I was visiting the Apostle Islands National Lakeshore, a 23-island archipelago in Lake Superior, when suddenly I found myself pining for Stockholm. Why? Because standing on the boat dock in Bayfield, Wisconsin, I realized that the 23,000-island Stockholm archipelago is more accessible to me, an American, than my own 23-island national park.
These wilderness islands with haunting sea caves are accessible only by tour boat at a cost of $151 for a family of two adults and three children. There is no free 15-minute ride across the strait to Basswood Island closest to the mainland, nor a $10 shuttle between the islands, as there would be in Sweden where a heavily subsidized ferry system makes the Stockholm archipelago available to all citizens — as well as to American tourists.
It seems that Americans would rather have inaccessibility to public places and crumbling infrastructure than pay more in taxes, right? After all, every American seems to know that taxes in Sweden are high and that they want nothing to do with high.
My wife and I have been dividing our time between jobs in Sweden and Wisconsin for the past dozen years, and I'm here to tell you that taxes in Sweden are not that high. To my surprise, I found that there are lots of things to love about the Swedish tax system. Swedish taxes are easy to pay, rational, and efficient. Best of all, rather than take away opportunities, Swedish taxes expand them.
Here are six reasons I have come to love Swedish taxes.
1) Swedish income taxes are not much higher than US taxes — but they give you an education
US critics say that Swedes pay 56 percent — so the government takes over half of your money. This is not true — 56 percent is the marginal tax rate, i.e. what high earners pay on income over a certain amount in both state and local taxes. Only 15 percent of Swedes pay tax at this rate. It turns out the average Swede pays less than 27 percent of his or her income in direct taxes. As I've written elsewhere, my wife and I pay about 22 percent of our US income in taxes. Our Swedish income tax was 31 percent. So, yes, our income taxes in Sweden were higher than in the US, but we still paid less than one-third in tax.
And you get far more for your taxes than you do in the US. In Sweden, college is free and students get a housing stipend. A colleague's daughter, Kerstin, just completed a five-year dental program. Her family paid nothing for her education. The Swedish government gave her $340 a month to live on when she was in school and the right to borrow $700 more a month, which she did. After five years, she graduated with a debt of $37,153.
In the US, dental students graduate with an average of $215,000 in debt from dental school alone.
2) Tax forms come already filled out
Our US federal and state forms tax forms were more than 30 pages long last year, downloaded completely blank. During the two weeks we'll spend in Wisconsin this summer, our main job will be to get our taxes done.
I'll wade through stacks of bank and credit card records line by line, documenting all professional income beyond our wages and scanning for every possible business or charitable deduction. Once this is done, we — like the majority of US taxpayers — will hire a tax professional who charges us $500 to review and co-sign our work.
Tax-preparation services cost American taxpayers more than $32 billion per year. My wife, Betty, and I each have a PhD, but that's not enough to understand IRS instructions. Finally, with a great sigh of relief, our marriage still intact, we'll sign the forms and send them to the IRS.
Of course, despite our great efforts, we don't know whether the IRS is going to be happy or not. We might get audited and have to dig up all this stuff again, because the government has three years to check and revise our returns.
In Sweden, the four-page tax form comes in the mail already filled out. On a Saturday morning, Betty and I take our coffee to the couch and review the forms. Seeing they look reasonable, as they always do, we "sign" with a text from our phones. In 15 minutes we are done. We don't have to hire a tax consultant, and we avoid fights about whether a print cartridge bought at the drugstore is a business expense or not.
The Swedes expect their government to be efficient, and the tax authority is. Only 11 percent of the Swedish taxpayers say it is NOT easy to fill out their forms. I can't imagine what a similar survey question would show in the US.
3) There is no property tax
Property taxes go back to the founding of the United States. They are administered by local governments and most go to pay for schools, local roads, and other services. They range from a high of 2.38 percent in New Jersey to a low of 0.28 percent in Hawaii. Property taxes hurt older citizens, whose incomes are not going up but whose property taxes are. In our great American tradition of making taxes hurt, Wisconsin property tax bills come in a lump sum just before Christmas. The envelope might as well say, "I am from the government, and I am here to make you miserable."
When the conservative government, favoring lower taxes, came to power in Sweden in 2006 one of its first steps was abolish the property tax and replace it with a fixed fee. The real estate fee for services is 7,112 SEK per house ($825 at current exchange rates).
