Response to interpellation 2024/25:70 on tax cuts in the budget
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
I believe that good growth is crucial for financing the welfare state and that high marginal taxes limit the economy 1. I propose to strengthen the job tax credit and remove the tapering so that it pays to get an education 1. I argue that lower marginal taxes lead to increased growth and that the government stands on the side of wage earners by lowering the tax on pensions and ISK 2. I believe that they have prioritized among the state's expenditures to finance a dental care reform 3. I argue that it is possible to do many things at once, such as taking responsibility for the state's finances, strengthening the defense and the police, and supporting households through an increased housing allowance 3. I want to kickstart the economy by lowering marginal taxes and argue that those who earn a lot pay more in tax 3. I argue that Sweden has a low national debt and that one prioritizes fighting inflation and welfare while simultaneously investing in the future 4. I believe that it is good to lower the tax for everyone 3. S argues that Swedish growth is the worst in the EU and that households have become poorer 5. S believes that tax cuts for the richest have a low multiplier effect and that the money should instead be used for public investments or an increased child allowance 6. S argues that Sweden has lower growth than many other EU countries 7.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! Ola Möller has asked me if I consider that the tax cuts in the budget have a reasonable distribution and if I intend to take any actions based on my standpoint.
Good growth is crucial for the Swedish economy to be able to finance our welfare systems in the future as well. A prerequisite for high growth is that we have high employment and a well-educated population. Strengthening the drivers for work and education has therefore been prioritized.
High marginal taxes on labor risk limiting growth in the economy. The Government is now taking further steps to strengthen the work principle and proposes an enhancement of the job tax credit, primarily for full-time workers with low and medium incomes in the range of 16,000 to 40,000 kronor per month. The Government also removes the tapering of the job tax credit in order for it to be worthwhile to educate oneself and take increased responsibility at work.
In order for pensioners to receive a corresponding economic improvement, the government also proposes a corresponding tax reduction for pensioners. The proposal to abolish the tapering has been calculated to be self-financing in the long run and is judged to lead to increased growth.
Pensioners with a pension of 16,000 kronor per month have an income that this time falls outside the range where the tax is lowered. This is, however, a group that in recent years in many cases has had a significantly stronger income development than other groups in society. The guarantee pension was strengthened by 200 kronor per month in 2020 and by an additional 1,000 kronor in 2022. Furthermore, the guarantee pension is a benefit that is adjusted for inflation, which has contributed to their pensions increasing faster than workers' incomes for a period of some years.
A prioritization of strengthening the drivers for work and education is expected to lead to fewer people standing outside the labor market and more people working more. In the long run, this will lead to higher pensions and more people receiving sufficient pensions.
Ola Möller (S)
Mr. Speaker! Thank you for the answer, Minister for Finance!
I appreciate the approach of highlighting Sweden's growth, which, with few exceptions, is the worst in the EU. During Elisabeth Svantesson's time in power, the Swedish economy has practically stood completely still; if anything, it has actually retreated. The Swedish people have seen ten years of real wage increases disappear, and savings have ended up in the pockets of food retailers and the banks' shareholders.
In addition to households becoming poorer, cuts have been made in welfare. Unemployment has reached the highest level in ten years, except for the pandemic. Furthermore, unemployment is now also increasing among academics, something that has not happened in ten years. To this should be added that we can read in the media that child soldiers have become the new normal situation in the country - a market driven by a very high demand for violent crimes.
It is completely obvious that Swedish growth needs to be strengthened. The holes that are draining our economic resources are enormous. Healthcare is running with gigantic deficits. In the shop window of the Tidö parties, Skåne, where I come from, the region has almost gone 9 billion minus in two years. These are monies that need to be borrowed and that will be pushed over to our children and grandchildren.
Besides the fact that we, which I am the first to admit, have a rotten regional governance in the form of the Tidö agreement, the reason is also that Elisabeth Svantesson does not take her responsibility and sends increased general state grants to the regions. She has betrayed the regions throughout this entire mandate period, Mr. Speaker.
