IDEAS home Printed from https://ideas.repec.org/p/hhs/iuiwop/1032.html
   My bibliography  Save this paper

Inheritance Taxation in Sweden, 1885–2004: The Role of Ideology, Family Firms and Tax Avoidance

Author

Listed:

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.

Suggested Citation

  • Henrekson, Magnus & Waldenström, Daniel, 2014. "Inheritance Taxation in Sweden, 1885–2004: The Role of Ideology, Family Firms and Tax Avoidance," Working Paper Series 1032, Research Institute of Industrial Economics, revised 28 May 2015.
  • Handle: RePEc:hhs:iuiwop:1032
    as

    Download full text from publisher

    File URL: https://www.ifn.se/wfiles/wp/wp1032.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    2. Piketty, Thomas & Postel-Vinay, Gilles & Rosenthal, Jean-Laurent, 2014. "Inherited vs self-made wealth: Theory & evidence from a rentier society (Paris 1872–1927)," Explorations in Economic History, Elsevier, vol. 51(C), pages 21-40.
    3. Gunnar Rietz & Magnus Henrekson & Daniel Waldenström, 2015. "Swedish Inheritance and Gift Taxation (1885–2004)," Palgrave Macmillan Books, in: Magnus Henrekson & Mikael Stenkula (ed.), Swedish Taxation, chapter 0, pages 223-265, Palgrave Macmillan.
    4. William G. Gale & Joel B. Slemrod, 2001. "Rethinking the Estate and Gift Tax: Overview," NBER Working Papers 8205, National Bureau of Economic Research, Inc.
    5. Gunnar Rietz & Dan Johansson & Mikael Stenkula, 2015. "Swedish Labor Income Taxation (1862–2013)," Palgrave Macmillan Books, in: Magnus Henrekson & Mikael Stenkula (ed.), Swedish Taxation, chapter 0, pages 35-122, Palgrave Macmillan.
    6. Thomas Piketty, 2011. "On the Long-Run Evolution of Inheritance: France 1820--2050," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1071-1131.
    7. Jesper Roine & Daniel Waldenström, 2009. "Wealth Concentration over the Path of Development: Sweden, 1873–2006," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 151-187, March.
    8. Wojciech Kopczuk, 2012. "Taxation of Intergenerational Transfers and Wealth," NBER Working Papers 18584, National Bureau of Economic Research, Inc.
    9. Thomas Piketty & Emmanuel Saez, 2013. "A Theory of Optimal Inheritance Taxation," Econometrica, Econometric Society, vol. 81(5), pages 1851-1886, September.
    10. 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, September.
    11. Gabriel Zucman, 2013. "The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1321-1364.
    12. Randall K. Morck, 2005. "A History of Corporate Governance around the World: Family Business Groups to Professional Managers," NBER Books, National Bureau of Economic Research, Inc, number morc05-1, September.
    13. (IFS), Institute for Fiscal Studies (ed.), 2010. "Dimensions of Tax Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553754, November.
    14. 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.
    15. Assar Lindbeck, 1997. "The Swedish Experiment," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1273-1319, September.
    16. Jesper Roine, 2006. "The political economics of not paying taxes," Public Choice, Springer, vol. 126(1), pages 107-134, January.
    17. Anthony B Atkinson & François Bourguignon, 2014. "Handbook of Income Distribution," PSE-Ecole d'économie de Paris (Postprint) halshs-02923231, HAL.
    18. Stenkula Mikael, 2014. "Swedish Taxation in a 150-year Perspective," Nordic Tax Journal, Sciendo, vol. 2014(2), pages 10-42, November.
    19. Eliason, M. & Ohlsson, H., 2013. "Timing of death and the repeal of the Swedish inheritance tax," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 45(C), pages 113-123.
    20. Henrik Hammar & Sverker C. Jagers & Katarina Nordblom, 2008. "Attitudes towards Tax Levels: A Multi-Tax Comparison," Fiscal Studies, Institute for Fiscal Studies, vol. 29(4), pages 523-543, December.
    21. Gunnar Rietz & Magnus Henrekson, 2015. "Swedish Wealth Taxation (1911–2007)," Palgrave Macmillan Books, in: Magnus Henrekson & Mikael Stenkula (ed.), Swedish Taxation, chapter 0, pages 267-302, Palgrave Macmillan.
    22. Marika Cabral & Caroline Hoxby, 2012. "The Hated Property Tax: Salience, Tax Rates, and Tax Revolts," NBER Working Papers 18514, National Bureau of Economic Research, Inc.
    23. Ulf Jakobsson & Magnus Henrekson, 2001. "Where Schumpeter was nearly right - the Swedish model and Capitalism, Socialism and Democracy," Journal of Evolutionary Economics, Springer, vol. 11(3), pages 331-358.
    24. Scheve, Kenneth & Stasavage, David, 2012. "Democracy, War, and Wealth: Lessons from Two Centuries of Inheritance Taxation," American Political Science Review, Cambridge University Press, vol. 106(1), pages 81-102, February.
    25. Huizinga,Harry & Jonung,Lars (ed.), 2005. "The Internationalisation of Asset Ownership in Europe," Cambridge Books, Cambridge University Press, number 9780521852951, December.
    26. Ohlsson, Henry, 2011. "The legacy of the Swedish gift and inheritance tax, 1884–2004," European Review of Economic History, Cambridge University Press, vol. 15(3), pages 539-569, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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.
    3. Magnus Henrekson & Dan Johansson & Mikael Stenkula, 2020. "The rise and decline of industrial foundations as controlling owners of Swedish listed firms: the role of tax incentives," Scandinavian Economic History Review, Taylor & Francis Journals, vol. 68(2), pages 170-191, May.
