Tuesday, November 10, 2009

How the Sheep are Shorn

Or Taxation: How it Shrinks Economies and Initiative

At a dinner the other evening I got into a conversation with a woman who owned a company. She explained her company to me and it was in the same line of work as what I do. Later, the conversation turned to her asking if I would like to do some work for her. Initially, I thought it sounded great.

Then I thought about it further. If I were to work for this person, any income I make would be taxed at the highest income tax rate in Sweden. That would be 59 point something percent. Mind you, this is after a reduction. It was somewhere around 62 percent. For every dollar, I made, I would have to give the government 60 cents. At this point, I am working hard to see the up side. Jees, you must make a boatload of money then to be in this tax rate. Maybe, maybe not. This rate applies to around 300,000 Swedes with the very highest incomes, starting at 75,000 dollars a year. I don't know what is worse that only 300k Swedes make more than 75k a year or that they start this draconian rate at 75k. Who'd want to make more than 75k, you'd only be punished for your success.

For fun, I will also factor in the fact that Swedish employers match the employee’s withholding with a separate employer’s tax of 40 something percent. Let's also recognize that corporations do not pay taxes. They either pass them on to the consumer and they simply keep wages lower to compensate. Hence, the insane consumer prices.

Now, I go out shopping with my wage deflated forty cents on every dollar. Nearly every purchase is met with the 25% national sales tax or VAT tax! Factoring in my payroll tax, my employers contribution and my VAT taxes, I am now in the negative. In the red, over 20 percent. Wow, what a deal, where do I sign up?

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