Attitudes Towards Tax Reform and Progressive Taxation: Sweden 1991-96

Attitudes Towards Tax Reform and Progressive Taxation: Sweden 1991-96Author(s): Jonas EdlundSource: Acta Sociologica, Vol. 42, No. 4 (1999), pp. 337-355Published by: Sage Publications, Ltd.Stable URL: http://www.jstor.org/stable/4201166 .

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ACTA SOCIOLOGICA 1999

Attitudes towards Tax Reform and Progressive

Taxation: Sweden 1991-96

Jonas Edlund

Department of Sociology, Ume? University, Sweden

ABSTRACT One of the most debated elements of the Social Democratic reform of the Swedish tax

system was the lowered income tax rate, which mainly affected the upper tax brackets. An analysis of public attitudes to the tax reform during three time periods reveals that attitudinal patterns are characterized by stability, both on aggregate and individual

levels, and by profound social divisions. Support is more prevalent among more affluent social strata and those affiliated with Bourgeoisie parties compared to workers, low- income earners and those with left-wing preferences. Following attitudinal

developments in the aftermath of the tax reform, social conflicts - mainly structured

along class dimensions - as well as demands for tax progression tended to increase between 1991 and 1996.

Jonas Edlund, Department of Sociology, Umed University, 901 87 Umed, Sweden (e-mail jonas. edlund@soc. umu. se) ? Scandinavian Sociological Association 1999

1. Introduction

The development of the ambitious Swedish welfare state can clearly be observed in her tax

system. In 1960, taxes constituted 27.2 per cent of the GDP. Three decades later, tax revenues had risen to 55.6 per cent (OECD 1994). The elevated level of tax revenues

required for the welfare state set the stage for

political discussions regarding the efficiency of the tax system, which became a prominent issue in Sweden during the 1980s. The main

targets were the high marginal income tax rates and the many opportunities for tax deductions.

Finally, in late 1989, a tax reform with radical

changes designed by the Social Democratic

Party was announced and eventually passed. Indeed, taken all together, the changes were so radical that the reform earned the title 'The Tax Reform of the Century'.

Changes in the tax system, which came into full force in the beginning of 1991, included more widely distributed, increased and uniform taxes on consumption and capital,

reduced tax rates on corporate income, decreased opportunities for tax exemptions, and perhaps most important, lowered income tax rates. The progressive tax became only a shadow of its former self when a four-bracket tax scale running from 35 per cent to 72 per cent was replaced with a two-rate structure of 30 per cent and 50 per cent (Finansdeparte- mentet 1990).

The proposal and implementation of such a radical reform did, however, cause disputes, mostly within the labour movement. The most controversial aspect of the reform was the modification of the personal income tax scale. Critical arguments in the public debate, which revolved mostly around the consequences of

diminishing income tax progress, claimed that the tax reform departed too much from traditional Social Democratic politics. The Social Democratic elite, on the other hand, defended the reform with support from economic experts and emphasized that the reform must be seen in its totality, not only as a 'marginal tax cut' reform. In 1991, general elections were held



338 ACTA SOCIOLOGICA 1999 VOLUME 42

and the Social Democrats lost power. It has been

argued that the tax reform contributed to the Social Democratic electoral failure. Seen in this

perspective, it is particularly interesting to examine how the public has responded to the reformation of the tax system and how the distribution of taxes among different income

groups is perceived. The paper is organized as follows. The next

section briefly summarizes the political context within which the tax reform was created and

finally passed. This is followed by an analysis of the response patterns and structure of various attitudes related to the tax reform, both on the

aggregate and individual levels, utilizing survey data from March 1991 to September 1992. Thereafter it is examined to what extent

responses to the tax reform can be categorized into divisions between social groups. Attitudinal links between the tax reform and political affiliation are also subjected to empirical analysis. Finally, using data from 1991 to 1996, we focus on how Swedish attitudes towards tax

progression have developed in the aftermath of the tax reform. A brief description of the data is available in Appendix 1. In the last section, some implications of the main results are discussed.

