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Tax Cuts Stimulate Sweden

Posted By David Weinberger On May 11, 2012 @ 10:00 am In Economics | Comments Disabled

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Since the beginning of the recession, academics, authoritative international institutions, and most government officials pushed for massive stimulus spending. Sweden bucked the trend, focusing instead on slashing marginal tax rates and peeling government back. How did it fare?

The Spectator reports [2]:

While most countries in Europeborrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy — the so-called ‘punk tax cutting’ agenda. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. ‘Look atSpain,Portugalor theUK, whose governments were arguing for large temporary stimulus,’ he says. ‘Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt.’ Tax-cuttingSweden, by contrast, had the fastest growth inEuropelast year, when it also celebrated the abolition of its deficit.

Too bad the U.S. decided against Sweden’s advice. Still, missing one opportunity doesn’t mean we have to miss another: Tax reform is calling.    [3]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/05/11/tax-cuts-stimulate-sweden/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/stockholm-sweden.jpg

[2] reports: http://www.spectator.co.uk/essays/7779228/swedens-secret-recipe.thtml

[3] Tax reform is calling.   : http://www.heritage.org/research/reports/2011/12/the-new-flat-tax-easy-as-one-two-three

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