General Question

ETpro's avatar

Why Does Sweden Have so Many Billionaires?

Asked by ETpro (34202 points ) November 2nd, 2013

According to right-wing dogma here in the USA, we have to cut the effective tax rate for billionaires to one far lower than their office employees pay and get rid of most or all of our social safety net in order to protect our poor, beleaguered billionaires from bankruptcy. Perhaps it is so, but if it is, why do the Nordic countries with their high tax rate, a highly progressive one to boot, and with their solid social safety net, produce so many billionaires? Could their ideas work in the USA, or are they just some socialist/communist trick to delude us into bankrupting our terribly threatened billionaires?

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19 Answers

funkdaddy's avatar

I don’t think the article says what you think it says

At the same time, while Scandinavian success stories show that great companies can be born and innovate amid generous welfare states, they do have some cautionary tales for left-wing thinking. The Swedish tax code was substantially reformed in 1990 to be friendlier toward capital accumulation, with a flat rate on investment income. Sweden has no taxes on inheritance or residential property, and its 22 percent corporate income tax rate is far lower than America’s 35 percent. Even after spending cuts by the current center-right government, the Swedish public sector is still about half the total economy (much higher than here), but the taxes that finance it fall more heavily on consumption and less on business investment than in the U.S.

Unless you’re rallying for a consumption based tax system.

Jaxk's avatar

Interesting question. I’m not sure I would object to their taxation but I doubt the liberals would ever go for it. For instance no inheritance tax. Or a 22% corporate tax rate. Hell even the income tax on the federal level is only 25%. And the regulatory environment is much friendlier than here. You seem to want to cherry pick which taxes you like and then say ‘Oh if we could only be like them’. The Democrats would never go for it.

Seek's avatar

Bear in mind they’re also not spending a quarter of their GDP on flawed healthcare systems, and another 30% (numbers made up by me) on having 1000% the military of the rest of the world.

If we weren’t wasting so much money on pointless bullshit, we’d totally get by with a 22% corporate tax rate.

bolwerk's avatar

Far as I know, tax systems elsewhere tend to resemble the pre-Reagan USA tax code. That means nominally high marginal income taxes in theory, but in practice plenty of opportunity to spend to enjoy write-offs. It encouraged rich people to be spendthrift, rather than to hoard cash. Reagan actually did a backdoor tax increase by lowering marginal rates and eliminating credits and write-offs.

Of course, [b/m]illionaires don’t make their money off earned income. They make it from dividends and capital gains. American corporate taxes are high, which drives corporations off-shore, while taxes on unearned income are relatively low – it makes America a good place to be a [b/m]illionaire, and a bad place to have a high corporate net income.

@Jaxk: you’re cherry-picking the partisan delusions you like. The Republikans would go for it even less, since they’re against closing tax loopholes. They’re letting America be looted.

Jaxk's avatar

@bolwerk

I don’t think that’s true. Republicans pushed closing loopholes twice. Obama wouldn’t hear it, he wanted the rate hike. Now that he’s got his rate hike, he’s after another hike by closing loopholes. Obama is all about raising taxes to fund his big government plans. Just for curiosity, what loopholes do you think need to be cut?

bolwerk's avatar

@Jaxk: I’m not really an ideologue about it. Near as I can tell, all sorts of strategies would work. Raising marginal rates, especially on unearned income, and increasing the number of loopholes is an option that would likely encourage domestic spending, especially right now. So is reducing loopholes and flattening marginal rates, though that admittedly hurts the poor more.

The real problem with the U.S. tax code is it doesn’t respond to capital flight. Other countries realize our corporate taxes are higher than theirs and that we double tax much foreign investment income, so they compete by offering lower corporate taxes and an effective shelter from double taxation. For a similar reason, billionaires elsewhere set up roots in New York (which, in the U.S., has a reputation for high taxes), because the U.S. has somewhat unusually low income rates.

Espiritus_Corvus's avatar

Sweden invests in their society. They are well educated in very good schools, they are secure in the fact that they will always have worker protections, good pay, pensions, and at the time in their lives when we are scrambling to pay our kid’s way through college while trying to save and invest for our pensions, pay into a multitude of insurance policies to protect our properties and investments from tort actions (which are unnecessary and superfluous for the most part in a country who’s people are covered from womb to grave by their taxes), and health insurance with outrageous deductibles and punitive copays, etc., to keep up our aging bodies, and desperately trying to hang onto our jobs—at this same time in life, the Swede has paid into the system all their life and is relaxing on winter beaches in Majorca, Mykonos, or Florida during their annual five weeks’ paid vacations, enjoying much better health and longevity than the average American, or they are at their summer homes in the woods on Lake Siljan thinking of getting another Volvo next year. Americans are idiots.