It is clear, then, that the main focus of this

paper is rather country-specific. However, the

object of this research applies more generally as well. First, in recent years the role of institutions in determining preferences among social actors has been increasingly recognized. While it has been suggested that institutions shape preferences in the electorate (Thelen & Steinmo 1992; Rothstein 1994), it should be emphasized that

empirical studies within the field have concen- trated on behaviours and strategies adopted by different 'elite' groups (Evans et al. 1985;

Skocpol 1992; Weir 1992; Steinmo 1993; Steinmo & Watts 1995), while institutional feedback processes, 'particularly those directly

affecting mass publics (...) have yet to receive sufficient attention' (Pierson 1993:597). The extent to which institutional change influences

public preferences should be considered an

empirical question, not an axiom (Putnam 1993:17f.; Rothstein 1996:148).

Second, in the ongoing controversy regarding dominant cleavage patterns in contempor- ary society, the relevance of class is a hotly contested issue (Lee & Turner 1996). Class- critical arguments suggest that long-term economic prosperity and the establishment of the

welfare state have de-emphasized class conflicts

while underpinning conflicts along the axes of

gender, employment sector and age (Hoel & Knutsen 1989; Inglehart 1990).

Hopefully, by following attitudinal developments during the 1990s, we may shed some

light on both the impact of the tax policy changes and whether social conflicts tend to be structured along other demarcation lines, such as gender, sector and age, rather than class.

2. The Swedish tax system and the political context surrounding its reformation

In the beginning of the 1980s a tax deal between the Social Democratic Party and the

governing Bourgeoisie coalition was struck. This event, subsequently called the 'Wonderful

Night', was the first serious attempt in decades to bring down the high marginal taxes (Hade- nius 1981). Historically in Swedish politics, ties between the Social Democrats and the Swedish Confederation of Trade Unions (LO) have been numerous and strong, and the 'Wonderful

Night' agreement, with lower taxes on high incomes, was not viewed positively by the LO

(Feldt 1991). The Social Democrats returned to office in

1982. At this point, the government and most

economists believed that the Swedish economy was in a rather unhealthy state, with low

productivity and a large budget deficit.2 Begin-

ning with a major devaluation in 1982 followed

by the deregulation of the banking system and

capital markets, Social Democratic politics led to

increased tensions between the governing party elite and the LO; the political actions taken were

seen as unfair and too capital-friendly. However, the economy recovered rather quickly and the

budget deficit was eliminated (Aberg 1994b; Therborn 1991).

In the latter half of the 1980s heavy wage increases and high inflation led the government to try to control wages and purchasing power by various means. Most attempts failed and ten-

sions with labour unions increased. The harsh

disagreement between them culminated when the government proposed, without success, a

cost-reducing programme that outlawed strikes, froze wages and prices and reduced social

spending (Feldt 1991; Korpi 1993; ?berg 1994b).

Moving to tax politics more specifically, the

tax reform of 1991 was preceded by a couple of

minor reforms that set the stage for its

introduction. These reforms did not soften the



Attitudes towards Tax Reform and Progressive Taxation 339

criticisms of the tax system. From the right the

marginal tax rates and revenue levels were attacked. The left-wing critique was mainly concerned with the tax system's inability to close unwanted loopholes and the distribution of the tax burden. The LO criticized the

marginal tax rates, claiming that the burden had been distributed downwards. By and large, it was these tax system changes and the

government's economic policies and interven- tion in wage negotiations that created the severe tensions, known as the 'War of the Roses', within the labour movement.

