NCPA - National Center for Policy Analysis

THE SWEDISH PARADOX

July 15, 2008

Sweden's exorbitant tax rates and extensive welfare system are well know throughout the world, says Maria Rankka, the president of the Swedish free-market think tank Timbro.  Even low-and-middle-income earners in Sweden pay 60 to 70 percent in taxes.

Indeed, the culture of opportunity which rose out of lowered taxes, deregulation and the country's move away from socialism in the 1980s has given way to a debilitating "culture of entitlement."  Yet, there is a compelling way to reform Sweden's welfare system: People should have the option to opt out of the government-run welfare state, says Rankka.

For example:

  • Those individuals could still pay their share of taxes for redistribution, but with the rest of their money they could buy private insurance.
  • A market for private insurance already exists in Sweden, because the labor market is highly dependent on collective bargaining agreements, many of which include private insurance.

Free-market principles have already been used to reform Sweden's school system, says Rankka:

  • Sweden introduced school vouchers in 1992 and almost 10 percent of Swedish students in compulsory schools are now in independent schools.
  • After the establishment of independent schools, Sweden has seen an increase in overall efficiency in the school system.
  • Academic studies have measured higher grades and downward pressure on costs within the system.

Source: Peter Saunders, "The Swedish Paradox," Policy, Winter 2008.

 

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