How Sweden Balances High Taxes And Growth

How Sweden Balances High Taxes And Growth


Let’s talk about taxes. They’re a big political
issue, especially now. New York congresswoman Alexandra Ocasio-Cortez
has proposed a 70 percent marginal tax rate on wealthy
Americans as part of her Green New Deal. Today is the day that we
truly embark on a comprehensive agenda of economic, social and racial justice
in the United States of America. It sounds like a big number
but there’s another country where some workers are
paying similar taxes. Sweden. This Nordic country is often
known for its picturesque landscape, ice hockey prowess, and companies
like IKEA and Volvo. But, Sweden is also known to have
some of the highest taxes in the world and without
costing its economy. So how did a country with fewer
than 10 million people pull it off? This is Torben Andersen. He’s a professor with the
Department of Economics and Business Economics at Aarhus
University in Denmark. The short version of the story
is that Sweden and the other Nordic countries that
have high taxes. And they have fairly
good economic performance. The simple explanation is that you
cannot judge the effect of taxes without knowing what they are
financing. I mean the Nordic countries, a large part of
taxes goes to finance education, health and other things,
in various ways actually support the labor supply
and high employment rates. In other words Sweden has been
able to support both high taxes and high economic growth because of
how it spends those taxes. Tax revenue supports generous
childcare programs, gives employees vast leave of absence
opportunities and helps offer basically free higher education. Those programs in turn help
make Swedish citizens more employable. They also don’t have to
ration big portions of their paychecks or things like
daycare or student loans. that makes them
better consumers. The average tax wedge for a
Swedish worker with an average income is about 43 percent, but the income
tax can go as high as 61.85 percent depending on how high
the income is. And the corporate tax rate
lies at 21.4 percent. What’s a tax wedge,
you might ask? It’s the difference between what a
worker pays in total taxes and what it costs to employ them. Basically the difference between your
take home pay and your total pre-tax paycheck. It’s also a measure of how
taxes can drag down employment. Sweden has had pretty steady GDP
numbers since its recession in 2012 and during the 2008 crisis,
and even before that Sweden suffered a severe recession back
in the 1990s. And prudent reforms to its banking system
and regulations helped it bounce back in a big way
through the next few decades. Sweden now has the 12th highest
GDP per capita in the world. In fact other high tax
Scandinavian countries like Norway and Denmark also ranked in the top 10
countries when it comes to GDP per capita. Sweden’s tax system has,
of course, income taxes. It also has a
high level of social contributions. And the end of the
day, it’s not so important whether the taxes are collected
in one way or another. They’re still a wedge in the
labor market creating a difference between the cost of labor to
the employer and the take-home wage after taxes and all social
contributions to the workers. So for example a single
worker making roughly seven hundred twenty six thousand Swedish krona a
year in salary or about $78,000 in U.S. dollars would have a marginal
tax wedge of 69.7 percent. That percentage is nearly
what Alexandra Ocasio Cortez is suggesting. But she’s saying that this tax
rate would apply to those making over $10 million dollars a year. Where do these tax
dollars go in Sweden? They pay for things like
childcare, health care and education. But if you look at an
average family, yes they pay taxes. But then on the other
hand they don’t have any expenditures on education for the
kids and so on. So they give out a lot of
money on one hand, they also get appreciated services back. Of
course, nothing is perfect but they still get value for money.
And you can also see that politically there’s very broad support
for maintaining this system. But it’s up to Swedish politicians
to decide how to spend tax revenue. This is Johan Norberg. He’s a senior fellow
at the Cato Institute. We’ve got more revenue from
the people so the politicians can put it to work where they find it
most of interest to people or to themselves. You pay when you work
and it’s distributed to yourself when you have children or
when later on when you need more health care or
something like that. So it’s more a redistribution
within the lifecycle of people, more than redistribution between different
groups of people from the rich to the poor.
And so it means, more public services. But
it also means, we pay for it ourselves. So what’s the big
deal against high taxes? In Sweden, they get you
top-rated health care and higher education that doesn’t put people
in six figure debt. In the U.S., advocates for lower income taxes say
they stifle economic growth and consumer spending. So we have this paradox with
Sweden and the the other Nordic countries that taxes and taxes
wedges are relatively high. And at the same time
employment rates are high. So it’s hard to say that taxes or tax wedges in themselves are causing huge negative
effects of employment. That’s simply not the case. In fact, Sweden has one of
the highest employment rates with over 77 percent of working age citizens
employed as of the third quarter of 2018. To compare, the same rate clocks in
at 71 percent in the United States. A 2012 study showed that
countries with higher taxes can stifle entrepreneurial success. But that hasn’t been
the case in Sweden. Some tax dollars go into a
leave of absence program that allows a worker to take unpaid time
off while retaining job security and status. In 1998, Sweden started the right
to leave to conduct a business operation act. It gives employees the right to take
a leave of absence of up to six months to start
their own company. That is if the company won’t
be a competitor to their current employer. Now, Stockholm has its
own Silicon Valley. Several startups born there have been
valued at more than a billion dollars. Like Spotify. Candy Crush. Minecraft. and Skype. The last two of which
were bought by Microsoft. In Sweden, there are 20
startups for every 1,000 employees versus five for every
1,000 in the U.S. And for some of those entrepreneurs
who may have come into wealth along the way, there’s an absence
of other taxes they would maybe have to pay
if they lived elsewhere. Sweden is actually quite friendly
to large owners of capital. We don’t have taxes on property, no
taxes on wealth, no taxes on gifts or inheritance. But instead it comes from
income taxes but also from consumption taxes. And that’s
the major difference between Sweden and the United States. We have almost as much in
value added taxes on consumption and excise taxes on different goods, as
we get in income taxes. Somewhere between high employment rates,
high taxes and support to those with the entrepreneurial
spirit, Sweden’s economy has stayed strong. Sweden though isn’t immune to
the ongoing global growth slowdown. In fact, the Swedish krona has
been the worst performing major currency in 2019. I think the outlook, as for
many other countries, is that growth will become somewhat lower. And of course there are
many other uncertainties, also things happening outside Sweden
or Nordic countries which affect Sweden. But they are sort
of pretty OK compared to other countries.

