Why the Swedes go for high taxes?
Why the Swedes go for high taxes?
An American academic in Stockholm
Why do low income Americans hate taxes so much while wealthy Swedes don’t mind paying higher taxes. Both groups are supporting an economic system that seems to violate their own self-interest?
That’s the question Carnegie Mellon researcher Christina Fong explored in a recent project. Americans work from Jan to April to pay taxes. Swedes work from January to August to pay taxes.
“If only income mattered and beliefs about fairness didn’t matter at all, then you should expect to see the world that traditional economists expect you to see, which is that poor people demand redistribution (of tax revenue) and rich people oppose it,” she writes. “The fact that we don’t see that requires some explanation, and a big part of the explanation is that these beliefs about fairness matter a lot. So if you’re poor but you think that the rich people really deserve to be rich, then you’ll accept having less.”
She says Americans believe in the idea of fairness – that you will earn more money if you work hard. They are more concerned with fairness than the actual degree of income equality or inequality.
She said both Swedes and Americans would give up 20% of their annual income to achieve a world that was fair if they perceive it as unfair. Some studies Dr. Fong and others have done illustrate that people will fork over money to ensure fairness. (Click here to read recent studies by Dr. Fong and her collaborators).
Sweden remains a fascinating study in political economy. P.J. Rourke’s book “Eat the Rich” (which now sells for .01 cent on Amazon used) was a good first introduction for me to the Swedish economy when I was an undergrad. He used Sweden as a chapter example of “good socialism” and showed the woes the Swedish economy faced. I’d be curious what readers think of future growth prospects and issues for Sweden’s economy and whether the U.S. should consider aspects of its model or not?