This is the same for everyone no matter what the assessed value of the dwelling. The fee is $12 a month for our co-op apartment in Stockholm. If we owned the same property in Madison, our taxes would be $18,000 a year.
The author and his wife hiking in Sweden. (Tom Heberlein)
4) Sales taxes in Sweden are higher — but less noticeable
Swedes and many other Europeans are grumpy when they visit the US, buy something for $10, and the clerk asks for $10.55. Just as we make our income tax process miserable and the property tax bill shows up just before Christmas, sales taxes are an add-on, which makes you notice them more.
Sales taxes are high in Sweden, but you don't see them, and that makes them easier to pay. If something costs 100 kronor, you pay the 100 kronor! Only when you look at the receipt do you see that it costs 80 kronor and 20 kronor for VAT (value-added tax). Many things are taxed at lower rates — 12 percent to have dinner out or buy groceries, 6 percent (only half a percent higher than our sales tax in Madison) for books and tickets to cultural events and in-country travel. Health related items: zero percent.
It is true that sales taxes are regressive; poor people pay a higher proportion of their income in this tax. In the US, a 25 percent sales tax would have to be offset with some kind of subsidies for our many poor. But because Sweden has a narrower income distribution, its sales tax is less regressive than in the US.
5) We get cash instead of deductions
One of the reasons US income tax preparation is so awful is that we try to reward certain activities by providing a tax deduction. If you do some good deed (like putting in a solar panel) and if you can find the receipt and documentation (I am thinking ahead to our summer "tax vacation" in the Wisconsin), then you can list a number on Form H, line 36, that will lower your taxes.
Does this feel good? Do you feel rewarded for your solar panel? Or is it just another damn number on a tax form?
If the Swedish government wants you to do something, they give you the money. For example: Having children is good for the society and costs parents money. In the US, you get a deduction on your income tax for dependents. In Sweden, you get a check every month and you can use it to buy shoes. For one child you get $120 a month and up to $620 for four children. Every parent gets a check.
The process is simple, fair, totally clear, and you don't have to do anything on your tax form. The money comes when you need it —not a year or more later hidden in a tax refund check.
Another example: To stimulate the economy in 2008, Sweden's parliament approved a "rotavdrag" as a temporary job stimulus paying up to 50 percent of the labor costs for household repairs. As a result, the Swedish IRS paid its share of our recent remodeling bill — and I didn't have to do a bit of paperwork. When I got the final remodeling bill, there was a deduction of 50,000 kronor for my wife and 50,000 for me (the maximum allowed). I asked if I was supposed to pay this. "Oh, no," the contractor said. "Just pay the remainder, and the Swedish IRS will send me their share."
6) High taxes give me more choices and freedoms
David Brooks, in a New York Times editorial, argues that if Americans paid European-style high taxes, it would "weaken the ability of members of the middle class to make choices about their own lives."
Maybe Brooks needs to live abroad. Guys like Brooks seem to be proud that tax revenues in the US are only 26 percent of GDP (the third lowest of all countries in the Organization for Economic Co-operation and Development) while in Sweden they are 43 percent.
But tax dollars are not burned — they are used to provide collective goods that are beyond the reach of any individual and that benefit everyone. These collective goods give the middle class more choices, not fewer.
Not having to pay for college gives the best and the brightest the opportunity to attend any school they choose — equalizing opportunity on merit, not parents' wealth.
No matter how rich Bill Gates is, he cannot buy a hiking trail system in Seattle like those we take for granted in Stockholm. I get to use it for free and have more choices for hiking than I can ever enjoy in Wisconsin. The family of five I witnessed waiting on the dock to visit the Apostle Islands was powerless to see them. Our national park, accessible to the few but not the many, is but one casualty of our low taxes.
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Another casualty? Our public transportation system. Betty and I used to live the village of Lodi, about 25 miles from Madison. This being America, I was free to travel to Madison however and whenever I wanted, as long as it was by private automobile. There was (and is) no bus service to Madison. Even though railroad tracks run right through the village, there is no commuter rail service either.
If this were a suburb of Stockholm or any other European city of 250,000, there would be train service and bus service several times an hour. These are the choices Europeans have that we don't, because they devote more of their income to collective goods.
If we value freedom, those of us who drive cars should pay higher gas taxes so that those who are old, infirm, too poor to have a car, or want to reduce their environmental impact can have fast and efficient bus and train service. Besides the moral issue of providing freedom of choice, there is a great economic value. If we had bus and train service to Madison, the value of all of the real estate in Lodi would shoot up, and our crumbling downtown would have a shot at a future.
