The 101.2% Solution

When Sweden put draconian tax regulations into effect in January, an early victim was one of the welfare state's leading citizens: Director Ingmar Bergman. Two policemen abruptly called Bergman from a Stockholm stage, where he was rehearsing August Strindberg's The Dance of Death, and hauled him away for interrogation on suspicion of having evaded payment of $119,000 in taxes. Although all charges were dropped last week, Bergman remained holed up on his bleak island home at Faaro, sunk in what doctors described as "a deep depression as a result of shock."

Bergman was not the only Swedish taxpayer suffering from this malady. The condition has reached epidemic proportions among the roughly 500,000 Swedes (out of 8.2 million) who own small businesses, farms or shops, or who pursue careers in law, private medicine or the arts. They are being hit by new regulations that have raised taxes to levels that are astronomical and sometimes even absurd. For example, a self-employed taxpayer has to pay 101.2% of all income over $35,000.

Cunning Bid. Many small businesses have closed because their owners could not afford to make money. Pop Singer Lill Lindfors and three other vocalists decided not to collect $108,000 in royalties from their recording company; they would have had to pay more than that total in taxes. Lennart Kjelson, a physician, wearily declared he would continue a part-time job at a school only if they ceased to pay him. In culture-proud Sweden, where some writers are awarded state-guaranteed incomes, under the new rules an author who does nothing but collect his state income can be better off than if he publishes a successful book.

Sweden's super-stiff taxes for the self-employed are the result of a strategy of Prime Minister Olof Palme's Social Democratic Party to build popularity in an election year. The Social Democrats only barely prevailed in the 1973 elections, and Palme faces another severe test at the polls in September. In a cunning bid to woo the country's 3 million blue-and white-collar wage earners Palme decided to make companies and self-employed citizens shoulder the soaring cost of Sweden's cradle-to-grave social programs. At the same time, wage earners were allowed to stop contributing to health insurance and pension plans. As a result, their average tax bite has been reduced by 10%.

The blatant politics of the Palme tax policy upsets many Swedes, however. Worried about a political backlash, Palme's tax officials last week insisted that the 101.2% maximum was an "accident," and it was announced that a "provisional tax revision" was under study. Meanwhile, Bergman has angrily canceled all his film and theater projects in Sweden. Some tax experts are suggesting another way for certain self-employed Swedes to cope: divorce. Swedish husbands, they advise, could divorce their wives, dispatch them abroad, then send them big tax-deductible allowances. Upon reaching retirement age, the couple could be joyfully reunited to enjoy both their savings and the manifold blessings of the welfare state.

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