9 ms·
Sweden Has a 70 Percent Tax Rate and It Is Fine
- bluedevil2k 8y agoWhen 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 8y agoWhich 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.
- iscrewyou 8y agoYeah. It simply means investment. Same could go for most of the well off cities in the US.
- thaumasiotes 8y agoTo 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 8y ago> 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 8y agoSo what? Someone with international success can still only live in one place.
- ilikehurdles 8y agoYeah the same story can be said about downtown Boston.
- paulcole 8y agoI don’t think so. Look at the list of richest Americans. How many live outside of America?
- scarejunba 8y agoIsn't that the case for any desirable city? The Vancouverites complain about "The Chinese", as do the Bay Area folk. The Londoners complain about the oil royals. The Miami people say everyone buys there.
- rayiner 8y agoFun fact: Americans of Swedish descent have a 55% higher income than Swedes in Sweden.
- booleandilemma 8y agoI 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? :)
- RickJWagner 8y agoAn excellent point. A look at the annual "Golden Fleece" awards will show that the government doesn't spend the current revenue wisely. Why add more?
- cblum 8y agoIIRC in the novel Tau Zero the world kind of decided to let Sweden govern everything because they were so good at it. It's not central to the plot though, it's just mentioned in passing (and again I'm not sure I'm remembering that correctly).
- lr4444lr 8y agoThis 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-construction-costs.html https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
- eschaton 8y agoTwo 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.
- xupybd 8y agoBut how can you morally justify taking 70% of someone’s income at threat of violence?
- lr4444lr 8y agoIt's a marginal rate, no?
- xupybd 8y agoYes it’s a marginal rate but at some point, after someone has earned enough, for every dollar they earn the government is going to take 70cents of that dollar to spend as they see fit. If the person does not pay they will send around cops with guns and the threat of violence to take that money or put that person in a cage for not paying taxes. It’s not about how much money you have to live on it’s about other people claiming a right to money you have earned.
- flapjackfritz 8y agoThe government doesn't just spend it how they want, we have a system where it is collectively decided. That means you have to follow the law whether you agreed with it or not, it's how democracy works.
- xupybd 8y agoYes, the collective (the government as elected by the people) decides how to spend other peoples money. That is not a moral justification. This is how democracy works. But if collectively a people democratically decide to do something that doesn't make it morally correct. You do have to follow the law, but what I'm saying is that we need to consider the moral implications of the law being suggested.
- flapjackfritz 8y agoThe moral implications are important. That's why it's a marginal rate being proposed in the USA, only on income over 10 million. Taxing higher rates on much higher income amount is morally better than taxing that same rate on a lower income. This is because of the impact it has on the earners well being. Income after 10 million has a much lower impact on that persons well being than say, their first 1 million.
- jacknews 8y agoIt 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 8y agoWhat's more surprising is that so little is on consumption.
- smt88 8y agoThere are lots of arguments against taxing consumption, but one of them is that in a capitalist system where growth is necessary, taxing consumption is risky. It's like disincentivizing the exact behavior you need to keep the whole system running.
- arachnids 8y agoTax on consumption hurts poor people. The 1$ sales tax on soap worth X$ hurts me much less than someone making minimum wage.
- jayd16 8y agoLike sales tax or some other form? They're usually regressive taxes.
- davidivadavid 8y agoNope, they're usually flat taxes.
- jayd16 8y agoFlat taxes are regressive.
- ribble 8y agothink i'll spend 70% on ammunition with a focus on keeping socialism away instead.
- skh 8y agoIn what way is this a worthy comment? You think it in any way efficacious for a country to impose a 70% tax rate to buy ammunition?
- ribble 8y agoin what way is thieving 70% of someone's income worthy? bunch of thieves.
- whamlastxmas 8y agoIf you can produce income in the wilderness without any aid from society or any interaction with other humans in any way then I would say you're entitled to not be taxed. Otherwise we all owe society for what it's provided to us and taxation is a morally upstanding concept.
- hyperpallium 8y agoI know you're making the point that just about everyone should be taxed, but to make your argument even stronger: a wilderness-liver probably has equipment (including clothes, shoes), knowledge/skills discovered/invented by others and learnt via others, and was raised within society. There may be a counter-argument for some knowledge/skill as a sort of "human heritage", like language, general knowledge, arithmetic, that isn't itself created by the state or this state (though its transmission may have been) and shouldn't be taxed. I have some sympathy for this fellow. EDIT also, there's no reason collaboration with other individuals should necessarily attract taxation. Human collaboration predates all states.
- chasing 8y ago1) Not thieving. Jesus Christ. 2) Ocasio-Cortez brought up a 70% tax on income over $10,000,000. Literally no one is seriously talking about taxing a straight 70% of anyone's income. Except for the people who are trying to confuse you into misunderstanding the facts.
- geomark 8y agoRecent 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 8y ago> 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!