The 33 million Americans who are still not covered by health insurance don't have much choice when they get sick, unless you think, "Your money or your life?" is a choice. Paradoxically it turns out the bloated, heavily lobbied, privatized US system spends more tax money ($4,437) per person than Sweden's socialized health care ($3,184).
This is due to Swedish efficiency rather than poor service. I do get to choose my doctor, have high-quality care a short walk from my home, same-day appointments and short waits when I walk in unannounced. And one day my physician himself phoned to tell me I had left my gloves in his office — it was my choice to walk back and get them.
I am not burdened by Swedish taxes. In fact, paying more allows me to increase my quality of life in a big way. That's why I believe that if we all paid higher taxes with less pain in the collection, more of us would be granted the American version of freedom we have been promised.
Tom Heberlein divides his time between Wisconsin and Sweden, where he is working on a book, Falling in Love with Sweden (One Mistake at a Time). He is a professor emeritus at the University of Wisconsin Madison.
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Life gets expensive, and sometimes everyday costs can add up to a lot of money. Between utilities, groceries, child care, and other expenses, Americans face a lot of bills. Luckily, there are many ways you can save on your regular costs.
One easy way to save money is to stick to a budget. Only about one third of Americans budget monthly, and of those who do, many go over most months. If you are able to carefully plan for your necessary expenses and stay on target, you will be better about saving money. You can also save money by conserving energy, being smart about your trips to the grocery store, making wise child care decisions, and also by making many items at home that you would normally purchase at the store. By making smart choices, you can save money regularly, which will reduce your everyday cost of living. Read on to see five easy ways to save money regularly.
1. Conserve, conserve, conserve
Utility bills can be very expensive, particularly if you have a large home or a big family. Even people who live in a small apartment or home can feel the burn of a high utility bill. Lucky, there are basic changes you can make that will add up to big savings quickly. The most obvious change is to turn things off when you’re not using them. Turn your lights off when you are not home or out of the room. As nice as a warmly-lit home is, a fat wallet is even nicer.
Turn the radio and TV off when you are not listening to them, or set a sleep timer if you often fall asleep to an electronic device. The same goes for water; turn the water off when you are brushing your teeth, and turn it back on when you are ready to rinse. If you are doing dishes, only use the water you need. Lastly, if you work during the day, program your thermostat so that the heat or AC is lower during the day when you don’t really need it.
2. Plan your grocery trips
We’ve all heard the tip, don’t go grocery shopping while you’re hungry. Another good tip is to never go grocery shopping without a list, because you will spend more money. Plan your meals ahead of time, and also take an inventory of all the food you need to stock up on. Use coupons if you can — even if you don’t have time to check every circular. If you shop at a particular store regularly, planning your meals around what is on sale for a particular week will save you money.
It will also save you by eating in season, because vegetables and fruits that are in season are more affordable. Lastly, consider purchasing items that you regularly use in bulk: this can mean purchasing at a bulk store like Sam’s Club or Costco, or simply buying multiples of something that stays good when it goes on sale at your regular grocery store.
3. Save on child care
Children are cute, but let’s face it, they’re also expensive. If you work full-time, you likely see much of your paycheck go towards child care. Even if you stay at home or work part-time, you will need a babysitter sometimes, and sitters can be costly as well. As expensive as child care is, there are many ways you can save on it. If you have family who can help, you may be able to pay less. Or if you have a friend or neighbor who offers care in their home, you can consider that; usually in-home daycare centers cost less. If you have friends with kids, creating a babysitting co-op can be a great way to have some time out without paying for it.
If you regularly go to a gym, look for one where child care is part of the membership fee. Many gyms now offer free child care with a family membership. You should ask about the training and certifications that your gym requires of their child care workers, but if you feel comfortable, you can have good child care as well as a workout.
4. Make it yourself
If you have the time and energy, you can make many items yourself that you would normally purchase at the store. If you’re short on time, try combining activities: make something while you watch your favorite show. There are many items you can easily make at home to save money. Making baby items at home can be especially cost effective; baby wipes, burp cloths, and baby food are fairly easy to make and will save you money.
