Response to interpellations 2023/24:101 and 117 on tax for persons with sickness and activity compensation
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
M argues that tax cuts through an enhanced earned income tax credit is a structurally correct measure to create incentives for work and compensate employees who have been affected by real wage reductions due to inflation 1 2. M emphasizes that sickness and activity benefits are already indexed to compensate for inflation 1 2 3. M believes that the safety nets for persons without work capacity should be strengthened by getting more people into work 3. M argues that tax cuts for those who work are important from a fairness perspective 3. S argues that it is deeply unfair that persons with sickness and activity benefits pay higher taxes than those who can work 4 5. S argues that these persons cannot leave their dependency on benefits and that the tax is an unfair gap that should be removed 4 6. S argues that the abolition of the tax would not affect inflation 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)
Madam Speaker! Eva Lindh has asked me how I justify the difference in taxation between persons with earned income and persons with sickness and activity compensation, and Karin Sundin has asked me why I and the government do not remove this difference. Eva Lindh and Karin Sundin call this the "funkisskatt" (disability tax).
Sweden is in a very serious economic situation. Inflation remains at a very high level and is putting pressure on households. The most important thing we can do for households is therefore to ensure that inflation is fought. For that to succeed, a restrained budget is required where expenditures are weighed against each other and where we do not throw gasoline on the inflation fire. It is precisely such a budget that the government laid on the table of the Riksdag on September 20.
But at the same time, we need to support households through the crisis. Many who receive benefits and transfers have received full or partial compensation for the high inflation. For example, the sickness and activity allowance is adjusted for inflation. However, the wage earners have suffered a significant real wage reduction. Therefore, we are now ensuring that taxes are lowered broadly through an enhanced job tax credit. It is also a structurally correct measure. In order for more people to leave benefit dependency and support themselves, better incentives are required. In the budget, we therefore focus our tax cuts on those who work and who have worked.
But we also support the most vulnerable households. We extend the enhanced housing allowance, which means that families can receive up to 2,100 kronor more per month in extra allowance. We lower the fuel taxes by over 5 billion kronor. And the most important thing - I cannot emphasize it enough - is that we continue to fight inflation.
Eva Lindh (S)
Madam Speaker! I thank the Minister for Finance for the answer and for the fact that we can debate this important issue here today.
When the Moderate-led government introduced the so-called earned income tax credit in 2007, it was the first time we received a tax gap between those who work and those who have other types of income. When wage earners received the earned income tax credit, persons with sickness and activity compensation were not included in these tax reductions. This means that persons who have these compensations pay more in tax than others. It hits hard against persons with functional variations and against the severely ill.
On 1 January 2024, the gap widens further. Pensioners are compensated with reduced tax when the job tax credit is increased this time – but not people with sickness and activity compensation. It affects those who actually cannot work. Over 260,000 people in Sweden live on sickness and activity compensation. Many receive barely 10,000 kronor a month before tax is paid, and it is difficult to live on that. Being sick or having functional variations does not become easier because one is also poor.
From a fairness perspective, there is no sense of reasonableness in that those who, for various reasons, are currently unable to work should pay higher taxes than those who can. Naturally, it should pay to work, and it usually does if one has a full-time salary compared to, for example, a pension or compensation from social insurance. Various incentives that stimulate work are already built into these systems. Furthermore, there are a number of other strong drivers for gainful employment that have nothing to do with the level of taxation, namely the will to work and the will to contribute.
High earners should be encouraged to work more. Those who cannot work should be punished. It is important for several reasons that a tax system is both fair and perceived as fair, and this tax gap is deeply unjust. It is unjust that people who have chronic illnesses or have suffered injuries that prevent them from working pay higher taxes than others. This unjust tax gap must be removed. People with sickness and activity compensation should not be forced to pay higher taxes than others.
