(Bloomberg) -- Sweden’s government pledged to lower marginal tax rates to benefit higher earners from next year as part of a spending boost to help the largest Nordic nation’s faltering economy.
The reform extends tax deductions across higher income groups at a cost some 4.7 billion kronor ($460 million), aiming to increase productivity and motivate people to educate themselves for more qualified roles, Finance Minister Elisabeth Svantesson said in an op-ed in the business daily Dagens Industri.
The announcement is part of a package that the center-right cabinet had prepared to introduce already this year, but was postponed to avoid the risk of fueling inflation. As price increases have now subsided, Svantesson has vowed to raise expenditure next year to spur a rebound from almost three years of stagnation.
According to an inquiry into the effects of the move published last year, it would lower the top marginal tax rate to 52% from 55%. Svantesson said it is an important step toward the government’s ambition to allow employees to keep at least half of their incomes. The move will benefit about 450,000 employees with monthly wages of 65,000 kronor to about 180,000 kronor, the news agency TT reported.
“The current progressive tax deduction means that a specialist doctor or a research manager will have to pay more than half of every additional dollar earned in taxes,” Svantesson and her co-authors from coalition parties said. “That leads to a lack of labor in highly-qualified professions, and to the number of hours worked being too low.”
The move immediately triggered criticism from opposition parties that argue the government’s policies are disproportionately benefiting the rich.
“This is a mockery against families that struggle to make ends meet,” Mikael Damberg, a former Social Democrat finance minister, told TT. “It makes me annoyed, because it shows that the government doesn’t understand how regular people live today.”
While Sweden’s income inequality remains low by international standards, the share of income going to the top 1% earners has increased in the past decades, reaching a record level of 10.4% in 2021 before declining slightly to 10% in 2022, according to the latest available data from Statistics Sweden.
(Updates with details, including comments from opposition, from fourth paragraph.)
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