Swedish Labor Income Taxation (1862–2013)

92 Pages Posted: 26 Oct 2013 Last revised: 23 Nov 2014

See all articles by Gunnar Du Rietz

Gunnar Du Rietz

Research Institute of Industrial Economics (IFN)

Dan Johansson

Örebro University School of Business

Mikael Stenkula

Research Institute of Industrial Economics (IFN)

Date Written: October 24, 2013

Abstract

This paper presents annual Swedish time series data on the top marginal tax wedge and marginal tax wedges on labor income for a low-, average- and high-income earners for the period 1862 to 2013. The tax wedges were initially low and the tax system proportional. The tax wedges began to increase during World War I. The increase accelerated during World War II and through the post-war period. In the 1970s, the top marginal tax wedge was occasionally as high as 90 percent. The main explanations for this development were temporary crises that led to permanent tax increases, the expansion of the public sector and distributional ambitions, bracket creep and the introduction of employer-paid social security contributions. The 1990–1991 tax reform represents the beginning of a new and continuing period of decreasing marginal tax wedges.

Keywords: Labor income taxation, Marginal tax rate, Marginal tax wedge, Tax reforms

JEL Classification: H21, H31, N44

Suggested Citation

Du Rietz, Gunnar and Johansson, Dan and Stenkula, Mikael, Swedish Labor Income Taxation (1862–2013) (October 24, 2013). IFN Working Paper No. 977, Available at SSRN: https://ssrn.com/abstract=2344827 or http://dx.doi.org/10.2139/ssrn.2344827

Gunnar Du Rietz

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Dan Johansson

Örebro University School of Business ( email )

School of Business
Örebro, SE-70182
Sweden

Mikael Stenkula (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Stockholm, 102 15
Sweden

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