Author:

100 thoughts on “How Sweden Balances High Taxes And Growth”

  • Gnomezonbacon says:

    America isn't Sweden or Denmark. We shouldn't manage our gigantic nation like it's a tiny northern European country.

  • Like many, really advanced nations…Sweden and Germany made those decisions years ago and dont have resources to waste. Yes I would pay more taxes for better healthcare, free education, and a better standard of living which reduces the overall cost of living. I might live longer as a result.

  • Sweden and US are not the same.. Sweden has a homogenous population with a shared history which makes politics and consensus building fairly easy unlike in the US,where the states from early on had fairly independent autonomy in what is a federal structure with their own laws and constitutions etc…US should evolve its own model of social security and welfare,tax systems etc tht suits them rather than copy what's working for other countries which is a sure sign of failure!!

  • Ikea and volvo are not Swedish companies, not anymore. Ikea almost does not have even the workers. All are on the recruitment company workers and can be fired instantly without any brand damage. They do not pay any tax

  • Anders Ljungberg says:

    What is not to mention is that there is harsh criticism of the high taxes in Sweden from economists and from the political opposition. and two of the government's co-operation parties are demanding that they lower the tax. and funny enough of parties calling themselves liberals. the difference may be that Swedish liberals say we are not socialists

  • Shaun Rosenberg says:

    Stop saying taxes would be 70%. NOBODY is going to be paying 70% in taxes on their income, but it gives the right a talking point and some people will change their mind based off of the lie anyways.

  • It all works well if the educated people go to work, but now, with the dumbing down of the population by migrants, that just has added something which has hitherto been absent.

  • Eliminate all consumption taxes. Increase marginal taxes on the rich up to 90 percent over 50 million. (50 percent over 1 million, 55 percent over 3 million, 60-65 percent over 5-7 millio, 70 percent over 10 million etc). End the wars (drug war included). Shrink the CIA. Nationalize the oil companies and the banks

  • If we just gut military spending we could have free university for everyone thrice over. International students could study tuition free and you'd still have billions to spare!

  • Frank Boguszewski says:

    Sounds great.You have enough money to take care of a large amount of immigrants.How long will that work?How much time before you lose your country to a foreign culture that doesn't share your values?.Please wake up before it's too late.

