GDP per capita rose by 50 percent in Sweden between 1995–2016. In 2018, researchers at Oxfam and Development Finance International named it the most committed country to reducing inequality, and according to the World Happiness Report 2020, it’s the 7th happiest place on Earth. So I guess it’s safe to say the Swedes have it good. But what exactly is their secret?
Well, this Swedish citizen thinks it’s purposeful internal politics. In a recent Facebook post, they used their own life as an example to explain taxes, healthcare, and other vital parts of their country. The post soon went viral, making its way into personal feeds abroad, too. Foreigners — especially Americans — even got jealous.
Image credits: Fredrik Rubensson
As Elke Asen, a Policy Analyst with the Tax Foundation’s Center for Global Tax Policy, pointed out, Scandinavian countries are well-known for their broad social safety net and their public funding of services such as universal healthcare, higher education, parental leave, and child and elderly care.
Of course, high levels of public spending require high levels of taxation. In 2018, Denmark’s tax-to-GDP ratio was at 44.9 percent, Norway’s at 39.0 percent, and Sweden’s at 43.9 percent. For comparison, the same in the US was 24.3 percent.
In 2018, these three Northern Ruropean countries raised a high amount of tax revenue as a percent of GDP from individual taxes, almost exclusively through personal income taxes and social security contributions.
One way to analyze the level of taxation on wage income is to look at what experts call the “tax wedge,” a figure that shows the difference between an employer’s cost of an employee and the employee’s net disposable income.
In 2018, the tax wedge for a single worker with no children earning a nation’s average wage was 35.8 percent in Denmark, 35.9 percent in Norway, and a whopping 43.0 percent in Sweden. Although Denmark and Norway are below the OECD average of 36.1 percent, their tax wedges—and Sweden’s—are higher than the U.S. tax wedge of 29.6 percent.
By international comparison, Sweden is a prosperous country that evenly distributes wealth between its citizens. Its sociopolitical model consists of three fundamental pillars: a labor market that facilitates adjustment to change, a universal welfare policy, and an economic policy that promotes openness and stability. And after reading the now-viral post on Facebook, people have been saying it must be working.