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Research Institute of Industrial Economics (IFN) Working Paper Series

No 977:
Swedish Labor Income Taxation (1862–2013)

Gunnar Du Rietz (), Dan Johansson () and Mikael Stenkula ()

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 taxation; Marginal tax rate; Marginal tax wedge; Tax reforms; (follow links to similar papers)

JEL-Codes: H21; H31; N44; (follow links to similar papers)

45 pages, September 19, 2013, Revised September 10, 2015

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This paper is forthcoming as:
Du Rietz, Gunnar, Dan Johansson and Mikael Stenkula, 'The Evolution of Swedish Labor Income Taxation in a 150-year Perspective: An In-depth Characterization', in Henrekson, Magnus and Mikael Stenkula (eds.) Swedish Taxation: Developments Since 1862, Palgrave Macmillan



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