  • Its not "how much higher" the taxes are, its "how its destributed". The US destributes taxes to fuel wars and sell guns, Sweden destributes taxes to allow health care and education.

  • In small highly developed nation like Sweden this will work , but it will be nightmare to apply in some big ass country …

  • Just stop waisting money in Defence… (Attack) and US will thrive! Convert the defence company’s to space exploration or more productive areas!
    The hole word will benefit from that!

  • Here's a story from a small town in Sweden called Filipstad. Population: under 10 000. It already had a substantial immigrant ie. muslim population before the year 2015 and the economic prospects and future for the town wasn't looking very bright. In 2015 thousands upon thousands of welfare leechers, I mean invaders, I mean muslims, I mean "refugees" (poor little children ie. 95% bearded muslim men) came to Sweden. Filipstad took in over a 1000 of these "poor little Syrian children" who happened to be men from Afghanistan, Somalia, Iraq, Morocco etc. And why wouldn't they take those criminals to live there (yes they are criminals by default since they entered the country without proper paperwork and the asylum treaties clearly state you have to apply for an asylum in the first safe country and EU rules state you have to apply an asylum in the first EU country. Well I guess Sweden is the first EU country if you go through 6-8 other EU countries first.

    Anyway the Swedish taxpayers' money was pouring into Filipstad since it was the average Swedish taxpayer who paid for those people living in Filipstad, not just the people in Filipstad. For 3 years life was good for those money hungry hotel owners and social workers etc. who now had those poor little children to take care of with the help of the taxpayers' money. Well the government and the taxpayer only agreed to give money for 3 years and after that it was time for the town of Filipstad to start paying for unemployment benefits etc. (over 95% of those muslim men are unemployed. Well some are hired by the town to do some useless crap and act as a mascot but it's nothing productive and it's just a cost done to hide the fact almost all would be unemployed)
    The social benefits the town of Filipstad has to pay has doubled in the past few years and the cost is rising constantly. The native Swedish people, mainly younger people are moving out instantly if and when they just get the chance and at the same time they are being replaced by new, fresh muslim men pouring in (and being born of course). I could also tell how the once peaceful town had massive fights between the native Swedish youths and the muslim men and how girls are being molested (by muslim men) but that's nothing new.

    And this is just a one single small town in the middle of Sweden and there are many many small towns like it in Sweden running out of money.

    Things are not looking great in Sweden no matter what lies the media is trying to tell you.

    Here's a graph depicting the money spent on welfare in Flipstad over the past few years.
    https://www.morrissey-solo.com/proxy.php?image=https%3A%2F%2Fwww.svtstatic.se%2Fimage%2Fwide%2F650%2F23437722%2F1566904563%3Fquality%3D70%26format%3Dauto&hash=c8f45d2d6ac945836d5a4d4d48fe44f3

    Personally, I'm not Swedish nor am I British or American either. It's just a shame a functinal and a civilized country is being destroyed with the decision of a handful of people while the majority of people don't want that.

  • Sweden is not full Socialism. They started more socialism and then relaxed it when it was not working. The US is not full capitalism. We have medicare, medicaid, public schools up to 12th grade including technical schools. We started as the opposite of Sweden where they were more socialism and came more to the center and US was more capitalism and came more to the center. To get taxed more for temporary life expenses is not the way in my opinion. Average wage for a college grad in US is around $50k a year and taxed at 12%. Paying 10 years of student loans and medical from your employer, you will bring home roughly $38k a year. That same person if taxed around 60% will only bring home $20k. 40% tax rate that person will bring home only $30k a year. One of these options seems to give you more "freedom". Which would you pick?

  • I stopped watching because the music was so bad and distracting and I could hardly hear the speakers CNBC i hope ur see this ; please use better BG music 🙂

  • Mirror Mirror Media says:

    A. They only have 10 million people. B. They used to have lower taxes. C. Debt to GDP is 38% – Unemployment is 7.1% – Double the US rate…

    Bad economics kicks the can down the road… Just wait

  • If I was a high tax payer, I wouldn't mind more going towards taxes…. provided I could choose where that money would go towards re: public services e.g. more on education rather than military spending or state welfare.