To prevent child soldiers from emerging, we would need to strengthen the school. We would need to have a strengthened social service, and we would obviously need to ensure that jobs are strengthened. We would need a housing policy for new production and renovations, and we would need to pinpoint every young person who is drifting. But no, those funds do not exist.
Instead, Elisabeth Svantesson chooses to give herself over 3,000 kronor in tax reduction. These are funds that the Finance Minister, when asked directly, did not know what she would use them for. Besides the irony of a person having so much money that she has no idea what she should do with 3,000 kronor, this shows that one does not take particularly much consideration of the enormous common needs we have.
It also shows why it is bad growth policy to give so much money to a person who already has a lot of money. The savings rate, i.e., the money that is set aside from every krona one receives, is much higher among people with high incomes than it is among people with low incomes. One therefore gets much more bang for the buck if one gives it to people with lower incomes than if one gives it to people with higher incomes. The Finance Minister thus becomes marginally richer while all of us others become significantly poorer.
Mr. Speaker! I wonder: How does the Minister for Finance justify, from a growth perspective, that one invests most in those who have the highest savings ratio if the purpose now is to increase growth?
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! Thank you, Ola Möller, for the interpellation! It is important that we raise questions about growth.
I have had the privilege of submitting three budget bills - state budgets - to the Riksdag. When I took office a little over two years ago, we inherited high inflation, high unemployment, and low growth. I decided that we should work day by day to bring down inflation. This we have now done. We shall ensure that the economy starts moving again. Sweden is an interest-sensitive country. We are in a recession just like Germany and France, for partly different reasons.
The latest budget that we placed on the Riksdag's table was not as restrained as the two previous ones, even though they also supported the households. At the same time, we have now dealt with inflation. Then I think like this, and this is what drives me: I feel a responsibility to do everything I can so that Swedish growth will be stronger tomorrow than today, but also stronger in 15 and 25 years, and 5 as well for that part.
Then many different things are required. Investments in infrastructure, energy systems, education and research are required, but a tax system is also required that always ensures that what is best and right for growth is done.
It is not strange that Ola Möller and I do not share the view on marginal taxes in Sweden. I just think it is a pity that the Social Democrats have abandoned the tax reform principle of the 90s, which is to say that no one should have to pay more than 50 percent in marginal tax.
To those who wonder what marginal tax is, I can say that it is about how much one needs to pay in tax on the last earned thousand. We think the basis—the principle of half remaining—is good, while Ola Möller obviously thinks it is not a big problem to pay 56 percent in tax on the last thousand. One can have different opinions on this.
OECD and the Productivity Commission are quite clear that this hinders growth. But the thing is – and that is perhaps where Ola Möller and I differ, Mr. Speaker – that Ola Möller paints very many things in black and white: If you do this, you cannot do that, and if you do A, you cannot do B.
What we have shown with three budgets is that we stand on the side of the wage earners. We have lowered the tax for two consecutive years. We have lowered the tax on pensions. We have changed the reduction obligation so that it has become significantly easier and cheaper for those who are dependent on their car to refuel. We are now removing the aviation tax to ensure that one can fly in all of Sweden. We have lowered the tax on ISK for two consecutive years. The list can be made very long of what facilitates things for people and strengthens households' purchasing power - and at the same time actually affects growth.
Then I understand that we can have different starting points in exactly this, and I am not surprised that the Social Democrats would like to have a debate about lowered marginal taxes. When one lowered the marginal taxes oneself - or removed the wealth tax, which I thought was very good - it was done for good and noble reasons, but when a Moderate-led government lowers the marginal taxes so that they come down to 52 percent, it is apparently done for selfish reasons.
For me, it is about doing many things at the same time to ensure that the economy grows in the long run. How does the economy grow? I mentioned that just now. When the economy grows, which we know it does if we improve productivity, there are more resources for welfare, Mr. Speaker, and for financing defense, police, the judiciary, and much more. Growth is therefore A and O here. It is about getting the economy moving now and about implementing the right structural reforms today so that the economy grows next year and in the years ahead.
