Sweden: Falldin’s Fall

Bedeviled by tax reform

No issue is so certain to rile the normally subdued Swedes as taxes. With reason. The average Swedish worker must turn over about half of his earnings to finance the cradle-to-grave welfare society, and for the self-employed the tax bite frequently exceeds 85% of income. Historian Sven Stolpe was so disgusted by his tax assessment that he threatened to burn all his unpublished manuscripts. An actor even set himself ablaze last March outside Stockholm’s tax office. But most Swedes have chosen a less extreme alternative: the ballot box. In 1976 they turned out the Social Democratic Labor Party after four decades of growth in Sweden’s social experiment. Last week the only alternative to the socialists, the ruling three-party coalition of Centrist Prime Minister Thorbjörn Fälldin, was in trouble. Once again the bedeviling issue of tax reform was to blame.

Sweden’s latest political crisis came to a head when Fälldin called in opposition Social Democratic leaders for routine discussions of the government’s tax-reform program. During an all-night session late last month, a negotiator for Fälldin unexpectedly agreed to Social Democratic demands that a proposed 50% limit in taxes on income earned after wages be delayed until 1983. He also agreed to reduce by 50% the deductions that high-income property owners could claim for interest payments. The surprise deal angered Gösta Bohman, leader of the coalition’s Moderate (Conservative) Party, who blasted the compromise as “a total capitulation.” Said Bohman: “They didn’t even telephone me once, and I’m the Finance Minister.” After he stormed out of the government with seven other ministers, Fälldin was forced to resign.

Fälldin vowed to head a new minority government, but with polls showing the Social Democrats out in front with 50.7% of the vote, most Swedes were betting that veteran Party Leader Olof Palme would be back in power before long. Said Palme: “Since we have to bring the country out of an economic crisis, the sooner we get started the better.” Whether he could control Sweden’s 12% inflation and growing payments deficit was a matter of debate. Though public expenditure now accounts for two-thirds of Sweden’s G.N.P., the Social Democrats are talking about spending even more to finance a scheme to create new jobs. Demanded one taxpayer in Stockholm: “Who’s going to pay for it?”