Many household convenience items can also be made at home. Soap is pretty easy to make at home, as are cleaning supplies and even some foods that you would normally buy at the store (like granola bars, marinera sauce, breads, and so on.) Homemade gifts will also save you money, and may mean more to the person receiving the gift.
5. Stick to a budget
Saving money on everyday costs is great, but unless you have a solid budget, you will still face many months where you are overspending. Take the time to carefully review your bills, budget for unexpected bills and emergencies, and of course, budget for fun too. Try a budget template if you are new to budgeting. Certain habits can easily derail a budget, like eating out too often and accruing unnecessary fees by not paying attention to your credit card or bank fees.
If you already have a budget but you are having a hard time sticking to it, there are many ways you can get back on track. If you’ve had a change in income or bills, you need to update your budget; many people’s budgets suffer because they assume they can keep operating under the same budget even when circumstances change or prices go up. Plus, you need to make realistic expectations: if you budget too little, you won’t be able to stay on track, and you will get frustrated. If you budget too much, you won’t save as much as you should.
There are many ways that you can save money on everyday costs, but each money saving tip requires careful planning. So take the time to determine how you can turn off more lights, conserve more water, be more careful at the grocery store, save money on child care, make some items yourself at home, and most importantly, stay on budget.
While looking for ways to reduce your everyday costs is important, it is equally critical to keep a tab on your spending trends. Last week, we had looked at some of the best personal finance apps out there to help people develop financial responsibility. Below is a recap of some of the best tools we found:
1. If you need an app for budgeting and keeping track of accounts
Mint.com has a collection of helpful personal finance apps. The company’s iPhone app was named the Best Finance App by App Awards and included in Time Magazine’s 50 Best iPhone Apps of 2011. The app makes it easy to track your finances and offers alerts for high spending. The app also allows users to check account details and update their budgets; it also updates the instant you enter in new purchases.
The app also is password protected, which is a nice feature in case you lose your phone or have nosy friends or coworkers. Most user reviews are positive and suggest that the app is easy to use and helpful, but did note that some features that are available on the browser-based version are not available on the app. The app is free.
2. If you need an app for monitoring bills
Manilla’s app is great for keeping track of your bills on the go. The app holds information for all of your different bills and sends automatic reminders when your bills are almost due; it also reminds you when reward points are about to expire. More than 4,000 businesses – credit cards, utility companies, wireless carriers, and more — are included, but you can also add other accounts that you want to keep track of but are not available online (like babysitting).
The app offers easy access to bills, financial accounts, loyalty programs, and other options, and it uses one password, which makes it easy for users to access while still being secure. Also, unlimited online document storage is also included.
3. If you need an app for increasing savings
SavedPlus offers a free mobile app for Android and iPhone, as well as a website, like the other apps mentioned. According to its webpage, clients save $4,200 per year. The app helps users meet their financial savings goals by automatically transferring a set percentage of money over to savings when clients use their credit card or checking account, which should hopefully help you save more in the long term.
Users can choose a set amount – from 5 to 20 percent of their purchases –to be saved each time. The company works with any bank, so you can include your accounts easily. All transactions are encrypted and secured by Thawte, and the company says it does not collect or store any personal information. The app seems to be popular with users and media alike.
4. If you need an app for investing
The TD Ameritrade mobile app is available for iPad, iPhone, and Android, and it allows users to quickly manage their accounts and make trades. The app allows users to analyze trends, access market news, monitor orders, view streaming quotes, and access charts for technical analysis; users can also transfer cash from other accounts. Check deposits can be up to $10,000.
The company also offers the TD Ameritrade Mobile Trader App, which is a more advanced app with more options. Users can trade stocks, manage multi-leg and complex options, use paperMoney options to test strategies, view charts with technical indicators, and see streaming programming. It is available for iPad, iPhone, Android, and tablets.
5. If you need an app for business travel
Expensify has apps for iPhone, iPad, Android, Windows Phone, and Blackberry. Expensify mobile is ideal for people who travel regularly for business purposes, because the apps allow users to track expenses, create expense reports, and even snap photos of receipts in order to save time when trying to get reimbursed later.
Once you take a photo of your receipt, SmartScan fills in all the expense details or attaches the receipt to the associated credit card expense. The process can take up to 10 minutes to complete, which seems pretty reasonable. You can also add expenses related to time spent by entering the number of hours and the rate. The app even has a mileage expense option.
There are many other neat personal finance apps out there, and you can find one for pretty much whichever part of your own finances you want to keep in check.