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(Sweden:) Wealth tax abolition widely welcomed
www.thelocal.se ^ | 03/28/2007 | AFP

Posted on 03/28/2007 5:55:23 PM PDT by WesternCulture

Sweden will abolish its wealth tax this year to boost investments and create jobs, Prime Minister Fredrik Reinfeldt said Wednesday, the latest in a slew of reforms announced since his centre-right government ousted the Social Democrats from power six months ago.

The move was broadly welcomed in political and business circles.

"We will propose to abolish wealth tax as of 2007 in our spring budget bill," Reinfeldt, the leader of the conservative Moderate Party, wrote in an article published in daily Dagens Nyheter.

The article was co-signed by the heads of the three other government coalition partners, Maud Olofsson of the Centre Party, Lars Leijonborg of the Liberals and Göran Hägglund of the Christian Democrats.

The spring budget bill, to be presented to parliament on April 16, is traditionally a revision of the autumn budget.

The move is aimed at attracting risk capital investments, which would helpcompaniesgrow and increase employment, the government said. Job creation has been the centre-right government's primary objective since coming to power.

"We hope to give a boost to the desire to invest in Sweden, in order to create conditions for new, expansive companies and create more new jobs," the four party leaders wrote.

They quoted tax authorities as saying that Swedish capital worth about 500 billion kronor ($72 billion) is currently placed abroad for tax reasons.

Finance Minister Anders Borg said Sweden also needed to keep pace with developments in other countries.

"When one country after another abolishes wealth tax, and we are left as one of the few countries to still have it, then you have to take this kind of decision," he said.

The government said that of the 30 members of the Organisation for Economic Cooperation and Development (OECD), only five countries – France, Norway, Spain, Sweden, Switzerland – still have wealth tax.

Wealth tax was introduced in Sweden in 1947. In 2005, the state yielded some 4.8 billion kronor ($688.2 million) in revenues from the tax. Some 225,000 people pay the tax, representing about 2.5 percent of the population.

The tax is equivalent to 1.5 percent of wealth exceeding 1.5 million kronor for singles and 3.0 million kronor for couples.

However, some of the country's richest entrepreneurs have been exempt from wealth tax since 1997 – including the family that controls Swedish cheap and chic fashion retailer H&M – since they threatened to leave the country and take their companies with them if they were forced to pay millions of dollars in wealth tax.

The abolition of the tax is expected to be adopted in parliament, where the four coalition partners hold a majority.

The measure will be compensated by a decrease in the tax break granted to private pension savings.

An employee earning up to 400,000 kronor a year can deduct about 20,000 kronor for money invested in a private pension fund. The government will now cap deductions at 12,000 kronor per person per year.

Since taking power after September's elections, the centre-right government has introduced a series of measures aimed at getting Swedes into the workforce, including a reduction of unemployment insurance and higher union fees, as well as a tax break on home help.

It has also proposed the sale of the state's holdings in six companies.

Those measures caused a storm of controversy from the opposition and unions, and the government's popularity suffered as a result.

By contrast, the wealth tax move has been widely welcomed, though not all approve of the methods used to get rid of it.

The powerful Confederation of Swedish Trade Unions, LO, which has close links to the opposition Social Democrats, said it was "unacceptable" that pension savers have to pay the price of the abolition,. The Confederation of Swedish Enterprise hailed the move as a "sensible decision".


TOPICS: Business/Economy; Government
KEYWORDS: europe; moderaterna; reinfeldt; scandinavia; sweden; taxation; taxes; wealth
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1 posted on 03/28/2007 5:55:24 PM PDT by WesternCulture
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To: WesternCulture

Huzzah for Sweden.

Could this move eventually lead to tax reductions for "the average Joe" in Sweden?


2 posted on 03/28/2007 5:59:40 PM PDT by Army Air Corps (Four fried chickens and a coke)
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To: WesternCulture

So, they're just moving the tax. Not abolishing it.


3 posted on 03/28/2007 6:00:00 PM PDT by Psycho_Bunny (I'm holding out hope that at least the DEMOCRATS might accidentally nominate a conservative.)
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To: WesternCulture
The measure will be compensated by a decrease in the tax break granted to private pension savings.

Governments always have to "pay" for tax cuts somehow, even though it's proven to be not necessary. Zero-sum economics at its worst.

4 posted on 03/28/2007 6:01:41 PM PDT by Disambiguator
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To: WesternCulture
WTF?

Socialism is not mathematically sustainable?

Where is the "consensus" of scientist refuting this?

5 posted on 03/28/2007 6:02:20 PM PDT by lormand (Liberals - the barbarians of our time.)
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To: WesternCulture

"The powerful Confederation of Swedish Trade Unions, LO, which has close links to the opposition Social Democrats, said it was "unacceptable""

Ha,ha, the unions don't like it. Now there's a shock !!!


6 posted on 03/28/2007 6:11:29 PM PDT by Obie Wan
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To: WesternCulture
Sweden has enjoyed good finances and high GDP growth before in history.

Sweden has experienced governments that have spoken about tax reductions before.

However, these two things haven't coincided too often since Sweden became a true democracy in the beginning of the twentieth century, but now they have.

For a long time, the typical pattern has been one of Social Democrats (The 'Socialists' to keep it simple) maintaining high taxes when the economy has performed well, handing out all kinds of government goodies and launching all sorts of new welfare projects, followed by a period of weaker economic development when different right wing government constellations sometimes - often the Socialists have remained in power - have been able to overthrow Socialist governments, only to find the state of the economy so poor that tax reductions have seemed to hazardous to them.