Ola Möller (S)
Mr. Speaker! It is interesting that the marginal tax rate was higher during the years when we Social Democrats were in power, but that growth was also significantly higher. The connection that the Finance Minister paints here, that is, that lower marginal taxes would give direct growth, therefore does not hold true.
The OECD, for example, pointed out in a speech by that organization as early as 2015. In a paper titled "We are in the same boat: Why reducing inequalities is positive for everyone" – which is just one of many papers published over the last 10-15 years – the idea that underpinned, among other things, the tax settlement of 1990, which the Minister for Finance brings up here, that increased inequalities would drive growth, is refuted. It simply is not true, and the Minister for Finance knows that.
It is the so-called horse shit theorem that is meant and which has been predominant in economic policy in Sweden since the 80s. The decades have however shown that the theorem does not hold; it is not the case that increased inequalities drive strong growth. Nor is it the case that the theoretical models applied when one says that this would be self-financing are correct. People are not rational, fully informed individuals, but people are just people. Therefore, one cannot act based on theoretical models, but the test of reality must be what determines what works.
It is also like this, which the Finance Minister knows: the multiplier effect, that is, how much effect one gets from every invested public krona, is much lower for tax cuts than when it concerns public investments, transfers, and public consumption. It is unequivocally so, and the Finance Minister knows that. Above all, the multiplier effect is lowest for tax cuts to the very richest.
Therefore, the question is why an increased child benefit would be worse than 3,000 kronor to the Minister for Finance. Why is a subsidy for a new apartment, so that a construction worker gets a wage, worse than 3,000 kronor to the Minister for Finance? It is actually the case that it creates something when one invests in certain effects. If we invest in the child benefit, children will have winter shoes, but if we invest 3,000 kronor in the Minister for Finance, a bank account will grow. It is difficult to walk through the snow in someone else's bank account.
That is why the effect of this becomes so negative. We do not get the positive effect for social development that we want through tax cuts for the richest. When Handels asks its members what they would do with 2,000 kronor, which is 66 percent of what the finance minister gets, they say: I would go to the dentist. I would eat my fill. I would have a child. That is what Handels' shop employees members say they would do with 2,000 spänn - and the finance minister does not know.
Yes, we have different views, but in my world, a high multiplier effect is better than a low multiplier effect. In my world, it is better for people to have whole teeth and be able to eat until they are full than for the Finance Minister to get 3,000 kronor and not know what to use them for. That is what I wonder: Why is it better for growth to give 3,000 kronor to the Finance Minister and a bit over 1,000 kronor to me than for someone to go out and spend the money on a pair of winter shoes for their children here and now?
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! As the saying goes – as one knows oneself, one knows others, or vice versa?
When I repeatedly hear Ola Möller talk about my potential tax cut, I must assume that Ola Möller seriously thinks that I am thinking of myself. But does Ola Möller know what? I have had many years in my life where I have turned over every krona - every krona - to be able to buy food for my children. I know exactly what it means to have tight margins, and there are those who have even tighter margins now.
My motivation in my political work is that both Sweden and the Swedes should become wealthier and have it better. Our roads, means, and methods look somewhat different. One can believe in science and research, or one can refrain from doing so. I shall refrain from talking about multiplier effects here; I have taught about that many times in macroeconomics at the University of Örebro. But it is unambiguous that Sweden has high marginal taxes. One can think it is reasonable that we pay 56 percent of the last earned thousand, and one can think it is unreasonable. There is a moral aspect, but there is also a growth aspect.
Above all, it is the totality of the policy that is interesting, that is, what is done in aggregate. Therefore, I think it is very interesting that Ola Möller is now highlighting that people cannot afford to go to the dentist, because what is this government doing? Yes, by prioritizing among the state's expenditures - for example, aid, interest deductions on unsecured loans and other things - we can finance the largest dental care reform in a long time. It is something that Ola Möller has never voted through and which means that the elderly get a significantly lower cost to go to the dentist.
