Sweden’s Social Democrat-led government will outline tax cuts for top earners on Wednesday, widening the gap between rich and poor in a country that has long enjoyed a reputation for social equality.
The boost for wealthy Swedes is part of a compromise deal, struck between centre-left and centre-right parties after a September election resulted in a hung parliament, aimed at excluding the anti-immigration Sweden Democrats from government.
It mirrors a dilemma facing politicians in other European countries such as Germany and Denmark where mainstream parties have faced a choice between papering over left-right animosity or giving populist parties a taste of power.
But with many Swedes increasingly unhappy with public services such as policing, schools and care for the elderly, analysts warn the tax cuts in fact risk fuelling xenophobia and populist sentiment, widely seen as rooted in growing inequality.
The policy, which will be outlined in a “mini-budget” update to the main autumn bill, scraps a 5 per cent surcharge levied on the income of workers who earn more than about 700,000 Swedish crowns ($75,700) a year. The extra tax was introduced during the
economic crisis of the early 1990s to support public finances.
Those top earners will still be heavily taxed compared with many other countries, at around 60 per cent. But the move, which takes effect next year, is likely to widen the divide between society’s “haves” and “have nots”.
It follows a series of policies in recent years that benefited the well-off, including the scrapping of a wealth tax.
While Sweden is still has one of the most equal societies, the divide between the richest and poorest people has grown faster than in any other developed nation in recent decades, according to the OECD. The organisation uses the Gini coefficient to measure how equally income is distributed across society.
The 20 billion crown revenue loss from this tax cut and a wider income tax reduction introduced in December’s 2019 budget, will in part be offset by cuts in spending on care for the elderly and the overseas aid budget, and higher environmental taxes.
Some in the centre-left Social Democrats are angry over what they see as a betrayal of the values of a party that built Sweden’s famed welfare state and engineered a society widely seen as setting the standard for equality and fairness.
“It’s about defending democracy and for our group that means defending the welfare state where no one is left behind,” said Markus Kallifatides, a Social Democrat lawmaker.
“Sweden is not that society anymore.” But for many others, sidelining the anti-immigration Sweden Democrats is worth the price.
“Reducing taxes for high income earners is not going to reduce inequality, of course,” Swedish Finance Minister Magdalena Andersson said on March 29.
“There is no question this is not the priority of the Social Democrats, but you need to get a majority so you have to compromise.”
In September’s election, the Social Democrats posted their worst result for more than a century with the Sweden Democrats, eurosceptic nationalists who want to close the doors to asylum seekers, becoming the third-largest party. — Reuters
Simon Johnson
Oman Observer is now on the WhatsApp channel. Click here