Kropotkin's avatar

Is this the Sweden with one of the fastest growing rates of inequality and one of the highest youth unemployment rates from the OECD countries?

The only reason Europe (in general) has a more generous welfare and social security system is because there’s a lot more of it for the right-wing to dismantle.

The Nordic countries had the most dominant social-democratic parties and had the most time to establish their social democratic states. But, that’s history. It’s coming to an end. They’re simply going to be the last ones to fall.

Sweden appears to be the new poster child for “dynamic and efficient” neoliberal economic policies. Apparently they can have their social democracy with “flexible” capitalism and lots of billionaires.

It’s also bullshit.

No, their ideas will not work in the USA. They don’t even follow their own ideas any more.

Sweden and the Nordic model is a pipe-dream sold to naive American liberals who think capitalism can be made somehow compassionate and fair. Sweden will sooner follow the US model.

ETpro's avatar

@funkdaddy I am not really a left wing thinker. I just know that the right-wing stuff we’ve been doing for most to the last 30 years hasn’t been making America a healthier economy, unless we want to become a banana republic. I’d like to see our corporate tax rate cut, but leveled so that small business—the real economic engine of job growth—aren’t the only ones forced to pay the nominal rate. There are numerous multinational corporations in America that get tax refunds or pay no corporate taxes on incomes in the hundreds of billions and earnings in the 11 figure range. I’m fine with tax on consumption when it only targets conspicuous consumption. Essentials like non-luxury food, heating, basic clothing, and basic housing should not be taxed,

@Jaxk I thought we’d discussed this before. See my statement above on corporate taxes. Out plan damages our economy. We should level the playing field between small businesses and mega multinational corporations, and substantially cut the top rate. You may be right that most Democrats wouldn’t go for it. It would take a great explainer to get the rationality of that approach across to the populists and unionists.

However, I’d need to see evidence before I would accept that the regulatory environment in Sweden is far more lax than in the USA. There, I believe it is you who are either cherry picking or just making stuff up. Looking for facts, I found this, and this, and this. They all document the exact opposite of your claim. So who’d picking cherries here?

@Seek_Kolinahr Those healthcare and defense costs are indefensible and are hurting us. We’d be wise to do reduce them, making sure in the meantime that mega multinationals don’t get by with Zero tax.

@bolwerk I’m with you. Things were working far better in America prior to Reagan’s Voodoo Economics than they ever have since.

@Jaxk As you’re so fond of saying, nice try. Reagan cut top rates by 50%. Obama raised them by 12% and you’re claiming any further revenue enhancement, even by tax code simplification, is out of the question? Get real. Reagan closed a ton of loopholes to try to make his plan work. Even so, it didn’t. He tripled the national debt in his 2 terms. His Voodoo Economics is what launched us on the course for the massive debt we have today. But most of the loopholes he eliminated have been bought back by the lobbying money available to the rich. So the percentages noted above, lopsided though they are, don’t begin to tell the real story.

@bolwerk Cleat thinking. Thanks for the thoughts.

@Espiritus_Corvus That’s my understanding of their system, as well. It’s interesting what the right wing here, being free from the evidence based Universe, thinks is going on there.

@Kropotkin The actual GINI Index in the US is 45 and Sweden is just 25. It’s the second lowest GINI index in the world, second only to Denmark. Here’s how the actual inequality rate is growing in the US. Here are the two nations compared in growth of inequality.

Youth unemployment is an artifact of rapid immigration of mainly poor, uneducated populations. In the USA, 15% of the youth population is out of school and out of work. In Sweden, it is half that. The inflated numbers you see for Sweden count those who are in school or job training programs as unemployed. Do the same for the USA and out numbers are much worse than those in Scandinavia.

So yeah, there’s some bullshit being slung. But I’m not slinging it.

Jaxk's avatar

@ETpro

The orginal link you posted says the Swedish regulatory environment is much less than the US.

“Sweden also has a relatively lightly regulated economy. There are rules about public health and environmental protection, of course. But Sweden is arguably further down the neoliberal path of dismantling purely economic regulations than the U.S.”

You didn’t need to go through all that research to find it, just read your own link.

Kropotkin's avatar

@ETpro Your original question was as to why Sweden creates so many billionaires. I’m not sure why this is something to value or boast about, and regardless of the immigration they have, Sweden has recently been rapidly moving to the right-wing and abandoning its social democratic values (and most recently on the pretext of immigration.)

