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Working Paper No. 977

Swedish Labor Income Taxation (1862–2013)

Working Paper
Du Rietz, Gunnar, Dan Johansson and Mikael Stenkula (2013). “Swedish Labor Income Taxation (1862–2013)”. IFN Working Paper No. 977. Stockholm: Research Institute of Industrial Economics (IFN).

Gunnar Du Rietz, Dan Johansson, Mikael Stenkula

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.