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.
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.
So, what...U.S. should stop at around 62% upper marginal tax rate?
There's a huge difference between 70% and the current U.S. marginal rate of 37% for over $500k. Argue homogeneity, small, relatively rich population all you want, we're talking about nearly double the tax rate!
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.
What's interesting from a political science perspective from the U.S. is that Ronal Reagan believed that the tax on labor should be less than the tax on capital. The U.S. has shifted very much rightward on this issue in the last 40 years.
Somewhere along the line, we decided that risking some of one's disposable wealth deserved a higher premium than risking years of one's life in labor. Of course, the "we" making that decision was the people who have wealth, and policy makers who could be influenced by wealth. Because for everyone else it's obviously insane and unjust.
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.
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.
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”.
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.
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.
> 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.
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.
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%.
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? :)
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.
IIRC 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).
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.
If 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).
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.).
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.
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.
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.
Isn't that how it actually works in Norway and Denmark (don't know about Sweden)? "Luxury cars" are taxed like a 100%.
My understanding is that Tesla's are so popular over there because those are exempt of precisely that luxury tax.
The problem with that is that it's regressive and hurts those who earn less.
Let's say sales tax is 10%. If I'm a high earner and buy a cheap Android for $50, the $5 I'm paying in sales tax has a much lower impact on my budget than it does to someone who earns less than I do and wants to buy the same phone.
Yes, you’d be taxing the poor at the expense of the rich even more than today’s tax system, since spending doesn’t scale anywhere near linearly with income.
This is also why a “flat tax” is bad compared to increasing marginal tax rates. Remember that most systems don’t tax all income at the same rate; they tax anything above $a ie $(a-0) at x%, anything above $b and only that $(b-a) at (x+2)%, and so on.
Anti-tax fundamentalists use terms like “tax brackets” to trick people who don’t understand this system into thinking it’s possible for eg one’s net income to go down as they earn more money. (“Make this much, and you’ll be in the y% bracket!”) Don’t buy into this, it’s not true.
[+] [-] mogadsheu|7 years ago|reply
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|7 years ago|reply
[+] [-] davvolun|7 years ago|reply
There's a huge difference between 70% and the current U.S. marginal rate of 37% for over $500k. Argue homogeneity, small, relatively rich population all you want, we're talking about nearly double the tax rate!
[+] [-] eschaton|7 years ago|reply
[+] [-] fxfan|7 years ago|reply
[+] [-] charlesism|7 years ago|reply
[+] [-] jacknews|7 years ago|reply
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.
[+] [-] skh|7 years ago|reply
[+] [-] hliyan|7 years ago|reply
What would happen if we set tax brackets based on net worth? E.g. any income that raises a person's net worth over $1,000,000 is taxed at %X?
[+] [-] notacoward|7 years ago|reply
[+] [-] davidivadavid|7 years ago|reply
[+] [-] thestephen|7 years ago|reply
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.
[+] [-] geomark|7 years ago|reply
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.
[+] [-] bluedevil2k|7 years ago|reply
[+] [-] swedethrow|7 years ago|reply
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|7 years ago|reply
Maybe I will move someday, but it won't be because of taxes.
[+] [-] TheChaplain|7 years ago|reply
[+] [-] okl|7 years ago|reply
> 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...
[+] [-] lr4444lr|7 years ago|reply
[+] [-] AndrewDucker|7 years ago|reply
Sweden is 49.8% the US is 26%
[+] [-] henrikschroder|7 years ago|reply
The blue graph is inflation-adjusted disposable household income from 1950 to 2017:
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%.
[+] [-] sologoub|7 years ago|reply
Just to name two big ones, Sweden has free top rate healthcare and education. Imagine wiping out all student debt and health payments?!
[+] [-] booleandilemma|7 years ago|reply
[+] [-] lr4444lr|7 years ago|reply
[0] https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
[+] [-] cblum|7 years ago|reply
[+] [-] burfog|7 years ago|reply
The right was howling with laughter:
https://www.chicksonright.com/blog/2016/11/17/feminist-snow-...
[+] [-] RickJWagner|7 years ago|reply
[+] [-] andreygrehov|7 years ago|reply
[+] [-] skywhopper|7 years ago|reply
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.
[+] [-] gibybo|7 years ago|reply
[+] [-] scarface74|7 years ago|reply
[+] [-] DennisP|7 years ago|reply
[+] [-] rayiner|7 years ago|reply
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|7 years ago|reply
If they include things like VAT then yes, but a 20%> VAT is pretty much universal in Europe.
[+] [-] TheChaplain|7 years ago|reply
[+] [-] tlear|7 years ago|reply
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|7 years ago|reply
(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|7 years ago|reply
[+] [-] hliyan|7 years ago|reply
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|7 years ago|reply
[+] [-] helge5|7 years ago|reply
[+] [-] cblum|7 years ago|reply
Let's say sales tax is 10%. If I'm a high earner and buy a cheap Android for $50, the $5 I'm paying in sales tax has a much lower impact on my budget than it does to someone who earns less than I do and wants to buy the same phone.
[+] [-] scarface74|7 years ago|reply
[+] [-] eschaton|7 years ago|reply
This is also why a “flat tax” is bad compared to increasing marginal tax rates. Remember that most systems don’t tax all income at the same rate; they tax anything above $a ie $(a-0) at x%, anything above $b and only that $(b-a) at (x+2)%, and so on.
Anti-tax fundamentalists use terms like “tax brackets” to trick people who don’t understand this system into thinking it’s possible for eg one’s net income to go down as they earn more money. (“Make this much, and you’ll be in the y% bracket!”) Don’t buy into this, it’s not true.