Today, neither of these two situations is at hand. The Swedish economy is VERY healthy, but we do NOT have a government who wishes to maintain our traditional high levels of taxation.

Apart from getting rid of the Wealth Tax, PM Reinfeldt is determined to lower income taxes by and by if the high GDP growth continues. One such reduction has already been enforced, resulting in an average Swede having appr $145 more to spend on a monthly basis and another reduction will soon follow.

This is getting interesting.
7 posted on 03/28/2007 6:25:29 PM PDT by WesternCulture
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To: Army Air Corps
No Sweden is so Politically Correct that they are done.

Stick a fork in them!

8 posted on 03/28/2007 6:29:57 PM PDT by rocksblues (Do unto others as they do unto you!)
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To: WesternCulture

Geez,you guys might even get to keep some of your own money huh ???


9 posted on 03/28/2007 6:31:08 PM PDT by Obie Wan
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To: WesternCulture

Reinfeldt has done a marvelous job in his environment. Bravo!


10 posted on 03/28/2007 6:35:27 PM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: WesternCulture
One such reduction has already been enforced, resulting in an average Swede having appr $145 more to spend on a monthly basis and another reduction will soon follow.

Baby steps in the right direction. I am genuinely happy for the Swedish people.
11 posted on 03/28/2007 6:38:36 PM PDT by Army Air Corps (Four fried chickens and a coke)
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To: Army Air Corps

Could this move eventually lead to tax reductions for "the average Joe" in Sweden?

- The main argument for the abolishment is to encourage wealthy people to stay in Sweden and continue investing here and furthermore making Sweden a more attractive country to live and invest in for wealthy foreigners.

If such a development occurs at a greater level, it will, naturally, contribute a lot to the development of our economy and will allow us to lower taxes.

World economy goes up and down and Sweden, being a country of many large export industries, is heavily dependent on the state of the global economy at large, but presently I see no storms on the horizon. Asia is still booming, The US economy is growing steady but at somewhat more modest pace than one or two years ago and the largest economy on earth, the European one, is looking stronger day by day.


12 posted on 03/28/2007 6:43:37 PM PDT by WesternCulture
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To: Disambiguator; Psycho_Bunny

In this case, like in many others, a government launches a tax cut/tax abolishment but wishes to avoid appearing 'irresponsible'.

Now, two lines of development are possible.

Scenario A:

If all goes according to plan, the economy will continue to develop nicely and this alone will finance the tax cut to a great degree. A lot of 'moving around' in the budget won't be needed.

Scenario B:

However, if the economy weakens rapidly and unexpectedly, a government will be able to raise taxes or whatever they earlier said they would do in order to 'finance' the earlier tax cut (in order to maintain budget disciple) while simply getting away with reminding everyone they've been saying this latter measurement was going to be necessary all along.

Let's hope for the best. There actually have been politicians in history that have had the guts to lower taxes. Reagan was such a politician - and Reinfeldt and other Swedish Conservatives of his generation grew up admiring him.


13 posted on 03/28/2007 7:04:55 PM PDT by WesternCulture
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To: Army Air Corps
Could this move eventually lead to tax reductions for "the average Joe" in Sweden?

This "wealth tax" could be actually affecting a lot of people. The threshold for it is 1.5 million kronor in wealth which is just about $200,000. That's how Swedish Social Democrats define "rich"...
14 posted on 03/28/2007 7:06:43 PM PDT by AdrianR
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To: WesternCulture

Yes, but the article specifically states that the government is offsetting the funds with a reduction of the exemption on pensions.....they're just shifting the tax.


15 posted on 03/28/2007 7:09:41 PM PDT by Psycho_Bunny (I'm holding out hope that at least the DEMOCRATS might accidentally nominate a conservative.)
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To: AdrianR

Geez, their definition of rich and my definition differ widely.


16 posted on 03/28/2007 7:09:52 PM PDT by Army Air Corps (Four fried chickens and a coke)
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To: Army Air Corps

"Baby steps in the right direction. I am genuinely happy for the Swedish people."

Not a revolution, but I wouldn't call it baby steps either.

- $145 is $1740 on an annual basis. Now multiply this with the number of workers. Even though Sweden is a small country, you could easily imagine all the fun our politicians deliberately refrain from - like sending money to corrupt Socialist Regimes in Africa that end up on a Swiss bank account, calling it 'foreign aid', etc, etc.


17 posted on 03/28/2007 7:28:58 PM PDT by WesternCulture
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To: WesternCulture

True enough. That is $1,740 that Swedes can put in the bank or spend on goods and services or a combination thereof. Anytime that politicians have less money with which to commit mischief is a good thing.


18 posted on 03/28/2007 7:31:56 PM PDT by Army Air Corps (Four fried chickens and a coke)
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To: Army Air Corps; AdrianR
In Sweden, $200 000 will buy you, for instance, an ordinary house or three well equipped Volvo XC90 SUV's.

If you can afford this, which a lot of middle class people can (although few would buy three Volvo XC90's instead of being satisfied with one such car) the system views you as 'rich.'

The logic is therefore, in one way, that anyone who COULD afford to live a typical middle class life, but chooses to live very frugally although having a lot of money on a bank account ought to be punished. It's not the basic intention of the tax, but it's a somewhat bizarre side effect.
19 posted on 03/28/2007 7:51:46 PM PDT by WesternCulture
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To: Army Air Corps

"Anytime that politicians have less money with which to commit mischief is a good thing"

- Cheers to that!


20 posted on 03/28/2007 7:53:17 PM PDT by WesternCulture
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