Statecraft and Liberal Reform in Advanced Democracies by Nils Karlson

Author:Nils Karlson
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Abolishing the Inheritance and Gift Taxes

A last and somewhat different case of a reform during the Persson government is the abolition of inheritance and gift taxes in 2005. This was indeed an institutional change that few had expected from a Social Democratic government.

In 2000 the government had asked the Ministry of Finance to launch an extensive investigation of the Swedish tax system, including the effects of the inheritance and gift tax es. The investigation was led by Per-Olof Edin , a former chief economist of the Swedish Trade Union Confederation . He suggested that the inheritance and gift taxes should be abolished between couples and their children (SOU 2002). Prime Minister Persson later indicated that he was open to reform, commenting on Edin’s suggestions with the words: “I believe he is right, it is pointless to keep a tax that does not work, it just undermines the trust for the tax system as a whole” (Dagens Industri 2002).

In the fall of 2004, however, as the new budget was being negotiated, a parliamentary committee appointed two years earlier to investigate the inheritance and gift taxes did not recommend abolishing any of these taxes (SOU 2004:66). At the same time the budget negotiators suddenly announced that they had agreed to abolish the inheritance and gift tax by the year of 2005 (Lucas 2004).

According to Professor Sven-Olof Lodin (2009, p. 243), who previously worked at the Ministry for Finance as a political expert on taxes , the reform was the result of personal actions taken by Persson. He would most likely have preferred to remove the wealth tax , a levy on the total value of personal assets, whose negative economic effects were well known. The problems with the inheritance and gift tax es, especially for family businesses when it was time for a generational shift, were indeed grave, but the wealth tax still remained more important, according to Persson.

Lodin claims that Persson simply gave Lars Ohly, the leader of the Left Party, the task of choosing which of the taxes he would rather see disappear. Ohly chose the inheritance and gift taxes , since keeping the wealth tax carried more ideological symbolism to the Left Party. The chief budget negotiator of the Left Party, Marie Engström, later told the press that the decision was part of a larger deal that allowed her to send more money to the local municipalities (Lucas 2004).

It is of course hard to say which story is the most credible, but either way the Machiavellianism involved in this process where the inheritance and gift taxes were abolished by a left-wing government should be clear, even though the actors involved may have had strong rational arguments for doing so.

As we have seen, this is a recurring theme in the reform process of the Persson years—blame avoidance rather than claiming credit in the period from 1994 to 2006. This occurred even while Popperian elements—using scientific results and empirical research, rational argumentation and open public discussions in the development of the new policies and institutions—also had an important role.

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