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Lifetime versus Annual Tax Progressivity: Sweden, 1968–2009

Author

Listed:
  • Bengtsson, Niklas

    (Department of Economics)

  • Holmlund, Bertil

    (Department of Economics)

  • Waldenström, Daniel

    (Department of Economics)

Abstract
This paper analyzes the evolution of tax progressivity in Sweden from both annual and lifetime perspectives. Using a rich micro panel with administrative records of incomes, taxes and benefits over the period 1968–2009, we calculate tax rates across the income distribution accounting for different tax bases as well as the role of transfers. The uniquely long time span also allows us to compute tax progressivity as realized over a cohort’s entire life cycle. Our main finding is that taxes are considerably less progressive over the lifetime than in any single year. In fact, life cycle taxes are close to proportional, bearing a redistributive effect of only a few percent. Intragenerational income mobility seems to be driving this result, but the Swedish economic crisis of the 1990s and the tax reforms of 1971 and 1991 are also important events. Labor income taxes contribute less to progressivity in recent years, whereas transfers to unemployed and old-age pensioners have become increasingly important. Our findings are robust to using different tax rates, tax bases, sample populations, discount rates and reranking controls.

Suggested Citation

  • Bengtsson, Niklas & Holmlund, Bertil & Waldenström, Daniel, 2012. "Lifetime versus Annual Tax Progressivity: Sweden, 1968–2009," Working Paper Series 2012:11, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2012_011
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    References listed on IDEAS

    as
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    Cited by:

    1. Alexis Eidelman & Fabrice Langumier & Augustin Vicard, 2013. "Prélèvements et transferts aux ménages : des canaux redistributifs différents en 1990 et 2010," Économie et Statistique, Programme National Persée, vol. 459(1), pages 5-26.
    2. Torregrosa Hetland, Sara & Sabaté, Oriol, 2021. "Income Taxes and Redistribution in the Early Twentieth Century," Lund Papers in Economic History 224, Lund University, Department of Economic History, revised 05 Sep 2022.
    3. Boschini, Anne & Gunnarsson, Kristin & Roine, Jesper, 2017. "Women in Top Incomes: Evidence from Sweden 1974–2013," IZA Discussion Papers 10979, Institute of Labor Economics (IZA).
    4. Mike Brewer & Monica Costa Dias & Jonathan Shaw, 2012. "Lifetime inequality and redistribution," IFS Working Papers W12/23, Institute for Fiscal Studies.
    5. Andreas Peichl & Nico Pestel, 2013. "Multidimensional affluence: theory and applications to Germany and the US," Applied Economics, Taylor & Francis Journals, vol. 45(32), pages 4591-4601, November.
    6. Peter H. Lindert, 2017. "The Rise and Future of Progressive Redistribution," Commitment to Equity (CEQ) Working Paper Series 73, Tulane University, Department of Economics.
    7. Peter Levell & Barra Roantree & Jonathan Shaw, 2021. "Mobility and the lifetime distributional impact of tax and transfer reforms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 751-793, August.
    8. Gerlinde Verbist & Francesco Figari, 2014. "The Redistributive Effect and Progressivity of Taxes Revisited: An International Comparison across the European Union," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(3), pages 405-429, September.
    9. Sara Torregrosa Hetland, 2015. "Did democracy bring redistribution? Insights from the Spanish tax system, 1960–90," European Review of Economic History, European Historical Economics Society, vol. 19(3), pages 294-315.
    10. Elin Halvorsen & Thor O. Thoresen, 2021. "Distributional Effects of a Wealth Tax under Lifetime‐Dynastic Income Concepts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 184-215, January.
    11. Sara Torregrosa Hetland, 2015. "Did democracy bring redistribution? Insights from the Spanish tax system, 1960–90," European Review of Economic History, Oxford University Press, vol. 19(3), pages 294-315.
    12. Sara Torregrosa Hetland, 2014. "A fiscal revolution? Progressivity in the Spanish tax system, 1960-1990," Working Papers 2014/8, Institut d'Economia de Barcelona (IEB).
    13. Sina Önder, Ali & Terviö, Marko, 2013. "Is Economics a House Divided? Analysis of Citation Networks," Working Paper Series 2013:5, Uppsala University, Department of Economics.

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    More about this item

    Keywords

    Tax progressivity; Income distribution; Lifetime income; Redistributive effect; Kakwani index; Transfers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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