Government promises tax cut for pensioners

Government promises tax cut for pensioners
Sweden's centre-right government has indicated it will include tax cuts for pensioners to the tune of five billion kronor ($688 million) in its impending spring budget.

The tax cuts are planned to take effect from January 1st 2011 and will entail a reduction of 1,200-1,400 kronor per year for people on a guarantee pension and born before 1937. A pensioner with an income of 150,000 kronor can expect to retain 2,400 to 2,800 kronor more than is currently the case.

Combined with the government’s two previous rounds of tax cuts, guarantee pensioners will see their tax bills drop by 4,500 to 5,400 kronor per year, depending on municipal tax levels in their locality.

“Pensioners will see a clear improvement in their wallets,” said Christian Democrat leader Göran Hägglund after the proposal was announced at a meeting of the four leaders of the centre-right Alliance in Huskvarna in southern Sweden.

But the National Pensioners’ Organisation (Pensionärernas Riksorganisation – PRO), with 406,000 members, had mixed reactions.

“It’s very nice that attention is being directed to pensioners,” said organisation secretary Anders Teljebäck.

He stressed however that tax cuts for wage earners had so far exceeded those for pensioners, a state of affairs he wished to see rectified when the spring proposal is formally presented on April 15th.

“We won’t be happy until we get that, and we won’t give up. Nothing else will do,” said Teljebäck.

Social Democrat economic policy spokesman Thomas Östros was scathing in his criticism of the proposal.

“The only decent thing to do is to tax wages and pensions at the same level,” he said.

Östros referred to an opinion poll commissioned by his party in which nine out of ten respondents wished to see the same levels of taxation for wage earners and pensioners.

Prime Minister Fredrik Reinfeldt said the proposal would close a third of the taxation gap between salaried employees and pensioners, while also defending the government’s policy of cutting income taxes at a somewhat higher rate.

“It creates jobs and anything that creates jobs will also bolster the pension system,” he said, adding that people in work often have higher living costs.

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