How the Swedes Do It

A SMALL sense of deprivation often nags Americans visiting abroad. They note the frequency of London's shiny red double-decker buses, the scrubbed-clean streets of Paris and the tranquil, carefully manicured parks of Frankfurt. At a time when public services in the U.S. are in such a mess, Americans wonder how the Europeans manage to do so well.

A major reason is that Europeans accept tax bites that would numb Americans. Though partly warped by differences in purchasing power, some comparisons are enlightening. An unmarried German worker earning $5,000 a year pays about $1,500 in income and social taxes; a single American earning about the same pays $800. An Englishman who is married, has two children and earns $12,000 a year has income taxes of $3,257. An American in the same category pays $2,154. Europeans also pay savage excise levies: 400 on a gallon of gasoline in Germany v. about 120 in the U.S. The English pay excise taxes of 45% on cameras, watches and other "luxury" items. Beyond that, many European countries have a value-added tax, a kind of national sales levy that pounds up prices on everything from shoelaces to plumbing repairs. In France, the VAT is a towering 23%.

When it comes to high-level public spending for high-quality services, no Western country can match Sweden. Its taxes total 41% of its gross national product, compared with 31% in the U.S. Swedes earn less than Americans; wages of blue-collar workers average $6,270 v. $7,400 in the U.S.

On the other hand, Swedes are cushioned from birth to death against a wide variety of social and economic jolts. When a Swede cannot work because of sickness, he is insured against lost wages. When he is too old to work (over 67), he can collect up to two-thirds of his salary annually. Cities are sparkling clean, and police and fire services are excellent. Rail transport is modern and efficient, as are the highways. A monthly ticket on Stockholm's smooth-running subway, good for unlimited rides, costs $10.50.

Practically all medical and hospital care is free. Swedish hospitals have first-rate staffs and the most modern equipment; they lead the world in number of beds--17 for every 1,000 people. Sweden also has long had the world's lowest rate of infant mortality. Its men have the world's longest life expectancy, 71.7 years, and its women the second longest, 76 years, just behind Iceland. High-class, tuition-free education right through university is available to all academically qualified Swedes. University students get about $2,000 a year in living costs, partly in the form of state grants and mostly in low-cost loans.

Under the Swedish system, workers with average incomes get the most value from their tax kronor. A typical example is Paul Lundmark, who is married and the father of three children, ages 4 to 10. He lives in Orebro, a city of 275,000. Lundmark earns an average blue-collar salary of $6,500 a year by working in a paper mill. He pays more than one-third of this, $2,300, in direct local and national income taxes.

The Lundmark children attend local schools, where the teaching is first-rate. All pupils get their books and daily hot lunches free. At the local clinic, an outpatient visit costs $1.50. A city "social bureau" provides, among other things, "home help" to look after the children in an emergency. The Lundmarks also can use the city's bounteous sports facilities, including a curling hall, two pools, four ice-skating arenas and 20 athletic halls. Like all Swedes, they get a $224 state grant at the birth of each child, and collect an annual $250 allotment until the child reaches 16. Through a rent subsidy, the government pays 30% of the monthly rent for their four-room apartment.

The rising taxes to support all this, however, have most Swedes wobbling. For example, the value-added tax, which is piled on top of all other taxes, was recently increased by four percentage points, to 17.65%. Partly because of this boost, prices of most goods and services are soaring. Some cigarettes cost $1.40 a pack, eggs $1.20 a dozen, hamburger $1.99 per Ib. and filet mignon $5 per Ib. Increasingly Swedes are making do with items at the lowest end of the price scale: potatoes, carrots, cabbage and spaghetti.

Beyond VAT, Swedes face an awesome array of levies. The Social Democratic Party, which has held power for 40 years, holds that taxes should aim at demolishing accumulated wealth. Many high-income "tax exiles" have fled abroad to conserve the remains of their fortunes. The sharpest wrench for the middle class and the rich is the "wealth" tax, which requires individuals to list the value of their worldly goods--jewelry, cars, house, securities, bank accounts--and pay an annual 1% levy on any amount above $31,000. Income from investments--dividends on stock, interest on bonds, rent on real estate--is taxed separately. On top of all this, Swedish homeowners pay a form of property tax that amounts to about $320 annually on a house worth $16,000 and about $1,932 on one worth $50,000. Apartment owners pay a similar tax.

Particularly for people who earn more than the Lundmark family, income taxes are as steeply progressive as Everest. On a salary of $10,000 a Swede pays 43% of his income in national, local and old-age pension taxes. On $20,000 he pays 53%, and on $40,000 his combined levy is a brutal 63%. Loopholes are almost nonexistent, and deductions are rare. Corporate income taxes, which average 53%, are less severe because, unlike individuals, companies can deduct from their national tax the amount they pay in local taxes. Even so, Sweden's leading business magazine, Veckans Affaerer, has warned that if taxes continue to rise at the present rate, the government by 1980 will be taking 55% of the G.N.P. and will dangerously squeeze industrial expansion. This could crimp economic growth and diminish tax revenues, along with many of the public services that they provide.

It is neither possible nor desirable for the U.S. to emulate Sweden's controlled economy to achieve that country's justly praised social programs. But the Swedish experience does demonstrate that good public services cost more than American taxpayers have so far been willing to pay.

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