They’re the new poster-child of neoliberal economics, and serve a propaganda purpose in different ways to different audiences. To American liberals they’re a shining beacon of how capitalism “can work for everyone”, and to right-wingers they’re an example of how liberalizing their economy makes them “more efficient” (and creates more billionaires.)

Just as @funkdaddy pointed out, I don’t think the article says what you think it says, and you seemed to have missed the rapid rise in Swedish inequality which started around 1990, long before the recent rise in immigration, and around the time that they started moving away from their social democratic model.

It doesn’t matter that they’re still far more equal than the USA. Most of Europe is far more equal than the USA. Europe had stronger and more effective labour movements, and had decades worth of social-democratic governments building up welfare states which the USA never had to the same extent.

Looking at snapshot comparisons between the USA and Sweden, or almost any other European country, is misleading. The trend in Europe (and the Nordic countries) is to follow the US model, the welfare state is continually attacked and eroded with arguments that it “inhibits growth” and “incentivises laziness”, and all the other rationalisations for trickle-down policies you’ve heard in decades.

The right-wing (who just happen to represent the propertied rich, and large business interests in general) in Europe have been pushing back ever since the 70s and 80s and succeeding. In some cases, like Sweden, this push-back has started more recently.

What you might want to ask yourself is why Europe (and the wonderful Nordic countries) is trying to emulate the US, and is seemingly inexorably moving toward a more austere form of capitalism with an ever smaller public sector, decreasing union membership, and “trickle-down” economic policies.

bolwerk's avatar

Conservatives in Europe are often perfectly willing to give their own kind a social safety network. That’s why Merkel is willing to make sure Germany’s social safety network stays intact, while demanding savage cuts to spending in Mediterranean countries.

funkdaddy's avatar

@ETpro – understood and rereading my post it probably could be taken less lightly than intended. I know we’ve discussed some of this before and remember your preference for a highly progressive tax rate. Their system doesn’t seem to accomplish that as it stands now, so that was my thinking.

Come on over to the flat tax darkside ;) Close all deductions except college interest, farming, and charitable donations. First $25,000 of income tax-free for all entities, after that everyone gets the same rate to balance the budget and pay off a portion of the debt until it’s gone. Then we all get a tax break. Wheeee.

It would be interesting to see what people in Sweden are angry about with their system. Do some long for the good old days? Are there rallies and cries of succession from the extremes?

ETpro's avatar

@Jaxk, @Kropotkin, @bolwerk & @funkdaddy Interesting. Perhaps what I admire in Sweden is what’s left there as right-wingers dismantle all that once was good. They got off to a late start there as compared with the USA.

I would note that the people who are billionaires there now were so before any right-wing ideology took hold. That did not have anything to do with their success.

chinomoreno's avatar

As far as I’m concerned, Sweden is one of the countries with the highest quality of life. The government applies all the efforts to help the citizens of country to live their life in a wealthy way

ETpro's avatar

@chinomoreno I think that’s true, and at a time when disparity of wealth in the USA is approaching that of banana republics, I an loath to join @funkdaddy and his flat-tax dark-side designed to push ever more of the tax burden onto the poor and middle class.

funkdaddy's avatar

@ETpro – ouch!

Let’s say you make $24k in my dark dark world. I’m saying you don’t have to worry about federal income tax, you need that money for other things.

Let’s say you make $40k. I’m saying tax $15k of that at whatever flat rate balances the budget and pays off the national debt at a fair rate (10 to 20 years?). So, what 15%, 20%? Let’s say 20%, because I’m evil and running amok. So on $40k you’d pay $3000 in income tax. A 7.5% effective tax rate.

Let’s say you make $65k (this is your middle class), you’re taxed on $40k of it at that same tax rate. So $8000 or a tax rate of 12.3%.

Let’s say you make $100k, $75k is taxed and your effective rate is 15%.

So finally, top quintile, average income is $265k, almost all is taxed ($240k) and you pay $48k in taxes for an effective rate of 18.5%.

And your super rich that you’re worried about essentially get a 20% tax rate on all income.

So, about that tax burden?

talljasperman's avatar

Maybe it is in swis franks and not comparable to real American currency. Africa has some contries with trillion dollar notes and the bills or notes are worthless. We don’t call the trillionaires.

ETpro's avatar

@funkdaddy I like the simplicity of a flat tax. But it is ultimately regressive. You are playing with the bottom brackets. Nothing would change for them. If actually implemented in totality, your plan might tax the super rich a but more than the current set of exemptions. They typically pay rates between 10 and 15% right now. But the thing is that the rich gain a lot from the social order, and the super rich gain an enormous amount. It makes sense that they pay more of the burden than the average working slob who’s efforts serve to make them richer, and who is struggling to keep his or her head above water.

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