The proposal therefore means that these people pay more in tax than others. When we had the same situation regarding pensioners, it was also an unfair tax gap. That has now been removed, and that is very good. But now what we call the disability tax is increasing because these people, just as I have said, pay higher tax than people who can work. I think that is shameful, and that is why I have posed the question to the Minister for Finance as to how she justifies the so-called disability tax.
Karin Sundin (S)
Madam Speaker! I must thank the Minister for Finance for the answer.
Inflation, says the Minister for Finance. The fight against inflation is the answer to all questions to the Minister for Finance these days. But the discussion here today is about the effects of the eighth job tax deduction that the government wants to introduce.
When it comes to the effects of this earned income tax credit for the millions of Swedes who work, Finance Minister Elisabeth Svantesson has been very clear that the credit does not affect inflation. Nor, when it comes to the country's 2 million pensioners, who receive a corresponding credit on their taxes, does it affect inflation. But when it comes to the tax for the 250,000 people who live on the extremely modest sickness and activity allowance, which the previous speaker spoke about, inflation is suddenly the core argument. That logic does not hold.
Calculations for this year show that the disposable income for persons over 30 years of age who receive sickness benefit at the lowest level could increase by approximately 1,400 kronor per year if the disability tax were removed. That is, a little over a hundred in the month. It is a hundred that would make a difference for those who have no money, but it is not a hundred that drives up inflation.
Madam Speaker! The job tax credit will cost 11 billion kronor to introduce. These are funds that, according to the Minister for Finance, will not affect inflation. It would cost an additional 290 million kronor to also give those who live on sickness and activity compensation the corresponding tax credit - 290 million in a state budget whose expenditures amount to 1,331 billion kronor. Madam Speaker, forgive my language, but from a fiscal policy perspective, the funkis tax is no more than a piss in the Mississippi.
It is not these millions that will determine whether Elisabeth Svantesson will succeed in her ambition to go down in history as a responsible finance minister in a difficult time – especially not seen in relation to other things the government is investing in. Let me take two examples.
The government intends to abolish the excise tax on plastic bags. The revenues that the state receives through the plastic bag tax would, if it were retained, with a good margin cover the cost of abolishing the funkis tax.
The government also wants to raise the ceiling for the repair deduction during 2024. Those who can afford to renovate or rebuild their house will be able to make deductions for a much larger portion of the costs than before. That proposal reduces the state's tax revenues by an amount equivalent to three changed funkisskatter.
The government could do both, but the government does not want to. And instead of explaining why the government does not want to, the Finance Minister blames inflation, as if it were people with disabilities who were driving it - as if it were the 290 million that an abolished disability tax would cost that was the fuel on the inflation fire and what makes a Finance Minister appear loose.
I do not think anyone would accuse the Finance Minister of being loose-handed if the government abolished the funkis tax, but it would be heartless not to abolish it.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I thank both Eva Lindh and Karin Sundin for the interpellations.
I can begin by stating that I believe Karin Sundin has misunderstood my answer, so let me go back a bit and explain why I mention inflation as an important part of this discussion.
Right now, inflation is the root of many of the economic problems we see in Sweden. It is inflation that makes what one works for worth less, and it is inflation that makes interest rates have to be raised so that very many people are now struggling with high mortgage costs. Inflation simply causes havoc, and if we do not get inflation down, it will be a major challenge for Swedish households and the Swedish economy in the years ahead.
The question is, of course, which we will discuss in the next interpellation debate, what is driving inflation. Yes, it is first and foremost the budget as a whole. If one were very expansive, which one usually is in a recession, inflation would be affected in this situation.
The reason I mention inflation in my response in this interpellation debate is, however, primarily that our indexed systems mean that many are compensated for inflation. We have systems that index, for example, the guarantee pension, the sickness and activity allowance, and other parts of the compensation systems. On the other hand, those who work are not compensated, and very many have now received a real wage cut. The increase that has been seen over a decade has now actually disappeared due to inflation.
