Sweden has been a high-tax society since the 1970s. The sharp increase in taxes came as a response to industrial closures and the resulting unemployment. The high taxes became permanent, and finally put the nail in the coffin of the laissez-faire and low-tax policy that made Sweden prominent from around 1870 onwards.
It was not Social Democrats and high taxes that built the record-breaking country of Sweden, no, it was all the outstanding industrial companies operating in a partially liberalised and attractive market. The Social Democrats dismantled Sweden’s success story. And we have had stagnation and industrial flight ever since.
Many of my articles are about taxes, from the first one I wrote in 2005 until today. Why this fixation, you might ask? What’s the point?
I want to emphasise that high taxes are not just one problem among others, no, there are some directly systemic elements in such an arrangement. And many of today’s problems can be traced back to the tax burden. Let’s sort it all out.
Subject instead of citizen
In a high-tax country, where the public sector takes almost half of citizens’ salaries, people end up feeling disenfranchised. Even if the money would go exclusively to fantastic projects and important social programmes, the feeling of confiscation becomes stronger and stronger. Because individuals also have plans, dreams and ideas about what they want to do with their money. And when taxes are the biggest monthly expense, those dreams risk staying in the desk drawer. We become both poorer and more spiritually empty. We become unfree, like slaves.
The high-tax society was launched as a project based on solidarity and redistribution. People paid money in and got it back when they needed it, while helping the less fortunate. Today, however, we see a lot of tax money being spent on completely unreasonable things that do not benefit us personally or our society at all. And the distribution itself also costs huge amounts in administration, salaries, etc. The tax authority is one of our largest authorities. The money does not go solely to the community and the common good anymore. Anyone who says this is lying to your face. And this undermines people’s faith in society and its leaders.
Complexity, confusion and bureaucracy
Appropriating +50% of citizens’ income requires many different kinds of taxes. A 50% tax on salaries alone would be unreasonable. This is why we have VAT, excise duties on tobacco, alcohol, fuel, etc., employers’ contributions, capital gains tax, corporation tax, etc. etc. When the tax is distributed in many different places, it doesn’t hurt as much. The downside of this is confusion and hassle. It takes experts to understand and navigate the system. That’s why we have accountants, tax lawyers and a whole cadre of people who directly or indirectly make a living out of it.
Grit in the industrial machinery
In today’s international arena, companies can move wherever they want, to countries where taxes and the business environment are favourable. Unfortunately, taxes and the business environment are not very favourable in Sweden. Especially not for small and medium-sized enterprises, which do not have access to expert tax assistance. Taxes and bureaucracy are like grit in the industrial machinery. If you want a rich, innovative and well-functioning society, you should be extremely careful with the grit.
The system becomes a weapon
When you have a system that is too complicated, and nobody is 100% sure if you are doing the right thing, it can easily be turned against you. Unpopular people and critics can be framed for tax offences. If you look at tax history, you can often find something wrong with anyone. Complexity and over-regulation can be used as a weapon.
The high tax burden contributes to huge amounts of money at the disposal of politicians. Our elected representatives can plough huge sums into social projects that are not of general interest or engaging for the average person. Instead, they invest in refugee aid, long-term benefits, support activities, unnecessary infrastructure, IT projects, municipal boasting projects, etc. and to further expand the public sector. Those who have access to enormous resources can quickly change society, and create a sense of empowerment and untouchability.
Risk of hijacking
Once such a high tax system has been established, there is always the risk of it being hijacked by malicious forces. Even if it was built with good intentions, no one can guarantee what will happen tomorrow. This may involve politicians, parties and lobbyists who do not have a clean slate, as well as supranational bodies such as the EU, which not only have Sweden’s best interests at heart, but can use its high tax system to favour other countries or alliances.
There is certainly more. But this is good enough.