Swedish Government Unveils Major Tax Cut Package for Households

Reduced taxes on work and pensions, lower preschool fees, and decreased taxes on sickness and activity compensation are among the government's budget initiatives.

"A substantial package aimed at hardworking people, pensioners, and families," says Finance Minister Elisabeth Svantesson. S-top leader Mikael Damberg sees deadlocks within the Tidö cooperation that Swedish families are paying for.

"They refuse to increase child benefits."

The Tidö parties presented several budget news at a press conference on Monday.

"In total, it's about over 30 billion SEK that will go into Swedish households' economy," says Elisabeth Svantesson.

A new job tax deduction worth 21.4 billion SEK is the largest part.

Overall, a family with a police officer and a nurse with two small children living in a house will get about 1,800 SEK more in their pocket per month, if the previously presented reduced food VAT is included, according to the government.

The government will allocate one billion SEK next year to municipalities and 1.5 billion SEK in 2027 to make preschool and after-school care cheaper for families, according to information to Expressen.

The fee that municipalities charge will be reduced, and an average family will pay 4,500 SEK less per year, according to the government.

"No family should have to decline preschool because their wallet can't afford it," says Education and Integration Minister Simona Mohamsson.

Elisabeth Svantesson says there will be no increased child benefit in the budget, something the Social Democrats have demanded.

"Now we make this decision, and it's an enormous package for families," she says.

Reduced Electricity Tax and High-Cost Protection

The electricity tax will be reduced by almost 10 öre per kilowatt-hour, and a high-cost protection will apply if the average electricity price during a month exceeds 1.5 SEK per kilowatt-hour.

"We set a limit. No one should stand alone with sky-high electricity bills," says Energy and Business Minister Ebba Busch.

The Sweden Democrats' economic policy spokesperson Oscar Sjöstedt says that reduced electricity prices will also indirectly affect other production costs and, in the long run, could push down inflation.

"The Riksbank should at least not be less inclined to proceed with further interest rate cuts," he says.

Reactions: Positive Signals – and Too Little

The Social Democrats' economic policy spokesperson Mikael Damberg sees several proposals positively, calling, for example, lower preschool fees "a bit lively."

"It feels a bit like presenting a protection package against the result of their own policy," he says, adding:

"It's a bit telling that it happens a year before the election. Most families have struggled for three years and know how this government has chosen to direct the money."

Elisabeth Svantesson said during the press conference that one can expect the child benefit not to increase next year. Mikael Damberg thinks that's bad.

"They refuse to increase the child benefit, which is a politically accurate distribution profile measure. We know that many families with children struggle with their finances. Sweden is the only country in the Nordics that hasn't increased the child benefit during the cost crisis."

Damberg believes the explanation lies in the Tidö cooperation.

"Unfortunately, it seems to have locked for the Sweden Democrats and the Moderates on this issue."

Saco: Wants to See Larger Tax Reform

The senior organization SPF welcomes reduced taxes but thinks 150 SEK per month for a pension of 25,000 SEK is too little.

"70 percent of the country's pensioners don't have 25,000 SEK in pension, but less than that. A reduction is, of course, welcome, but for those with lower pensions, it will only be crumbs," says chairperson Maria Larsson, in a press release.

Shoka Åhrman, savings economist at the insurance company SPP, believes that the tax cuts, in addition to leaving more money for households, can send positive signals.

"It's not just about the thousands in the wallet, but also about the feeling that the economy is moving in the right direction. Such an expectation effect can itself help get the wheels of the economy moving faster," she writes in a comment.

The trade union organization Saco thinks it's reasonable to lower taxes on work but wants to see a larger comprehensive tax reform instead.

"Constantly changing tax rates without a long-term idea of how welfare should best be paid for is not particularly responsible behavior," says Saco's welfare economist Thomas Andrén, in a press release.