In that situation, the government compensates ordinary wage earners through further tax cuts. The interpellants seem to mock this. I mean that it is reasonable that the single woman who has two children, who works as an assistant nurse – whether it be in Örebro, Stockholm, or wherever it may be – and who has seen her real wage fall, gets a tax cut. It is also structurally important that we lower the tax for those who work; we know that it fundamentally leads to more jobs and more money for the welfare system.
With this said, many are having a tough time right now. If you live on sickness and activity compensation, you definitely have it tough, but you have received a compensation for the inflation. Now we are also lowering the tax for those who work, which is fundamentally reasonable and right.
My work going forward will involve a great deal of taking us through the situation we find ourselves in with precisely high inflation. We see that it is being dampened, and I hope that it will come down properly. That is what the Swedish economy and Swedish households need.
Eva Lindh (S)
Madam Speaker! Let me begin by stating that the Minister for Finance and I agree on a few things. Inflation is a major problem. We need to fight inflation; that is something the Minister for Finance and I completely agree on. I wanted to say this as something fundamental for the continued discussion. The Social Democrats also take responsibility for fighting inflation.
Let me also state that we also have an earned income tax credit in our budget. However, it is targeted at low- and middle-income earners.
But now this is about the completely unjust tax for people with sickness and activity compensation. This is deeply unjust. For me - and for us - it is about seeing and taking care of also that group, who have it tough financially already as it is.
It is also about a sense of justice. Why should people with sickness and activity compensation pay more tax than we who work do?
I am deeply pleased that the unfair pensioner tax has been abolished; it is very good. I do not understand the logic here, however. It is said that one is now targeting those who work and who have lost ten years of real wage increases due to inflation, and this is absolutely a major problem. But why can one compensate the pensioners so that they pay less tax than those who have sickness and activity compensation? I just cannot make it add up.
That is why it feels so deeply unfair that moving forward we will not only have the functional tax that we have today, but from the turn of the year it will also be higher. The difference will become greater between those who pay higher tax and us who work.
I can only say this briefly: I think we should abolish the unfair functional tax today.
Karin Sundin (S)
Madam Speaker! It is interesting to hear a Moderate Finance Minister speak about the importance of increasing the grants for specific groups. However, what we are talking about here are not the grants.
I know that many within the funkis movement see the funkis tax as a penalty tax. It is perceived as a punishment for those who cannot work because they do not contribute financially to society. It is easy to understand this perception when listening to the Finance Minister's response, where she describes the job tax credit as an effort so that more people will leave benefit dependency and support themselves.
We completely agree that those who can work shall work, for it is through people's work that we build society and finance the school, the healthcare, the elderly care, and everything else that we call welfare. But we cannot, as the Finance Minister does, turn a blind eye to the fact that there are people who actually cannot work.
The people we are talking about in this debate are individuals whom society, based on democratically made decisions and through the state agency Försäkringskassan, has assessed as incapable of working like others. People living on sickness benefits are people who have an illness or a disability that means they will never be able to work full-time. They are people with severe mental illness. They are people with brain injuries. They are people with Down syndrome. They are people living with severe pain due to congenital or acquired injuries.
They will not be able to leave the dependency on subsidies and support themselves, as the Finance Minister tries to make it seem when she describes her policy. On the contrary, this is a group of people who constitute a clear argument that all of us others who can work should also work, so that Sweden as a society can afford the welfare and can afford to finance a dignified life for everyone.
One can discuss how a dignified life should be measured in economic terms, but honestly, there shouldn't be so much to discuss when it comes to the disability tax. We cannot have a tax system that punishes sick people and people with disabilities.
I want to ask the Minister for Finance once more: Why does the government not remove the completely unreasonable and deeply unjust disability tax? Is it that the government wants to punish people with disabilities? Does the government want already poor people to become even poorer and to an even greater extent dependent on benefits?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! One never ceases to be surprised. One can be asked in the chamber of the Riksdag if one wants to punish people who cannot work.
