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PROPERTY

Immigrants and the young: Left behind by Swedish left?

Sweden's political left should embrace free market reforms if it is to achieve its goals for a more equitable society, writes Nima Sanandaji of the Captus think tank.

The political left should embrace free-market reforms. At least according to the Italian economists Alberto Alesina and Francesco Giavazzi. The argument is based on the notion that some aspects of classical right of centre economic politics, such as de-regulation of the service industry, lower taxes and privatization, clearly benefit the less fortunate members of society. People who oppose these reforms often talk about social justice, but are in fact using centralized economic planning to maintain the interests of various privileged societal groups.

According to Swedish economists Stefan Fölster and Fabian Wallen, this argument holds for a number of free market reforms that have come to the fore in the Swedish public debate. One example is rent control; a policy based on the notion that low income earners should be able to live in the same neighbourhoods as the wealthy. In practice, rent controls subsidize the cost of renting in expensive parts of cities, which in turn leads to less housing construction rent hikes in less affluent areas.

Understandably, those living in rent control apartments in well-off areas are typically far from low-income earners, but are rather wealthy members of society. Here policies of rent control might be viewed as a far-fetched socialist vision of integration between various segments of society, or perhaps simply an example of so called rent-seeking policies that benefit a small group at the expense of the rest of society.

A similar situation exists in the labour market. Regulating the labour market is one of the favourite policies of the left, who claim to be looking out for average workers. But economic studies clearly show that these policies benefit those having jobs, while shutting out marginalized groups of workers – such as immigrants and the young – from the labour market. The economist Per Skedinger recently wrote book regarding on labour market regulations that detailed this phenomenon.

Rent controls then benefit privileged tenants at the expense of other tenants (and those who cannot find housing since rent control limits construction), while labour market reforms benefit privileged groups of workers at the expense of marginalized workers. In the same manner, market regulations limit competition and benefit those manufacturers who succeed in manipulating the political machinery to benefit their business and shut out the competition.

It may seems a bold notion to claim that free market reforms in many cases not only would benefit society in general (which most people agree), but also direct their benefits to marginalized groups within society (something the left often thinks only its policies can accomplish). But as Fölster and Wallen note, there is ample research evidence to back up this argument.

Perhaps this is simply a difference in perspective. The left sees the state as the great equalizer, a force to be used in order to bring forth societal justice. But in reality, political power is often bent to the will of various interest groups, who use central planning to distort free and fair competition in order to benefit themselves at the expense of others.

The left should embrace free-market reforms, but with the possible exception of Marxist free-market intellectual Boris Benulic, the Swedish left has not yet reached this conclusion.

Nima Sanandaji is the president of the Swedish free market think tank Captus and publisher of the weekly online Swedish magazine Captus Tidning.

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MONEY

How you can lower the monthly cost of your Swedish mortgage

It’s no secret that mortgages in Sweden have become more expensive over the last year or so, as interest rates have risen following high inflation. But did you know there’s a way you can lower your monthly mortgage cost?

How you can lower the monthly cost of your Swedish mortgage

Essentially, when you take out a loan in Sweden, the government gives you a discount on the interest you pay, in the form of a tax rebate.

This doesn’t include interest paid on all types of loans – for example, student loans are not included – but it does include your mortgage.

In order to qualify for the discount, referred to as ränteavdrag (interest deduction) or skatteavdrag (tax deduction), you need to fulfil some requirements: 

  • You’ve paid income tax and at least 1,000 kronor in interest in the last taxation year
  • You have a capital deficit (meaning that your interest costs must be greater than any capital income you’ve earned through interest or dividends)
  • You are either partly or wholly responsible for the loan or mortgage in question

If there are two of you who are both named on the mortgage who fulfil these requirements, you’ll each receive 50 percent of the total tax rebate.

The interest deduction is automatically subtracted from your yearly tax and listed in your yearly declaration, if you fulfil the requirements, meaning you’re likely to get it back as a lump sum when tax season rolls around in April.

How much do I get?

The actual sum you get back varies depending on how much tax and interest you’ve paid during the year, but there are some general calculations which can give you a guideline of what you might get.

You’ll get 30 percent of your interest costs back on the first 100,000 kronor you pay in interest over a year, and 21 percent on anything over 100,000 kronor. 

If there are two of you, you each have your own individual tax deduction, even if you’re paying the same loan, so as a pair you’ll get back 30 percent on the first 200,000 kronor, as well as 21 percent on anything over this figure.

To figure out how much you’ll get, you need to first find out how much interest you’ve paid during the year your declaration covers and subtract this figure from your capital income earned through interest or dividends.

If your figure is negative, that means you can subtract this figure from your tax paid during the year. Bear in mind that if you owe tax, then your interest deduction amount will be used to pay it back first, lowering the total amount you receive.

You can also change the proportion of the deduction applied to each partner if you share a mortgage, dividing it 60/40 or 70/30, for example, if you don’t share the mortgage 50/50. You can do this through your bank or by manually changing the figures in your tax declaration.

I don’t understand. How does this make my monthly mortgage payments cheaper?

Here’s where something called skattejämkning comes in. This literally translates as “tax equalisation”, and it’s a way you can spread your tax rebate for interest costs out over a year, lowering your mortgage costs each month rather than of getting a lump sum in the form of a tax rebate during tax declaration season.

In order to equalise your tax, you’ll need to contact the Tax Agency directly, filling out a form with the catchy title of SKV 4302 – Jämkning (ändring av preliminär A-skatt) or using their Jämkning online service.

To do this, you’ll need to have in-depth figures on things like your salary, pension payments, sick pay and any other income like unemployment benefit or maternity or paternity payments, as well as capital income and any business income for the tax year you’re applying for, as well as your expected income for the rest of the year.

If your application is accepted, the Tax Agency will tell your employer to subtract less tax from your payslip each month, effectively meaning that you get your tax rebate for interest costs back in your monthly pay instead of getting it paid out all at once.

Bear in mind that if you do go down this route it’s important that your calculations are correct. If you accidentally overestimate your interest payments or underestimate your tax owed, you could end up being hit with a hefty tax bill once your declaration comes through.

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