Can municipalities justify their fiscal policy? Part I

The Swedish fiscal policy continues on its tight path, worsening the already fragile financial balance of the private sector (households and firms).
As a feeble reaction to this prolonged mugging I have decided to contact the municipality where I live, and asked them to justify their fiscal policy, two points in particular: municipality tax and property tax.
As a citizen I believe I have the right to do so.

For those of you whom are familiar with heterodox economics, the answers to these questions are straightforward: it is not really municipality’s fault but rather the central government’s. Remember that only the central government is able to issue its own IOU (Swedish Crown in this case), all other currency users are subordinated, including local governments.

It will be nonetheless interesting to see how they answer to my email, providing they do. I really hope not to get an answer like: fire is hot and ice is cold.

I will publish their reply as soon as I receive it.


Here it comes the email I sent.

Dear Kommun,

I am a financial analyst and macroeconomics researcher (independent). I have been working within financial risk modelling for about 10 years and 6 years of active involvement in macroeconomics with several presentations and seminars (the latest event I organised took place in Stockholm last may, here you have the link of the event in case you are interested: https://onexcent.com/heterodox-macroeconomics/).
I am sending you this email as a part of a research project that I am carrying out, aimed to unravel the inner causes of the decline of the Swedish economy.
I have published an article on this subject not too long ago, you can find it here: https://onexcent.com/2018/09/14/570/

I have been trying to get in touch with Swedish economists and organisations with the sheer intent to have a proactive discussion on the state of the Swedish economy, but so far I haven’t received a single reply (I may be wrong, but I am starting to believe that they don’t dare to answer…).
You are the first municipality whom I am trying to contact and it is not really a coincidence since I happen to live here.

I went through your website and read about your current and future policies regarding economic development and welfare.
It is noticeable a recurring emphasis on life quality and how to make your municipality an attractive place for households and companies. 
This is more than legitimate and agreeable, the problem I see is that your fiscal policy is in open contradiction to your intentions to attract people, it is rather discouraging in my view.
Let’s take as a reference a young couple who is wondering whether to move out from Stockholm city and buy a small house in your municipality.
First and foremost, why would anyone leave Stockholm for your municipality? “Life quality”, I think we all agree on that.

Now, I would like to argue about two crucial points regarding the fiscal policy: municipality tax and property tax.

First point: 33% municipality tax. 
Would you be able to give me an explanation on why this tax is so high?
Why would anyone feel attracted to live in a place where more than one third of his/her monthly salary disappear in taxes?
Compared to Stockholm, it is almost 3% more. In practice, this means that by simply changing you home address from Stockholm to your municipality you get poorer by 3% of your income.
Notice that we are not talking about moving from one country to another, but from two cities in the same country just 200 km away.

Second point: property tax.
While the municipality tax, even if disproportionate, can have some justification, the property tax goes beyond human decency.
In principle this is not even a tax, this is pure violence against the households’ economy.
How would you justify the fact that a household is mugged for 7.8 thousand Crowns every year for something that does not produce any income and it is arguably a reliable indicator of wealth.
Try to double think about the about the absurd logic behind this tax.
You have a house, which is your only property and the place you live. This of course does not produce any income since you just live in there and you are not renting out or doing any business with it. Still you have to pay an absurd amount of money on it.
The funny thing is that if you move into a house that already exists, that is already part of the landscape (in practice you exploit existing resources instead of consuming new ones) you are penalised. Instead if you build something new you are rewarded.
It would make sense to pay a property tax on an eventual second or third property since you don’t actually live there and can potentially generate an income out of it, but taxing one’s main and only house is simply cruel.

Would you give me at least one explanation, that makes sense, of why this tax exists in the first place?
Is it like a punishment for those who decides to live in a house instead of an apartment?

I believe we all agree that is important for smaller municipalities to grow (and keep growing) in order to guarantee a more equal wealth distribution across all the country. It is therefore key to be able to attract both households and firms providing them with a beneficial and stable economic environment.
I am afraid that an oppressing fiscal policy works against the development of smaller municipalities and this is even more critical for all those minor cities scattered within commuting distance (reasonable) from Stockholm.

Let me thank you in advance for your attention and I look forward to receiving a reply from your side in a near future.
I am completely eager to any sort of questions, elucidations or debates, so feel free to contact me any time.

 

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