inkomstbegränsningen

Inkomstbegränsningen is a Swedish fiscal policy instrument that aims to reduce the income gap between the rich and the poor. Introduced in the 2006 budget, it is a growing threshold for tax credits that applies to high-income individuals. The policy was designed to address the issue of vertical income distribution, where income growth benefits mainly high-income earners.

The inkomstbegränsningen sets a threshold limit on employed individuals with high incomes, beyond which they are not eligible for tax credits. The tax credits in question primarily concern invested income, such as interest and capital gains. The threshold is indexed to inflation. An individual who earns an amount in excess of the inkomstbegränsningen is no longer eligible for these tax credits, which are transferred instead to low-income earners.

Studies have shown that inkomstbegränsningen has had a positive effect on reducing tax avoidance and promoting social equality. As high-income earners lose tax credits they once enjoyed, it reduces the financial incentives to evade taxes to obtain higher taxable income. The reduced tax revenue had been one of the main complaints from the financial sector, but there is no conclusive evidence that it has affected economic growth. Continued debates have centered on whether the policy need be more targeted or could dedicate its gains to compensate low-income working individuals to augment the net financial result.