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The Evolution of Swedish Labor Income Taxation in a 150-year Perspective: An In-depth Characterization

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Author Info

  • Du Rietz, Gunnar

    ()
    (Research Institute of Industrial Economics (IFN))

  • Johansson, Dan

    ()
    (Örebro University School of Business)

  • Stenkula, Mikael

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

This paper presents annual Swedish time series data on the top marginal tax wedge and marginal tax wedges on labor for a low, average and high income earner for the period 1862 to 2010. We identify four distinct periods separated by major tax reforms. The tax system can be depicted as proportional, with low tax wedges until World War II. Next follows a period featuring increasing tax wedges beginning in connection with World War II. During the third period, starting with the 1971 tax reform and continuing throughout the 1980s, the efforts to redistribute income culminated and tax wedges peaked. The high income earner started to pay the top marginal tax wedge which could be 90 percent. The main explanations for this development are temporary crises leading to permanent tax increases, expansion of the public sector and distributional ambitions, bracket-creep and the introduction of social security contributions paid by the employers. The 1990–1991 tax reform represents the beginning of a new and still continuing period with decreasing marginal tax wedges.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 977.

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Length: 45 pages
Date of creation: 19 Sep 2013
Date of revision:
Publication status: Forthcoming in Swedish Taxation: Developments Since 1862, Henrekson, Magnus, Stenkula, Mikael (eds.), Palgrave Macmillan.
Handle: RePEc:hhs:iuiwop:0977

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Keywords: Labor taxation; Marginal tax rate; Marginal tax wedge; Tax reforms;

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References

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  1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  2. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
  3. Robert J. Barro & Chaipat Sahasakul, 1983. "Average Marginal Tax Rates from Social Security and the Individual Income Tax," NBER Working Papers 1214, National Bureau of Economic Research, Inc.
  4. Jaimovich, Nir & Rebelo, Sérgio, 2012. "Non-linear Effects of Taxation on Growth," CEPR Discussion Papers 9261, C.E.P.R. Discussion Papers.
  5. Assar Lindbeck, 1997. "The Swedish Experiment," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1273-1319, September.
  6. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2007. "The Long-run Determinants of Inequality: What Can We Learn from Top Income Data?," Working Paper Series 721, Research Institute of Industrial Economics, revised 30 Apr 2008.
  7. Roine, Jesper & Waldenstrom, Daniel, 2008. "The evolution of top incomes in an egalitarian society: Sweden, 1903-2004," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 366-387, February.
  8. Aidt, T.S. & Jense , P.S., 2007. "Tax Structure, Size of Government, and the Extension of the Voting Franchise in Western Europe, 1860-1938," Cambridge Working Papers in Economics 0715, Faculty of Economics, University of Cambridge.
  9. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1.
  10. Stenkula, Mikael, 2013. "Taxation of Goods and Services from 1862 to 2010," Working Paper Series 956, Research Institute of Industrial Economics.
  11. Johansson, Dan, 2004. "Skatternas utveckling, omfattning och fördelning," Ratio Working Papers 42, The Ratio Institute.
  12. Birkinshaw, Julian & Braunerhjelm, Pontus & Holm, Ulf & Terjesen, Siri, 2006. "Why Do Some Multinational Corporations Relocate Their Headquarters Overseas?," Working Paper Series in Economics and Institutions of Innovation 54, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Marginal tax rates in Sweden
    by Economic Logician in Economic Logic on 2013-10-23 15:14:00
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Cited by:
  1. Stenkula, Mikael, 2014. "Taxation of Real Estate in Sweden from 1862 to 2010," Working Paper Series 1018, Research Institute of Industrial Economics.
  2. Du Rietz, Gunnar & Henrekson, Magnus, 2014. "Swedish Wealth Taxation, 1911–2007," Working Paper Series 1000, Research Institute of Industrial Economics, revised 21 Mar 2014.
  3. Stenkula, Mikael, 2013. "Taxation of Goods and Services from 1862 to 2010," Working Paper Series 956, Research Institute of Industrial Economics.

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