Income Distribution

The goal of an even distribution of income has been central to Swedish tax policy and the debate on tax policy for the greater part of the postwar period. In giving a higher priority to efficiency, the 1991 tax reform reflects the change of opinion which took place in the 1980s. However, the goal of an even income distribution still puts an important restriction on policy, and it was emphasized that TR91 should not systematically change the distribution of income between rich and poor households. The reform was intended to be neutral in terms of income distribution due to a combination of factors. The reduction of the marginal tax rates would primarily benefit high-income earners. But they would tend to lose from the reduction of the tax rate for capital income since the size of interest deductions tend to increase with income. Further, increased child allowances and housing allowances would increase the disposable income of families with children. The estimates presented by the RINK Commission (in SOU 1989:33) indicated that, on average, these effects would cancel out for all income groups. However, this average hid a large spread between winners and losers. Thus, while the reform was judged in advance to be neutral, studies on income distribution by Statistics Sweden have shown that disposable income in fact became more unevenly distributed after 1991. The question is how these two pictures relate to each other. Were the estimates of the commission misleading or incomplete, or have other factors than TR91 been decisive for trends in the 1990s?