Sweden’s wealthy are weighing options to protect their assets — and even exit the country — as proposals for new taxes on large fortunes gain momentum before next month’s general elections.
The Left Party and the Greens, which favor higher levies on wealth, are part of a four-party opposition led by the Social Democrats that are 5.7 percentage points ahead of Prime Minister Ulf Kristersson’s government parties and the far-right Sweden Democrats, according to a poll by Demoskop. The concern is the two parties may be able to exert tax policy pressure on the Social Democrats.
Wealth levy proposals are gaining ground on both sides of the Atlantic as politicians seek to boost funding and reduce inequality. California is weighing a billionaires tax, New York has floated several new levies on the wealthy and UK Prime Minister Andy Burnham has also added to speculation that taxes may need to rise.
Sweden actually has a history on that, and it didn’t go well.
For decades, we imposed an annual tax on net wealth. The tax had deep historical roots: Introduced just before World War I as a temporary tax on the wealthy, it became permanent and lasted through Sweden’s high-tax postwar era. Yet after almost a century, Sweden abolished the tax in 2007. It did so not because Swedes had abandoned the welfare state but because the wealth tax had proved to be a poor instrument for financing it…
The revenue, meanwhile, was small. In research with Gunnar Du Rietz, I [Magnus Henrekson] found that Sweden’s wealth-tax revenue never exceeded 0.4% of GDP in the postwar period and amounted to only 0.16% of GDP (0.3% of total tax revenue) in 2006, the last year before repeal. That is a striking result. A tax that appeared symbolically powerful was fiscally marginal. It generated political conflict, administrative complexity, and economic distortions while contributing little to the financing of the Swedish welfare state.
Warren Buffett’s central claim is that many very wealthy investors can pay a lower effective tax rate than ordinary salaried workers because so much of their income comes from capital gains and dividends rather than wages. He has said that “the wealthy are certainly undertaxed compared to the broader population” and that he would accept higher taxes on people like himself.
His well-known example
In 2007, Buffett said his own effective federal tax rate was about 17.7% on roughly $46 million of income, while the employees in his office paid an average of about 32.9%. He argued that this revealed a tax system tilted toward the rich, despite saying he did not rely on tax shelters.
Why he says this happens
Buffett points primarily to preferential treatment for long-term capital gains and qualified dividends, plus the fact that payroll taxes apply mainly to wage income. Typical workers receive more of their income as wages, whereas a billionaire investor can receive much of it as investment income subject to lower rates.
He has supported a “Buffett Rule” concept: households with more than $1 million in adjusted gross income should pay at least a 30% effective federal tax rate.
Important qualification
His observation fits someone with Buffett’s investment-heavy income, but it does not necessarily mean every high-income household pays a lower overall effective rate than middle-income households. Tax Policy Center analysis found that, on average, higher-income groups generally pay higher combined income-and-payroll-tax rates, even though preferential investment-income taxation can give exceptionally wealthy investors unusually low effective rates.
So where do these uber-wealthy scumbags go when Sweden, Norway and Switzerland are already the best places to live? Will they go to Africa, Israel, Caribbean, Greenland, or ???
We should tax the wealthy, on all of their income, at a minimum of the lifetime tax rate paid by a teacher or a firefighter (20% to 30% of income over their lifetime), instead of the near zero tax rate gifted to the wealthy living off investment income or inherited wealth.
Seems simple to me, and I was enjoying the near zero tax rate prior to my Avis Car Rental short squeeze windfall back in April.
No U.S. state currently enforces a true annual wealth tax on a person’s total accumulated assets (like stocks and bonds). However, several states have enacted or proposed high-earner “millionaire income surtaxes” or capital gains taxes, and California is considering a targeted one-time tax on billionaires.