- skywhopper 8y agoIf 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 8y agoYou only pay FICA up to $127K currently....
- votepaunchy 8y agoMedicare is uncapped and adds 0.9% above 200K.
- gibybo 8y agoIf you were in the 39.6 tax bracket, you wouldn't be paying 15% in FICA because you'd be well over the contribution limit for Social Security (which is most of FICA).
- koolba 8y ago> 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 8y agoIt's not so great for retirees, though.
- helge5 8y agoIn 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 ;-)
- fxfan 8y ago.
- scarface74 8y agoThat’s also a regressive tax poorer people spend more as a percentage of their income.
- fxfan 8y agoBut poorer people will buy only groceries and cheap androids, all barely taxed.
- scarface74 8y agoIf 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.
- patrickg_zill 8y agoPoorer people spend more as a percentage of their income on pretty much everything, however.
- scarejunba 8y agoRobert Frank (an economist at Cornell) proposes a progressive consumption tax[0]. You report your income and your savings. The Economist argues for it[1], quoting the following part: > In terms of economic incentives, the most efficient remedy would be to replace the federal income tax with a much more steeply progressive consumption tax. Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts 0: https://inequality.stanford.edu/sites/default/files/media/_media/pdf/pathways/summer_2010/Frank.pdf https://inequality.stanford.edu/sites/default/files/media/_m... 1: https://www.economist.com/democracy-in-america/2010/11/17/all-hail-the-progressive-consumption-tax https://www.economist.com/democracy-in-america/2010/11/17/al...
- 8y ago
- mogadsheu 8y agoFormer 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.
- fxfan 8y agoIn other words, it can be partially attributed to aristotle's philia
- jayd16 8y agoIt 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.
- charlesism 8y agoIf anything, it puts the cart before the horse. Economic inequality increases tribalism.
- roenxi 8y ago> you could make this argument about any policy It is completely reasonable to say that good policy for 10 million people is different from good policy for 100 million people. Not all effects caused by increasing population scale in the same way. Economic geography is a very interesting subject and certainly admits the possibility for small, high-skill nations to be able to enjoy a localised prosperity that doesn't scale very well. > It doesn't really follow that tax policy should be different because a diverse population disagrees more I don't follow what you mean with that. A divided polity will produce a very different set of policy than a united polity. There is no convincing science, theory or philosophy setting what taxes should be. Taxes are what they are, and we've seen arguably successful societies at a wide range of tax levels. A small united polity will clearly be more successful at using government to achieve their aims than a large and disparate population.
- okl 8y agoNotably, 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-idUSKCN0X91QE https://www.reuters.com/article/us-panama-tax-nordics-idUSKC...
- andreygrehov 8y agoHave they ever had a lower tax rate? I mean, what if things would go much better have they 30% rate?
- lr4444lr 8y agoInteresting, 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 8y agohttps://en.m.wikipedia.org/wiki/List_of_countries_by_tax_revenue_to_GDP_ratio?wprov=sfla1 https://en.m.wikipedia.org/wiki/List_of_countries_by_tax_rev... Sweden is 49.8% the US is 26%
- patrickg_zill 8y agoComparing 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 8y agoEvery 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 8y agoThat’s because it’s a dogwhistle, not an actual argument.
- patrickg_zill 8y agoYou could try reading the comment by mogadsheu, which currently is the top-rated comment on this article, which lays out quite clearly some of the differences. It's incumbent on the author of the piece to lay out their argument - it should be self-evident that the structure of the Swedish economy and that of the USA's are quite different.
- tlear 8y agoAnd 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 8y agoWell, 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 8y agoSwedes in the US are materially better off than Swedes in Sweden, so you could say Sweden is doing pretty poorly.
- rayiner 8y agoThe 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.).
- sologoub 8y agoIf 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?!
- DennisP 8y agoI'd feel more accepting of Sweden-level taxes if we spent the money like Sweden does, instead of spending trillions on questionable wars.
- henrikschroder 8y agoAnother 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/hushallens-inkomster/ https://www.ekonomifakta.se/fakta/ekonomi/hushallens-ekonomi... 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%.
- swedethrow 8y agoBorn 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.
- TheChaplain 8y agoAmerican citizens are taxed even if they do not have economic ties with the US.
- hoaw 8y agoI 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 8y agoYou 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 8y agoPresumably 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.
- hliyan 8y agoI'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.
- hacerseelsueco 8y agoIt 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
- dogma1138 8y agoThe 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 8y agoThe 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 8y agoStill seem to contradict OECD data https://read.oecd-ilibrary.org/taxation/taxing-wages-2018_tax_wages-2018-en#page21 https://read.oecd-ilibrary.org/taxation/taxing-wages-2018_ta...
- TheChaplain 8y agoLooking 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%.
- thestephen 8y agoAs 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 8y agoWhat 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).