  • Yea. And those taxes goes increasingly to handouts for a growing population of migrants getting used to be fed and cared for by the government. Without participating in the workforce. House of cards.

  • André Rothweiler says:

    No wonder migrants are not working in Sweden. Why work with that great welfare system and if you can earn money tax-free illegally? The system will collapse one day and Sweden will be a mess. Soon boomers will retire 😉

  • Volvo is owned by China and you didn't mention everyone pays taxes, even if you only make $20,000 a year. In the 70s through the 80s, Sweden moved away from socialism to capitalism. Schools work on a voucher system (like Pres. Trump implemented in America). Sweden also has privatized insurance that everyone is moving to private insurance because of the long wait lines. Sweden is 9 million compared to Americans 327 million. Sweden has also been writing on America's coattails and not paying America for using its military…

  • Johan Norberg mentions the value added tax and it is very high, higher than the highest sales tax in the US, and even food is taxed. Skype comes from Estonia not Sweden. Amazing no taxes on property. Unfortunately for AOS, there aren't enough rich people to tax, and in order for the U.S to pay the bills for what social programs we do have and if we want to expand it, and unpopular as it would be, I believe that the only way is a Value Added Tax.

  • The problem with socialism in America or any other Western country is that the middle class ends up paying the majority of taxes. The idea that the wealthy is gonna pay everything is a fairytale.

  • Too many liberals,too many no go zones,too much immigrants and crime.Bad place to live,period!I Want to see how they are going to pay for their social services,when economy goes into recession

  • But a problem with these higher taxes is that these additional costs trickle down to the consumer in the form of a higher cost of living.

  • Rich Americans are to selfish and greedy. They dont care if poor people die. I know, I live here. I hear them all complain. That's why we will crash and burn. They will all take everybody down with them one way or another. It's the Ebenezer Scrooge system.

  • Attention world i figured it all out🙋‍♂️🤔 red dirt poor okie here in Oklahoma USA. Heres my solution to America's economy, min wage should be math, Cost of living for the area duh. Companies and businesses should be required to show on pay stubs/checks how much you earned them. agian simple math. Just pay us what were worth… medical insurance should not exist, its one of thousands of money black holes. Moving money from every one to just a few. State and city taxes should make hospitals affordable( $15 check up). Govorment should be here for its Internationale role. Not to regulate the people. State and city should regulate the people. We pay one simple state tax (based on what you earn) state pays goverment % of what citizens paid. Nov 1st oklahoma passes constitutional carry. Everyone over 21 witout a felony can openly carry. This is great. For our country!!😁 Nothing will change here, theres open carry permit almost anyone can get with a lil $. Peoples carrying everywhere. Lastly we love trump🤘 trump train!!. We have a great country here, lets not ruin it✌

  • Christian Oltra says:

    It is not just that they fund things that make the country more productive, if Sweden grows it is because it is a serious country with high economic freedom, rule of law, good governance and regulations, low levels of corruption, high education levels, etc. On the other hand, they accept high taxes because it is a very homogeneous population, historically egalitarian and democratic and the services provided by the state are good. Sweden grows despite having high taxes.

  • They never balance anything, the government just increase taxes because they want to control the people. They dont understand that if you take money from the people you slow down the growth. You know its really really difficult to even start youre own company.

  • Copying and pasting the Swedish model in USA wouldn't work out. In USA we do not have the same labor participation rate, education, and value-added jobs that the Swedes have (I am talking at a general level). We are not as healthy and physically active as they are, so our healthcare costs would be exponentially higher (just look at Bernie's 30 Trillion Medicare-for-All cost over 10 years). They also do not have the state-centric government model, but instead they have a more centralized and powerful central government. Until recently they did not have to deal with the costs of illegal migration (and once they starting dealing with it, the parties on the right started gaining traction in order to give some balance).

    I am not against importing some reforms that can be customized four our American republic, but just a massive copy-and-paste would be naive.

  • Our system in Sweden is terrible, we often end up paying more in taxes than we would if we lived in the US and actually paid for the services we use.

  • I'm Swedish and I can tell you the example at 3:30 is not correct. If the employer pays 78 k usd a worker would get 43k usd after the employer fees and employee tax… The reason is that: yes, we pay 70 percent of tax but only on the top 10k of earnings.

