Center for Freedom and Prosperity Foundation
For Immediate Release
Thursday, June 1, 2006
The Swedish Tax System: Should it be a
Role Model for the Rest of the World?
CF&P Foundation Issues First in a Series on World Tax Systems
(Washington, DC, Thursday, June 1, 2006) -- Today, the Center for Freedom and
Prosperity Foundation released its first research paper in a series of studies examining different tax systems from around the world. The study, entitled "The Swedish Tax System -- Key Features and Lessons for Policy Makers," is authored by Dr. Sven Larson, a research fellow with CF&P Foundation, and represents a comprehensive analysis of the Swedish tax system. Dr. Larson finds that there are some positive features of Sweden's tax system, but
that high tax rates are exacting a heavy cost, reducing economic growth and undermining job creation.
Link: The Swedish Tax System -- Key Features and Lessons for Policy Makers:
Below: Executive Summary and
Comments on the study:
Andrew Quinlan, CF&P Foundation ~ "Some advocates of big government point to Sweden as an example of how high-taxes can provide security and prosperity from cradle-to-grave. Sven Larson's research, however, shows that Sweden is paying a price and needs to become more competitive with its tax system if it wishes to reverse its gradual economic decline."
Daniel Mitchell, The Heritage Foundation ~ "Sweden is losing jobs and capital to other nations because of punitive tax rates on productive behavior. This new paper is a thorough indictment of the tax system used to finance Sweden's welfare state."
Veronique de Rugy, American Enterprise Institute ~ "Sweden used to be one the world's richest nations, but has fallen in the rankings since the enactment of welfare state policies. Without steep reductions in marginal tax rates on work, saving, investment, and entrepreneurship, it is difficult to envision a positive future."
Note: Over the next few months, the CF&P Foundation will release several more papers on the tax systems of selected countries. The next study will examine the tax system of Slovakia, followed by papers on the tax regimes of Hong Kong, Russia, Ireland, France, the United Kingdom and Switzerland.
Sweden has a worldwide reputation as a high-tax welfare state. Moreover, unlike Denmark – its main competitor for the dubious honor of the world's highest tax burden – there are thus far
no signs of tax weariness at the ballot box in Sweden. On the contrary, Sweden's dominant social democratic party has won national as well as local elections proposing higher taxes in recent years.
Is Sweden a success? Should the Scandinavian country be a role model or a bad example? In general, nations should not emulate the Swedish tax system. High tax rates and a heavy burden of
government have combined to stunt economic performance and lower living standards. This is an unfortunate development for a nation that used to be among the world's richest – particularly since Sweden managed to
avoid World War II and was well-positioned to prosper in the post-war environment.
But the news is not all grim. Despite its reputation as a high-tax welfare state, Sweden has implemented a handful of pro-growth reforms. The comprehensive tax reform that was
implemented in 1991, for instance, lowered marginal tax rates and reduced the tax burden on saving and investment. Many of these positive changes have eroded, but Sweden continues to have a very competitive
corporate tax regime.
- The tax burden in the Swedish economy tripled between 1950 and 1980. In 1970, when taxes were not much higher than they are in America today, Sweden's GDP per capita ranked fifth in the world .
- Since taxes passed 50 percent of GDP the country's overall prosperity has dwindled, and the downturn has been most dramatic in measures of the standard of living.
- A major tax reform in 1991 significantly lowered the top marginal tax rate to encourage growth. 87 percent in 1979 to 51 percent in 1991 (57 percent today).
- Although taxes and spending impose a heavy burden on the economy, Sweden otherwise has a market-oriented economy. The Heritage Foundation's Index of Economic Freedom ranks Sweden as the world's
19th freest economy and the Fraser Institute's Freedom of the World ranks Sweden 24th.
- Unemployment is now a significant problem in Sweden. The official jobless rate is about 8 percent, but independent estimates show the rate is closer to 20 percent.
- High taxes and excessive regulations have encouraged many large corporations to leave the country. Many individuals also are escaping the Swedish tax system, ranging from high-net worth
entrepreneurs to new college graduates.
- Even the Swedish tax authority tries to avoid Swedish taxes.
Link to paper:
PDF version of paper:
For additional comments:
Sven Larson can be reached at 518-581-8528 , firstname.lastname@example.org
Andrew Quinlan can be reached at 202-285-0244, email@example.com
Dan Mitchell can be reached at 202-608-6224, firstname.lastname@example.org
Veronique de Rugy can be reached at 202-862-7165, VdeRugy@aei.org