Our outermost safety nets exist precisely for people who do not have the capacity to work. They are important, and they must be strengthened. They are strengthened, among other things, by even more people entering the labor market and working. That is exactly how we can ensure that our safety nets function.
Something I said in my previous post and that I want to repeat is that inflation has hit incredibly many people very hard. Many of us in this chamber manage the cost increases, but those who had small margins before inflation hit have even smaller margins now.
Very many women and men have lower incomes. They toil and work and clock in every day. They struggle to make ends meet for their own livelihood, but they also participate and contribute to the common good. This is about, for example, a strengthened defense and improved welfare, but also about ensuring that the safety nets are there. These people have not received any compensation during this inflation crisis; instead, their wages have been eroded. Lowering the tax for those who work is therefore also important from a perspective of fairness.
Others, who have different forms of compensation, have received an increase through indexing due to inflation. When it comes to the sickness and activity compensation, the level is almost 10 percent higher. It is still the case that the person who has sickness and activity compensation has a very small income, but they have nevertheless been compensated.
Fundamentally, I want to return to inflation. It is not that I am using inflation as an argument for this group, but it is important to emphasize this. As Eva Lindh pointed out, we agree that inflation should be dampened; this must be done. Then it is a bit surprising that the Social Democrats have friends in politics who perhaps do not view inflation in quite the same way. Both Vänsterpartiet and Miljöpartiet have presented budgets that would increase inflation significantly.
If you are, for example, a single mother or father with a lower income, you should know that this would lead to continued high inflation. It would also lead to higher interest rates and even higher costs. Regardless of whether you work or not, you should know that inflation would definitely have been driven up by the budget that Nooshi Dadgostar would have presented here in the Riksdag as Minister for Finance.
With this said: We intend to work to dampen inflation, and we intend to work to support households that are having a difficult time during this period. In addition to the indexations that occur, we do so, for example, by extending the increased housing allowance. I know that approximately 60 percent of those who receive this are single women.
We also do it by lowering taxes, for example on fuels, and by changing the reduction obligation.
All of this will facilitate for households, both for those who work and for those who do not work or cannot work.
Eva Lindh (S)
Madam Speaker! We Social Democrats believe, once again, that inflation must be fought. We are doing so also with our budget.
The Minister for Finance spoke about friends. The government's friends, in any case, spoke very much during the election campaign about the group that has sickness and activity compensation. Therefore, it is surprising that they stand behind, and are actually a part of, the government's policy and present a proposal that increases the gap between those who work and those who have sickness and activity compensation. It is truly surprising.
It is still strange. High earners are to be enticed to work more. But one is not enticed to work more because one becomes poor. It is rather the case that if one has sickness and activity compensation, the economic circumstances are precisely so tough that one perhaps cannot be rehabilitated. We know that is the case. If one has a severe illness, one cannot work. Just as my colleague Karin Sundin said, we as a society have decided that one receives sickness and activity compensation precisely because one has difficulty working or cannot work. But the compensation one receives is so low that one has difficulty managing one's livelihood.
Let me emphasize once again that this is deeply unfair and unreasonable and that the funkisskatt should be abolished. I have not really heard any arguments from the Minister for Finance as to why this gap should persist.
Karin Sundin (S)
Madam Speaker! It is good that we agree that it is not a hundred or a couple of extra crowns a month for a well-defined group of poor people that is driving inflation in Sweden. I want, just like Eva Lindh, to remind that the disability tax can never become a driving force for more people to support themselves through work because those affected by the tax are people who, due to injuries or illness, cannot work and will never be able to work full-time.
The Minister for Finance does not want to use the term "funkisskatt" (disability tax) but defines it as a difference in taxation between persons with earned income and persons with sickness and activity compensation, and it is an entirely correct description based on the state budget's tables. But the funkisskatt is also a way to value people based on their ability to work. In practice, the funkisskatt is a way to treat people with disabilities as second-class citizens, and the funkisskatt makes Sweden a poorer and more unjust country to live in. Therefore, it should be abolished in 2024.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.