  • A country that basically comprises of 50 mini-countries with 300 million in comparison with a country with a homogenous population with 10 millions people.

    What’s that saying about apples and oranges?

  • The reason why higher taxation in the US is looked at with skepticism is, that more money would end up in Government's treasury which could then be used to significantly improve healthcare or education which would mean less money left to be spent in Walmart. This is what large corporations are afraid of. People may become self-sufficient. No more sheep to be sheared.

  • jeremiahwasabullfrog says:

    How much is Sweden paying into NATO? Maybe we should pull out of NATO and let the Swedens/Frances of the world defend themselves.

  • If US follow this sweden method
    I guarantee, many beaurocrats in US become more corrupt,
    As we know many greedy beaurocrats in there
    And also we all know that all taxes will be spent for weapons and for war
    IN THE NAME DEMOCRAZY!!
    Ooops

    So nope, i guess it wont work in US anyway
    Lol

  • What if I do not have any children, I do NOT need any "higher education" , and I do not need a doctor , because I am very healthy. Do I need to pay 63 % to government from my income ?? and 25 % VAT tax ??

  • Wow AOC’s proposals look pathetic in comparison to what they’re doing in Sweden. You have to make over 10million to reach the 70% bracket?!?! Lol

  • How can you even expect to apply the same rule to a 327million population country?
    Name one country with this much population and still managed to be successful charging 60percent income tax

  • I think one thing this video misses is how geographically dense and culturally unified Nordic countries are. This allows people to a) agree and be happy with what their tax dollars are spent on and b) see the tax dollars used very efficiently, since they only have to build services in a small handful of cities. Furthermore, the Nordic countries were already rich and educated after their intensely capitalist days from the post-war through the 70s, which gives them more runway to try things. All these factors make for a very unique situation for their counties. There are lessons to be taken from their governance, sure, but you can't expect to copy and paste it wholesale and get the same results.

  • Not one American in the comments below praising Sweden's welfare state would willingly give up 50%+ of their paycheck or pay 25% sales tax like the Swedes do. Thats $375 tax on your $1500 Apple Macbook or $5k on your $20k Toyota Corolla, after getting demolished on your take home pay. So until you're willing to be the first to give up your income to pay those taxes, just close your mouth.

  • If you think 60% is too much, look to Canada. I think Canada has perfect system that has both of northern European, and American.

  • Stefanos Spanopoulos says:

    min 06:45 No wealth taxes, no inheritance taxes, no property taxes, and low corporate tax 21%(like the Trump one). Everything comes from income taxes and consumption taxes, which means the middle class and…..everyone, including the poor. And of course, they go easy on the rich. That's how it works, it's right in front of your eyes: they take it from you and they spend it for you.

  • Skype was developed in Estonia and not Sweden (6:27) and there is even a Microsoft page that talks about it (https://www.microsoft.com/en-us/stories/skype/skype-chapter-2-welcome-to-estonia.aspx)

  • Sweden has public education, but they outsource it to private schools. It's by giving parents and students the ability to choose what school they want to attend through vouchers programs. The Left want high quality public education, but ironically against voucher programs because private businesses profit.

  • The re-distributive system for health and welfare works. Until you let in large volumes of people who have never contributed, and begin drawing upon that pot of reserved wealth! Then you get economic crisis!

  • I am ready to pay more tax to get CNBC to use better microphones in this video. Some part of the audio in this video was completely hard to understand 🙁

  • america doesnt need more taxes but spending control. when you spend billions overseas to build infrastructure you know there is a problem. when goverment fires a missle worth millions of dollars at people who barely bake a dollar a day, than there is a problem. when media makes you think we need more taxes , than there is a problem.

  • You have to have a very high wage to pay that much in taxes. It's unusual to have such high pay. I have a good wage, middle high pay, about 500k/year and pay on average 23-30% in taxes. I'm happy about all the benefits I get, so I don't mind paying taxes at all.

  • Thats great sweeden sound like paradise, we should move there. CNBC is trying to sell us a nice fair tale for their political interest. What guarantee do i have my high taxes will be properly managed by our politicians? Our current welfare system is already screwed up, social security, food stamp, and so many other. I doubt sweeden has quality health care…

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