It is, therefore, possible to do many things at the same time. It seems difficult for Ola Möller to understand, but that is how I think. This year, for example, the defense has [received] 27 billion more than last year. Police and justice have also received large additions. In a difficult and pressured time, we have both taken responsibility for the state's finances and supported households, for example, through an extended and increased housing allowance for single mothers and fathers. These are some of the things we do.
I and we want to get the economy started now. That Sweden has low growth now is not so strange considering the high inflation and the high interest rates, which have led to very many households holding back their consumption. We have, after all, larger loans than in many other countries and variable interest rates. But we are not alone in being in a recession. My focus is that the economy should get started tomorrow and the day after, but also further ahead. In that case, both infrastructure and energy systems as well as marginal taxes and much else play a role.
For those who are listening and wondering about the taxes, I can say that those who earn a lot pay more in tax. For example, a person who is well-educated and has a salary of 125,000 pays eleven times as much tax as a person who earns 25,000. We therefore have progressive taxation in Sweden, even if it does not sound quite like that on Ola Möller. One can have different opinions about that. I do believe, however, that it is good to lower the tax for everyone for two years in a row, as we did, and now also lower the marginal taxes. It is actually about time.
Ola Möller (S)
Mr. Speaker! I think it is a pity that the Minister for Finance chooses not to engage in the multiplier effect and, in response to my questions, explain why it is more growth-promoting to invest in something with a very low multiplier effect compared to investing in something with a significantly much higher effect. I do not understand the reasoning behind that, because it simply does not hold up.
The following is also interesting: Inflation is not a Swedish phenomenon, but Spain - which is social democratically led - has 3.4 percent growth, and Portugal has 1.9 percent growth. It is also a country that has a social democratically led government. The vast majority of EU countries, regardless of government, outclass Sweden in the growth league. They have also been in a situation with high inflation, but they have supported households through the crisis. In that regard, Sweden has stood out compared to, for example, its Nordic neighbors by not having an increased child allowance.
The housing allowance is one of the few things I have truly praised the government for, namely that one chose to maintain - and increase - the level of the housing allowance. Therefore, it pains me to see that it is now being cut by 775 kronor. Precisely the same individuals who cannot afford to go to the dentist will now be deprived of 775 kronor.
It is interesting that the Minister for Finance chooses the large dental care reform, because this is about the same girls who have answered in Handels survey that they cannot afford to eat until they are full. If they get pain in their teeth, they could, if they were given 2,000 kronor more, go and get them fixed. They are now losing their free dental care - that is the large reform.
I have nothing against reforms for better dental care for the elderly. I will think that is fantastically good when it is finally introduced in 2026 - that is, not next year but the year after that. But that one takes away the poor girls' free dental care is a major dental care reform that I do not understand why the Finance Minister is so proud of.
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! Thank you, Ola Möller, for a good discussion! There are clear lines of conflict and differences here, but also a good deal that we agree on. I believe that we both want Sweden and everyone who lives here to do well. As I have said, I have placed three budgets on the Riksdag's table. Looking at the overall distribution effects of the three budgets, the group that has the lowest disposable income is also the group that has received the highest percentage increase in income.
So, as I said, it is possible to prioritize fighting inflation and supporting households and welfare - which we did with 40 percent of the reform space this year - while simultaneously investing in making Sweden even wealthier and safer in the future. It is about prioritizing among the state's expenditures, and that is what we do. It is also about focusing and making the right efforts so that we actually become wealthier.
One can absolutely compare Sweden with Spain and Portugal if one wishes. I would, however, be careful about comparing with the growth they have right now, because these are countries that have huge national debts and problems. They will have difficulty handling the next crisis because they have enormous debts and are paying enormous amounts of money, and interest, on these debts right now. These are my colleagues, and I meet them every month. Many look with envy at the fact that we are so much in agreement in this Riksdag when it comes to frameworks and low national debt and that we actually keep our finances in order.
I intend to continue doing that. I also intend to continue ensuring that the Swedish economy grows so that we have more in the cake to share and ensuring that the purchasing power of wage earners and households is strengthened.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.