, middle and the high threshold values, the taxes you
pay is something like

(X * alpha) + (Y * beta) + (Z * gamma)

and only `gamma` is 0.7, `alpha` is something like 0.35 and I assume `beta` is
something in between.

So those who pay 70 percent taxes are already maxed out on the lower
contributions in corresponding income range.

------
SamReidHughes
Swedes in the US are materially better off than Swedes in Sweden, so you could
say Sweden is doing pretty poorly.

------
hliyan
I'm seeing a number of (well intentioned) people here raising the classic
Randian argument of the morality of taxes, and several other points from her
work _Capitalism: The Unknown Ideal_ , such as taxing consumption.

As a former Objectivist, all I can say (without writing an entire essay) is
that there are logically sound and morally superior counter arguments against
both of the above arguments, and in favor of limited forms of socialism.

I use the word 'limited socialism' because people (like me) who grew up during
the Cold War tend to associate any socialist program with Soviet communism and
totalitarianism.

------
fxfan
.

~~~
scarface74
That’s also a regressive tax poorer people spend more as a percentage of their
income.

~~~
fxfan
But poorer people will buy only groceries and cheap androids, all barely
taxed.

~~~
scarface74
If I made a $20K more than I make now, I doubt I would spend most of it. It
would go to savings. If I was making $30K a year, I would probably use it to
have a more comfortable lifestyle.

------
hacerseelsueco
It is not fine

There are many good reasons to live in Sweden but tax rate and winter are not
among them

The marginal tax rate used to be over 100% in some cases and it is caused by
too many years of too populistic socialism

Political economy has it tax rate should be no more than 50% and that
corporate tax rates need to be far lower

populism has a problem with taxing workers, but real estate, workers and
consumption should be taxed acc. to science. Middle class workers must be
taxed because they are so many they steer the totals

In such calculations, per the article, worker taxes paid by employers need to
be included as well as significant deductions

they also used to have a wealth tax causing the rausings/milk carton to move
out and kamprad/ikea to claim religion. If your rich enough and have to pay 4%
of your wealth you can never catch up and instead claim your living in
Brussels yelling from your condo on Strandvagen

How you tax rich individuals depends whether they move or not. If they move,
everbody lose. In the case of US, it is unlikely richies will leave because of
tax rate, there is really nowhere to go with similar opportunities. Imagine
Larry Page on punta del este: he'd be bored to death inside of a week

populism is a curse

------
patrickg_zill
Comparing the US to Sweden is moronic, given the wide disparity between the
two countries and the fundamentally different structures of their economies.

It's the worst kind of argument, a false equivalence.

~~~
cblum
Every time a discussion like this comes up I see a reply like this. Yet, it
never offers a counter point, or suggestions on how to make things in the US
work as well as they do in Sweden.

~~~
eschaton
That’s because it’s a dogwhistle, not an actual argument.

------
xupybd
But how can you morally justify taking 70% of someone’s income at threat of
violence?

~~~
paobuts
Not 70% of someone's income, just 70% of only the portion of any single
person's income over $10,000,000 per year. Morally justified the same way all
taxes are justified.

~~~
ribble
theft is never morally justified.

~~~
flapjackfritz
It's not theft, it's public policy. Threat of violence is how most public
policy are enforced.

You don't have to agree to the laws of a democratic constitutional republic,
but you sure do have to follow them.

~~~
ribble
not if they are unconstitutional, i don't.

~~~
cra
Eighteenths amendment prohibited selling of alcoholic beverages nationwide.
Would that be active today, would that stop you from buying beer?

~~~
FlyMoreRockets
Yes it would. Might not stop me from homebrewing though.

------
koolba
> Alexandria Ocasio-Cortez recently suggested raising the top tax rate to 70
> percent in order to raise money to fund climate change investments.
> Conservatives were dismayed by the proposal while liberals and leftists
> generally defended the proposal by pointing to the fact that top tax rates
> in the US were once 91 percent and by pointing to tax scholarship that says
> rates that high (or even higher) are optimal.

Income != Wealth

We should just tax wealth directly. We already do it for real estate (ie
property taxes).

Modern technology and finance makes taxing the average daily balance of bank
accounts and stock/ETF/mutual fund holdings doable. If you tax the entity that
is holding those assets across the board, you don’t even have to worry about
tax shelters or pass through corps. They’ll have no choice but to pass on
their hit upstream.

It’s the ultimate progressive tax as the destitute have nothing and pay
nothing.

~~~
DennisP
It's not so great for retirees, though.

~~~
helge5
In those socialist European countries that doesn't really apply. Pension is
supposed to be payed by the state, not by individual wealth built up during
your work live (very different to the US). Whether that idea is sound is a
different question, but that is how it kinda works ;-)

