Bloomberg: Sweden's economic miracle based on high taxes

Sweden’s economy has outperformed its OECD peers over the past two decades

High taxes, strong unions and an equal distribution of wealth.

That’s the recipe for success in a globalized world, according to Magdalena Andersson, the Social Democratic economist who’s also Sweden’s finance minister.

The 50-year-old has been raising taxes and spending more on welfare since winning power in 2014. She’s also overseen an economic boom, with Swedish growth rates topping 4 percent early last year, that has turned budget deficits into surpluses.

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The numbers are compelling. Sweden has one of the world’s highest tax burdens, with tax revenue about 43 percent of GDP, according to OECD data. The equivalent figure for the U.S. is about 26 percent. Sweden’s economy has grown almost twice as fast as America’s, expanding 3.1 percent last year, compared with 1.6 percent in the U.S.

Sweden has the highest labor force participation in the European Union. Andersson attributes this to tax-funded parental leave and affordable daycare, which make it easier for both parents to work.

In contrast to most of its European peers, Sweden has budget surpluses. The EU average will be a shortfall of 1.6 percent in 2018, while the estimated deficit in the U.S. of 5.7 percent of GDP, EU Commission data published in February show.

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