Sweden in new round of cut taxes to boost employment
Published: 19 Sep 09 14:30 CET | Print version
Online: http://www.thelocal.se/22180/20090919/
A new measure to tackle Sweden's rising rate of unemployment has been proposed by the Swedish government, with tax cuts of 10 billion kronor ($1.4 billion) hoped to stimulate the job market.
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The proposal, to be presented to parliament on Monday as part of the 2010 budget bill, is the fourth leg of a tax cut programme introduced in January 2007 to stimulate employment.
The fourth leg would enter into force on January 1, 2010.
With that step, 99 percent of full-time employees will have had their taxes reduced by a total of 1,000 Swedish kronor per month, while 75 percent will have had reductions of 1,500 Swedish kronor, the government said.
"The coalition government has agreed on reforms for jobs and entrepreneurship that will increase employment in the long-term. It has to be more profitable to work and more companies should be able to hire employees," the government said.
Since coming to power in late 2006, the government has launched a series of measures aimed at inciting Swedes to return to the job market instead of living off of state subsidies.
But instead of declining Sweden's unemployment rate has risen, from 5.7 percent in August 2006 to 8.0 percent in August 2009. Much of the increase has been attributed to the international economic crisis.
The government said it would also propose a series of measures in the budget bill aimed at boosting incentives to start companies and improve the business climate.
What do you think? Leave your comment below.
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Sweden's tax system seems to me to be a bit of an oddity with a relatively low corporate tax rate but has very high personal taxes on the middle class.
Here's how Sweden compares to the rest of the world. If comparing to Canada on this chart you have to ad the federal and provincial taxes together to get personal income tax.
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
It would make no difference if employees were paid their net wages and the tax openly charged as such.What counts is what happens at the margin ie when people are unemployed. The minimum price of labour is, broadly speaking, equal to the amount that an employer will pay so that an unemployed person will end up no worse off than on benefit. Otherwise they cannot afford to go to work!
This is why workers tend either to be replaced by machines, or the work does not get done at all, or it goes to a third world country.
The tax system is a disaster. Cuts in taxes on wages will tend to reduce unemployement be reducing the cost of labour to employers. Better still, get rid of them altogether so that the minimum cost of labour is no more than someone will receive in unemployment benefit.
How to pay for public services? Tax the rental value of land instead (markvärdesavgift). This does not discourage economic activity. On the contrary, it promotes it.
http://www.landvaluetax.org/international/vad-aer-markvaerdesavgift.html
A land-use tax is appealing because most of the time added value to (urban) land is really improvements to the structure above it (property). The distinction between "land" and "property" is important because improving property is also a good thing.
Additionally, one should tax "bad things" -- stuff that's bad for us or society when over-consumed -- like petrol, car use in cities, roads, drugs and even fat. Such taxes go some way to correct market failures and don't depress the economy.
To be clear the goal is not to "cut tax revenue", but rather a comprehensive tax reform which shifts taxing away from "good things" and onto "bad things".