Memories of Socialism

I remember that the family I stayed with in Sweden was griping A LOT about their tax system. They told me that the government encouraged a certain style of living. If they had porcelain tiles in their bath/shower, instead of the rubberized wallpaper they had, they would be taxed. If they had a wrought iron decoration on the outside of their house, they would be taxed. They were particularly sad about Bjorn Borg. He had been unable to come home to Sweden because he was overly successful. This had happened prior to my visit. These lessons helped to congeal in me a fear and loathing of anything that smacks of socialism. I found a blog post that addresses this:

Globalization has been an ally of taxpayers. Because it is increasingly easy for jobs and capital to cross borders, politicians are being forced to eliminate or reduce taxes that penalize productive behavior.

The latest example comes from Sweden, which is now eliminating its tax on wealth:

Maybe the next Bjorn Borg won’t feel compelled to move to Monaco now that Sweden plans to scrap a decades-old “wealth” tax that imposes levies on assets — not just on income. …The move, expected to be approved by parliament later this year, underscores the country’s efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state.

“It’s not sustainable to keep taxes that radically diverge from other countries,” Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press on Thursday. “Not if you want the money to stay in the country.”

Sweden is not alone. The article notes that other nations have been forced to eliminate this punitive levy on capital:

Several European countries have dropped taxes on wealth in the last decade, including Denmark, the Netherlands and Finland.

Switzerland and Monaco seem to be the favored destinations of Sweden’s tax exiles. At least the new government recognizes the damage caused by punitive tax rates. The wealth tax is being abolished in an effort to lure talented entrepreneur and capital back to Sweden:

[T]he wealthiest Swedes have fled the country, including IKEA founder Ingvar Kamprad, No. 4 on Forbes magazine’s list of the world’s richest people. He lives in Switzerland. Five-time Wimbledon winner Bjorn Borg moved to tax-haven Monaco in the late 1970s. The principality is also home to many Swedish sports stars such as Alpine skier Anja Paerson, high-jumper Kajsa Bergqvist and triple jumper Christian Olsson.

The government says more than 500 billion kronor, the equivalent of almost C$83 billion of Swedish capital, is outside of the country’s borders. “This is money that, if it was brought home, could be invested to create jobs and welfare in Sweden,” the country’s coalition leaders said in a joint statement this week.

Stefan Persson, the main owner of fashion retailer H&M, threatened to leave the country in the 1990s because of the wealth tax. The Social Democratic government at the time changed the law, giving him an exemption.

…Borg, the finance minister…added it was necessary for Sweden to remain competitive in an increasingly globalized economy. “It’s a step on the way back toward making Sweden an entrepreneurial society,” he said.

posted by Daniel J. Mitchell on 03.31.07 @ 1:42 pm

http://www.cato-at-liberty.org/2007/03/31/sweden-repeals-wealth-tax/