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Inheritance taxation in Sweden, 1885–2004: the role of ideology, family firms, and tax avoidance

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  • Magnus Henrekson
  • Daniel Waldenström

Abstract

This paper studies the evolution of Swedish inheritance taxation since the late nineteenth century to its abolition in 2004. Our contribution is twofold. First, we compute the annual effective inheritance tax rates for different sizes of bequests, if the inherited assets were family firm equity or not, accounting for all relevant exemptions, deductions and valuation discounts. Second, we attempt to explain changes in inheritance taxation over time. Ideology appears to be the main driver of the sharp tax increases of the 1930s through the 1960s. Wartime economies with higher pressures on the people induced politicians to raise inheritance taxes on the wealthy, primarily during the First World War. We also document increased opportunities for tax planning for the wealthy, most notably a series of tax cuts on inherited family firms in the 1970s. This rise in avoidance opportunities for the rich while middle-class heirs face growing inheritance tax rates undermined the legitimacy of the tax and led to its repeal.
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Suggested Citation

  • Magnus Henrekson & Daniel Waldenström, 2016. "Inheritance taxation in Sweden, 1885–2004: the role of ideology, family firms, and tax avoidance," Economic History Review, Economic History Society, vol. 69(4), pages 1228-1254, November.
  • Handle: RePEc:bla:ehsrev:v:69:y:2016:i:4:p:1228-1254
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    File URL: http://hdl.handle.net/10.1111/ehr.2016.69.issue-4
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    Citations

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    Cited by:

    1. repec:wly:econjl:v:128:y:2018:i:612:p:f482-f513 is not listed on IDEAS
    2. Ohlsson, Henry & Roine, Jesper & Waldenström, Daniel, 2014. "Inherited Wealth over the Path of Development: Sweden, 1810–2010," Working Paper Series 1033, Research Institute of Industrial Economics.
    3. Frank A Cowell & Chang He & Dirk Van de gaer, 2017. "Inheritance Taxation: Redistribution and Predistribution," STICERD - Public Economics Programme Discussion Papers 35, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    4. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute for the Study of Labor (IZA).
    5. Bastani, Spencer & Waldenström, Daniel, 2019. "Salience of Inherited Wealth and the Support for Inheritance Taxation," Working Paper Series 1260, Research Institute of Industrial Economics.
    6. Adrian Adermon & Mikael Lindahl & Daniel Waldenström, 2018. "Intergenerational Wealth Mobility and the Role of Inheritance: Evidence from Multiple Generations," Economic Journal, Royal Economic Society, vol. 128(612), pages 482-513, July.
    7. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    8. repec:ces:ifodic:v:16:y:2018:i:2:p:50000000002754 is not listed on IDEAS
    9. Bastani, Spencer & Waldenström, Daniel, 2019. "Salience of Inherited Wealth and the Support for Inheritance Taxation," CEPR Discussion Papers 13484, C.E.P.R. Discussion Papers.
    10. Spencer Bastani & Daniel Waldenström, 2019. "Salience of Inherited Wealth and the Support for Inheritance Taxation," CESifo Working Paper Series 7482, CESifo Group Munich.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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