The proposal calls for taxes to be lowered for retirees with annual incomes below 363,000 kronor ($55,000), which according to the government covers 90 percent of Swedes aged 65 and older.
For a single pensioner with little or no retirement income, the cuts would amount to 2,600 a year, assuming a local tax rate of 31.44 percent. People living in municipalities with higher local taxes would receive even more tax relief.
Overall, the roughly 25 percent of pensioners who qualify as low-income, would pay about 200 kronor per month less than they currently do.
“The proposal is very well-targeted. It’s a reform that is well-motivated from a distribution policy standpoint,” said Prime Minister Fredrik Reinfeldt.
For retirees with incomes greater than 130,000 kronor, the tax relief will be significantly lower.
A pensioner who earns 150,000 kronor a year would see a tax bill reduced by a total of 818 kronor, or 68 kronor a month.
According to the government, the proposal would cost about 2 billion kronor annually and would take effect at the end of the year.
But an association representing Sweden’s pensioners doesn’t think the government’s proposal is worth much.
“Our demand is that the taxation of pensioners by placed on equal footing with the taxation of wage earners. This isn’t even close to that,” said Anders Teljebäck head of the National Organization of Pensioners (Pensionärernas Riksorganisation – PRO).
According to Teljebäck, today a pensioner with an income of 13,000 to 14,000 kronor per month pays 600 kronor more in taxes per month than a wage earner.
“A pension is deferred salary and should be taxed as such,” he said.
The opposition is also critical of the government’s proposal.
“It’s clear that according to the government a pensioner who earns 150,000 kronor a year a high wage earner, as they only get a 68 kronor tax reduction. I’m afraid that they are going to be disappointed,” said Thomas Östros, economic policy spokesperson for the Social Democrats, to TT.