For much of the 20th century, Sweden enjoyed a justifiable reputation as one of Europe’s most egalitarian countries. Yet over the past two decades, it has transformed into what journalist and author Andreas Cervenka calls a “paradise for the super-rich”. Today, Sweden has one of the world’s highest ratios of dollar billionaires, and is home to numerous “unicorn” startup companies worth at least US$1 billion (£742 million), including the payment platform Klarna and audio streaming service Spotify.
The abolition of the wealth tax (förmögenhetsskatten) 20 years ago is part of this story – along with, in the same year, the introduction of generous tax deductions for housework and home improvement projects. Two decades on, the number of Swedish homes that employ cleaners is one marker of it being an increasingly two-tier country.
Listening to those who built the welfare state
As part of my anthropological research into the social relationships that different tax systems produce, I have been working with pensioners in the southern suburbs of Sweden’s capital, Stockholm, to learn how they feel about the decreasing levels of taxation in their later lives.
This trend has been coupled with a gradual shrinking of the welfare state. Many of my interviewees regret that Sweden no longer has a collective project to build a more cohesive society.
“Us pensioners can see the destruction of what we built, what was started when we were small children,” Kjerstin, 74, explained. “I was born after the end of the war and built this society through my life, together with my fellow citizens. [But] with taxes being lowered and the taking away of our social security … we’re not building anything together now.”
Sweden’s gini coefficient, the most common way to measure inequality, has reached 0.3 in recent years (with 0 reflecting total equality and 1 total inequality), up from around 0.2 in the 1980s. The EU as a whole is at 0.29. “There are now 42 billionaires in Sweden – it’s gone up a lot,” Bengt, 70, told me. “Where did they come from? This didn’t used to be a country where people could easily become this rich.”
But like other pensioners I met, Bengt acknowledged his peer group’s role in this shift. “I belong to a generation that remembers how we built Sweden to become a welfare state, but so much has changed. The thing is, we didn’t protest this. We didn’t realise we were becoming this country of rich people.”
Opposite of the American dream
Wealth taxation was introduced in Sweden in 1911, with the amount due based initially on a combination of wealth and income. Around the same time, some of the first moves towards the Swedish welfare state were made – notably, the introduction of the state pension in 1913.
The term used to describe this, folkemmet (“the people’s home”), denoted comfort and security for all in equal measure. It was arguably the ideological opposite of the American dream – its aims not exceptionalism but reasonable living standards and universal services.
After the second world war, the wealth tax – now separated from income – was raised again in several steps up to a historical high of a 4% marginal rate for wealthy individuals in the 1980s, although actual tax burden is is less clear due to complex exemption rules. But total revenues generated from the tax were still relatively low. As a share of Sweden’s annual GDP, it never exceeded 0.4% in the postwar period.
By the end of the 1980s, the political winds were starting to change in Sweden, in line with the shift to privatisation of public services and deregulation of financial markets in several European countries, including the UK under Margaret Thatcher, and the US.
The case against Sweden’s wealth tax
One recurrent criticism of Sweden’s wealth tax was that it was regressive, taxing middle-class wealth (mainly housing and financial assets) while exempting the wealthiest people who owned large firms or held high-up positions in listed companies. Another criticism was that the wealth tax drove tax avoidance, especially in the form of capital flight to offshore tax havens.
While a wealth tax might appear to signal their country’s commitment to socioeconomic equality, my interviewees said it wasn’t something they really thought about much until it was abolished in 2006 by Sweden’s then-rightwing government, following the axing of inheritance tax a year earlier by the previous social democratic government.
“When the wealth tax was abolished,” Marianne, 77, told me, “I wasn’t thinking about millionaires being given a handout, because … we didn’t have lots of rich aristocrats who owned everything. Abolishing the wealth and inheritance tax seemed like a practical thing, not so political.”
Marianne and other pensioners I talked to all told a story of the welfare state having been built through communal effort, as opposed to it being a Robin Hood project – of taking from the rich to give to the poor. This notion of the Swedish welfare state as having been built by equals, by an initial largely rural and poor population, arguably distracted these pensioners from questions of wealth accumulation.
While Sweden still taxes property and various forms of capital income, in hindsight, many of my elderly interviewees now regard the abolition of the wealth tax “on their watch” as a crucial step in reshaping Swedish society away from a social democracy welfare state towards something new – a place of billionaires and increased social disintegration.
“I think about my children, my two daughters who are working and have young families,” Jan, 72, told me. “As children, they were provided for by the welfare state, they went to good schools and had access to football and drama class and the dentist – but now I worry that society is going to get worse for them.”
As with others I spoke to, Jan showed regret at his own role in this change. “I now think that is partly my fault,” he said. “We got lazy and complacent, thought the Swedish welfare state was secure, didn’t worry about abolishing the wealth tax, didn’t think it was going to change anything … but I think it has.”
‘A society that is more humane’
My research suggests the impacts of wealth taxes, or absence of them, are not only about fiscal revenue streams and wealth redistribution. They have wider social ramifications, and can be foundational to people’s vision of society.
Only three European countries currently levy a whole wealth tax: Norway, Spain and Switzerland. In addition, France, Italy, Belgium and the Netherlands impose wealth taxes on selected assets, but not on an person’s overall wealth.
In Sweden at least, the question today isn’t just whether wealth taxes work or not, but about what kind of society they project – one of folkhemmet, or a paradise for the rich.
“Tax was just natural [when] I grew up in the 1950s,” Kjerstin recalled. “I remember thinking when I was in second grade, that I will always be taken care of, that I didn’t ever have to worry.”
Reflecting on how different living in Sweden feels today, she said: “Now people don’t want to pay tax – sometimes even I don’t want to pay tax. Everyone is thinking about what they get back and how to get rich, instead of about building something together.”
“I don’t think you can say: ‘I pay this much in taxes and therefore I should get the same back.’ Instead, you should pay attention to the fact that you live in a society that is more humane, where everyone knows from second grade they’ll be taken care of.”
Names of research participants have been changed.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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