How Scrapping Sweden's Wealth Tax Created a Nation of Billionaires
For much of the 20th century, Sweden stood as one of Europe's most egalitarian nations, a beacon of social democracy with strong welfare protections. Yet over the past two decades, the country has undergone a remarkable transformation into what journalist Andreas Cervenka describes as a "paradise for the super-rich." Today, Sweden boasts one of the world's highest ratios of dollar billionaires per capita and is home to numerous unicorn startups like Klarna and Spotify.
The Turning Point: 2006 Tax Changes
The pivotal moment in this transformation came twenty years ago with the abolition of Sweden's wealth tax (förmögenhetsskatten) alongside the introduction of generous tax deductions for domestic work. These policy shifts marked a significant departure from Sweden's traditional approach to taxation and wealth distribution. As part of anthropological research into how different tax systems shape social relationships, I've been working with pensioners in Stockholm's southern suburbs to understand their perspectives on these changes.
"Us pensioners can see the destruction of what we built, what was started when we were small children," explained Kjerstin, 74. "I was born after the end of the war and built this society through my life, together with my fellow citizens. With taxes being lowered and the taking away of our social security ... we're not building anything together now."
Measuring the Inequality Shift
Sweden's Gini coefficient, the standard measure of inequality where 0 represents total equality and 1 total inequality, has risen from around 0.2 in the 1980s to 0.3 in recent years. This places Sweden above the European Union average of 0.29, indicating a significant increase in wealth disparity. "There are now 42 billionaires in Sweden – it's gone up a lot," Bengt, 70, told me. "Where did they come from? This didn't used to be a country where people could easily become this rich."
Many pensioners acknowledge their generation's role in this societal shift. Bengt reflected: "I belong to a generation that remembers how we built Sweden to become a welfare state, but so much has changed. The thing is, we didn't protest this. We didn't realise we were becoming this country of rich people."
The Historical Context of Swedish Taxation
Wealth taxation was first introduced in Sweden in 1911, initially calculated as a combination of wealth and income. This period coincided with the early development of the Swedish welfare state, including the introduction of the state pension in 1913. The concept of folkhemmet ("the people's home") emerged as an ideological counterpoint to the American dream, emphasizing reasonable living standards and universal services rather than individual exceptionalism.
After World War II, the wealth tax was separated from income tax and gradually increased, reaching a historical high of a 4% marginal rate for wealthy individuals in the 1980s. However, due to complex exemption rules, the actual tax burden varied significantly, and total revenues never exceeded 0.4% of Sweden's GDP during the postwar period.
Changing Political Winds and Tax Criticisms
By the late 1980s, political attitudes began shifting in Sweden, mirroring broader European trends toward privatization and financial deregulation. Critics argued that Sweden's wealth tax was regressive, disproportionately affecting middle-class wealth in housing and financial assets while exempting the wealthiest individuals who owned large companies or held senior positions in listed corporations. Additional concerns centered on tax avoidance and capital flight to offshore havens.
"When the wealth tax was abolished," Marianne, 77, recalled, "I wasn't thinking about millionaires being given a handout, because ... we didn't have lots of rich aristocrats who owned everything. Abolishing the wealth and inheritance tax seemed like a practical thing, not so political."
The Social Ramifications of Tax Policy
My research suggests that wealth taxes, or their absence, extend beyond mere fiscal considerations to shape fundamental social structures and collective visions of society. Only three European countries currently levy comprehensive wealth taxes: Norway, Spain, and Switzerland, while several others impose selective wealth taxes on specific assets.
"Tax was just natural when I grew up in the 1950s," Kjerstin remembered. "I remember thinking when I was in second grade, that I will always be taken care of, that I didn't ever have to worry." She contrasted this with contemporary attitudes: "Now people don't want to pay tax – sometimes even I don't want to pay tax. Everyone is thinking about what they get back and how to get rich, instead of about building something together."
Generational Regret and Societal Vision
Many elderly Swedes now view the abolition of the wealth tax as a crucial turning point that reshaped their society away from social democracy toward increased stratification. "I think about my children, my two daughters who are working and have young families," Jan, 72, shared. "As children, they were provided for by the welfare state, they went to good schools and had access to football and drama class and the dentist – but now I worry that society is going to get worse for them."
Jan expressed personal regret about his generation's role: "I now think that is partly my fault. We got lazy and complacent, thought the Swedish welfare state was secure, didn't worry about abolishing the wealth tax, didn't think it was going to change anything ... but I think it has."
Kjerstin articulated what many pensioners feel has been lost: "I don't think you can say: 'I pay this much in taxes and therefore I should get the same back.' Instead, you should pay attention to the fact that you live in a society that is more humane, where everyone knows from second grade they'll be taken care of."
The Swedish experience demonstrates how tax policy decisions reverberate through generations, shaping not just economic outcomes but the very fabric of society itself. As Sweden continues to grapple with its identity as both a welfare state and a billionaire's paradise, the lessons from these pensioners' reflections offer valuable insights into the long-term consequences of fiscal policy choices.
