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An Indirect Route to Equality Taxing Consumers to Build the Swedish Welfare State

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An Indirect Route to Equality Taxing Consumers to Build the Swedish Welfare State An indirect route to equality Taxing consumers to build the Swedish welfare state Gunnar Lantz Economic History Umeå 2019 Detta verk är skyddat av svensk upphovsrätt (Lag 1960:729) Avhandling för filosofie doktorsexamen ISBN: 978-91-7855-073-9 ISSN: 0347-254-49 Umeå Studies in Economic History Elektronisk version tillgänglig på: http://umu.diva-portal.org/ Tryck: Cityprint i Norr AB Umeå, Sverige 2019 In Memoriam Torbjörn Bergström Harry Brorsson Acknowledgements I am grateful to a great number of people. First of all, to my supervisors Thomas Pettersson and Lena Andersson-Skog. Many others at the Department of Geography and Economic History in Umeå have contributed as well. A special mention goes to Magnus Lindmark, Ann-Kristin Bergquist, Martin Eriksson, Lars-Fredrik Andersson, Josef Liljegren, Mikael Levin, Emelie Hane-Weijman, Guilherme Chihaya da Silva and Urban Lindgren. I am grateful for input from Svante Prado, discussant at my final seminar, and from Tomas Sjögren, discussant at my mid-term seminar. The German Historical Institute in Washington D. C. enabled me to attend my first international workshop, Taxation for and against redistribution since 1945, in 2014. I am deeply thankful to the conveners Gisela Hürlimann and Elliot Brownlee for making that happen. It proved influential. I also participated in the follow-up meeting that they co-organised with Eisaku Ide in Odawara in connection to the 2015 World economic history congress. All this resulted in the book Worlds of taxation: The political economy of taxing, spending, and redistribution since 1945, published in the Palgrave studies in the history of finance series, within which I contribute a chapter based on the work on political processes presented more in-depth in this thesis. The graduate student workshop on History and politics of public finance connected to the Social Science History Association’s (SSHA) 2016 meeting in Chicago was another influential event. I am grateful to Isaac Martin, Lucy Barnes, Molly Michelmore, the SSHA public finance network and the American Bar Foundation for that. The University of Groningen’s Globalisation and inequality summer school proved valuable in many ways too. A coffee break conversation with one of the teachers, Branko Milanovic, assured me that I was on the right track. I would like to thank Jeroen Touwen and Marijn Molema for engaged comments on early research ideas at the ESTER research design seminar in Frankfurt. Towards the end of this PhD journey, I got the opportunity to present the fruits of my work at the Sound economic history workshop in Göteborg. I extend my thanks to the participants and organisers for an event of high scholarly quality in a nice atmosphere. Sara Torregrosa Hetland helped me getting started with the practicalities of how to conduct inequality and tax incidence calculations. That was a great help. Kristoffer Collin gave me a literature tip early on that unexpectedly opened the door to a whole new avenue of research. I guess he did not foresee those consequences at the time either, and he probably has no idea about it today. Such is life. Others whom I have talked to and gained valuable input iii and literature recommendations from include Petri Roikonen, Per Andersson, Glenn Sandström, Oriol Sabaté and Sara Moricz. And when it comes to Cristián Ducoing Ruiz, well he is simply a great guy. I would like to thank Thomas Blanchet for taking the time to answer my questions and upload a workaround for how to use his R package for generalized Pareto interpolation via Stata. I would also like to thank the staff at Statistics Sweden (SCB) for their assistance and Mikael Stenkula at Institutet för näringslivsforskning for sending me the data used in the book Swedish taxation: Developments since 1862. Funding was received from Johan och Jakob Söderbergs stiftelse, Wallenbergsstiftelsens fond (Kungliga vitterhetsakademien) and J. C. Kempes minnes stipendiefond. Parts of the work on tax incidence were adapted into an article titled ‘Letting the masses pay for the welfare state: Tax regressivity in postwar Sweden’, which has been peer-reviewed, revised and resubmitted for publication in the European Review of Economic History. If we move outside of academia, I am grateful to many from my previous life in journalism, Torbjörn Bergström, Kerstin Berggren, Henrik Klingberg, Christer Jansson to name a few, who taught me a lot about everything. I am grateful to my parents and all those others like Månsan and the Teljebäck- Högstadius family who formed the environment within which I grew up and the ground underneath my feet on which I am still standing firmly today. I am grateful to my love Ewa. Umeå, April 2019 iv Contents Acknowledgements ................................................................................................... iii Figures .......................................................................................................................vii Tables ...................................................................................................................... viii Abstract ...................................................................................................................... ix Abbreviations .............................................................................................................. x Terms.......................................................................................................................... xi Symbols .....................................................................................................................xii 1. Introduction............................................................................ 1 1.1 Contribution of thesis ........................................................................................... 8 1.2 Fiscal pathways in the postwar period ............................................................... 11 1.3 Swedish tax politics ............................................................................................. 15 1.4 Two problems ...................................................................................................... 18 1.5 Aims and research questions .............................................................................. 19 1.6 Outline ................................................................................................................. 19 1.7 Theory ................................................................................................................. 20 1.8 Methods and delimitations ................................................................................ 24 2. Inequality and taxation: Methods and previous work ............. 29 2.1 All eyes on tax returns? ...................................................................................... 30 2.2 Incomes and progressivity ................................................................................ 40 2.3 Data availability ................................................................................................. 50 2.4 Interpolation and extrapolation .........................................................................54 2.5 Consumption expenditure ................................................................................. 64 2.6 Consumption taxes ............................................................................................ 66 3. Tax regressivity in postwar Sweden ....................................... 69 3.1 Consumption and payroll taxes as a counterweight ......................................... 70 3.2 Conclusions ......................................................................................................... 79 4. Explaining the postwar path: The literature ........................... 83 4.1 A formative era ................................................................................................... 84 4.2 Potential explanations ....................................................................................... 85 4.3 Institutional structure and organised interests ................................................ 86 4.4 Public attitudes and the role of technocracy .................................................... 90 4.5 Country-level taxonomies.................................................................................. 96 4.6 Bringing the temporal dimension in ............................................................... 100 4.7 Mechanisms of institutional change ................................................................ 103 4.8 Implications for design of study ...................................................................... 104 5. How they all stopped worrying and learned to love the VAT ..107 5.1 Research design ................................................................................................. 107 5.2 A corporatist legislative process ....................................................................... 112 5.3 Sales taxes in Sweden ....................................................................................... 116 v 5.4 The fiscal setting of the 1950s .......................................................................... 116 5.5 Sceptics left, right and centre ........................................................................... 118 5.6 Consolidating the sales tax while meeting business interests halfway........... 128 5.7 International relations ...................................................................................... 136 5.8 Conclusions
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