    4. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute of Labor Economics (IZA).
    5. Spencer Bastani & Daniel Waldenström, 2019. "Salience of Inherited Wealth and the Support for Inheritance Taxation," World Inequality Lab Working Papers hal-02877003, HAL.
    6. Frank A. Cowell & Dirk Van de gaer & Chang He, 2018. "Inheritance Taxation: Redistribution and Predistribution," Research on Economic Inequality, in: John A. Bishop & Juan Gabriel Rodríguez (ed.), Inequality, Taxation and Intergenerational Transmission, volume 26, pages 1-13, Emerald Publishing Ltd.
    7. Stefan Jestl, 2021. "Inheritance tax regimes: a comparison," Public Sector Economics, Institute of Public Finance, vol. 45(3), pages 363-385.
    8. repec:ces:ifodic:v:16:y:2018:i:2:p:50000000002754 is not listed on IDEAS
    9. Henrekson, Magnus & Stenkula, Mikael, 2015. "Swedish Taxation since 1862: An Overview," Working Paper Series 1052, Research Institute of Industrial Economics, revised 10 Sep 2015.
    10. Ohlsson, Henry & Roine, Jesper & Waldenström, Daniel, 2014. "Inherited wealth over the path of development: Sweden, 1810–2010," Working Paper Series, Center for Fiscal Studies 2014:7, Uppsala University, Department of Economics.
    11. Daniel Waldenström, 2018. "Inheritance and Wealth Taxation in Sweden," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(02), pages 08-12, August.
    12. Spencer Bastani & Daniel Waldenström, 2018. "How should capital be taxed? The Swedish experience," World Inequality Lab Working Papers hal-02878153, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    2. Stenkula Mikael, 2014. "Swedish Taxation in a 150-year Perspective," Nordic Tax Journal, Sciendo, vol. 2014(2), pages 10-42, November.
    3. 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.
    4. Wojciech Kopczuk, 2012. "Taxation of Intergenerational Transfers and Wealth," NBER Working Papers 18584, National Bureau of Economic Research, Inc.
    5. 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.
    6. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," CEPR Discussion Papers 12880, C.E.P.R. Discussion Papers.
    7. Henrekson, Magnus & Jakobsson, Ulf, 2011. "The Swedish Corporate Control Model: Convergence, Persistence or Decline?," Working Paper Series 857, Research Institute of Industrial Economics.
    8. Henrekson, Magnus & Stenkula, Mikael, 2015. "Swedish Taxation since 1862: An Overview," Working Paper Series 1052, Research Institute of Industrial Economics, revised 10 Sep 2015.
    9. Mikael Stenkula, 2015. "Taxation of Real Estate in Sweden (1862–2013)," Palgrave Macmillan Books, in: Magnus Henrekson & Mikael Stenkula (ed.), Swedish Taxation, chapter 0, pages 303-327, Palgrave Macmillan.
    10. Piketty, Thomas & Zucman, Gabriel, 2014. "Wealth and Inheritance in the Long Run," CEPR Discussion Papers 10072, C.E.P.R. Discussion Papers.
    11. Gunnar Rietz & Magnus Henrekson & Daniel Waldenström, 2015. "Swedish Inheritance and Gift Taxation (1885–2004)," Palgrave Macmillan Books, in: Magnus Henrekson & Mikael Stenkula (ed.), Swedish Taxation, chapter 0, pages 223-265, Palgrave Macmillan.
    12. 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.
    13. Waldenström, Daniel, 2015. "Wealth-income ratios in a small, late-industrializing, welfare-state economy: Sweden, 1810–2014," Working Paper Series, Center for Fiscal Studies 2015:6, Uppsala University, Department of Economics.
    14. Spencer Bastani & Daniel Waldenström, 2018. "How should capital be taxed? The Swedish experience," Working Papers hal-02878153, HAL.
    15. Korom, Philipp, 2016. "Inherited advantage: The importance of inheritance for private wealth accumulation in Europe," MPIfG Discussion Paper 16/11, Max Planck Institute for the Study of Societies.
    16. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2016. "Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France (1800-2014)," World Inequality Lab Working Papers halshs-02794339, HAL.
    17. Theine, Hendrik, 2019. "The media coverage of wealth and inheritance taxation in Germany," Department of Economics Working Paper Series 290, WU Vienna University of Economics and Business.
    18. Gunnar Rietz & Magnus Henrekson, 2015. "Swedish Wealth Taxation (1911–2007)," Palgrave Macmillan Books, in: Magnus Henrekson & Mikael Stenkula (ed.), Swedish Taxation, chapter 0, pages 267-302, Palgrave Macmillan.
    19. Magnus Henrekson & Jesper Roine, 2007. "Promoting Entrepreneurship in the Welfare State," Chapters, in: David B. Audretsch & Isabel Grilo & A. Roy Thurik (ed.), Handbook of Research on Entrepreneurship Policy, chapter 5, Edward Elgar Publishing.
    20. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 620-663.

    More about this item

    Keywords

    Gift tax; Inheritance tax; Estate tax; Tax avoidance; Excess burden; Entrepreneurship; Ownership transfers of family firms;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:1032. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iuiiise.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elisabeth Gustafsson (email available below). General contact details of provider: https://edirc.repec.org/data/iuiiise.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.