In this rather turbulent political climate the 1991 tax reform was created. Looking back, it is obvious that the Ministry of Finance was the

key force behind the reform (Feldt 1991; Steinmo 1993; ?berg 1994a). Finance Minister Feldt and his associates complained in articles and speeches about the tax system and the need for reform (Feldt 1991:379; Steinmo

1993:186). Social Democrats on the left did not support the ideas without reservation, since it was argued, among other things, that 'the

very high level of progressive taxation just doesn't work' (Steinmo 1994:15). Despite the

critique that these 'market-friendly ideas' pro- voked, the Social Democratic elite received a mandate from the 1987 party congress to examine and suggest appropriate changes to the tax system. The official commissions'

proposals (SOU 1989a, 1989b, 1989c) were indeed sweeping and 'more far reaching than the mandate given by the party congress' (Feldt 1991:380). Having come this far, the government had two problems to solve: first, to get the LO and the rest of the Social Democratic Party to

jump on the bandwagon, and second, to find at least one coalition partner, since the Social Democrats did not control the majority of seats in the Riksdag.

The government negotiated with the LO, and both agreed that the current system could

by no means be defended. The corruption of the tax system, caused by extensive tax planning, high marginal tax rates and a great number of

loopholes had, in their opinion, gone too far. The LO was worried that the declining legitimacy of the tax system would become a serious threat to the welfare state (Rothstein 1992:282f.). In late 1988 it was announced that the labour movement had agreed to reform the 'rotten' and 'perverted' tax system (Elm- brant 1993:186).

If the antipathies to the old tax system unified both parties, the fairness of the new tax

system's effects on the income distribution was

questioned. The proposed large cuts in income tax were not approved by the LO, but after

promises from the government that low-income earners would not pay lower taxes at the

expense of low-income earners, and that the reform would be fully financed, the LO finally accepted the tax reform (?berg 1993; cf. Eklind & Johansson 1989; Schwarz & Nyman 1989; SOU 1989a; S?dersten 1991).

Negotiations with the other political parties revealed that the tricky part would be to

compensate the loss of income tax revenues. After intense deliberations, where the Social Democrats were forced to make a few conces- sions, the Liberals and the Social Democrats struck a radical tax deal in late 1989.

Getting the support of the rank-and-file members would, as Feldt writes, 'demand

exceptional pedagogical and agitatorial efforts

(...), since the new tax system at first glance could be perceived as a violation of every social democratic idea of how justice is done' (Feldt 1991:385). Scholars have been attentive to the remarkable pace of implementing the reform and the political methods used by the Social Democratic elite. Traditionally, a reform of this size would be debated and anchored over a

longer period (Elvander 1972, 1994). In this case, however, the Social Democrats did not make the tax reform plans known to any appreciable extent during the 1988 general election campaign, nor did they await sugges- tions from the internal party debate before

signing the deal with the Liberal Party (Steinmo 1993; ?berg 1994a; Elvander 1994).3

In studying attitudes to the tax reform, a few factors are worth considering. First, one must take into account the politics around the

implementation of the reform. Following Elvan- der (1994), the politics preceding the tax reform decision may be described as a form of

manipulative democracy in which important decisions were made by horizontal collaboration

among political elites instead of by vertical collaboration within a political party. Second,

political actions can often be interpreted in line with political predispositions. The Social Demo- cratic Party's responsibility for the creation and

implementation of the reform certainly framed the debate and affected attitudes to the reform

(?sard & Bennett 1992). If another party had been responsible for the reform, the debate would most likely have been different. Third, how did the public perceive and respond to the tax reform? It is interesting to consider whether




it was perceived as a marginal tax reform only, or as a complete package not violating Social Democratic values of justice. This is of great importance since, from a left-wing perspective, justifying the reform may be difficult if it is not taken as a whole. An examination of the

arguments of the tax system change reveals that the 'complete package design' was stressed.

According to the educational booklets and books describing the tax reform (Finansdepar- tementet 1990; S?dersten 1991), the arguments for a reformation ran as follows.

The pre-1991 tax system contained certain elements that did not serve the Swedish

economy efficiently. The main targets were the

progressive, high taxes on income, the unequal treatment of incomes and the unwanted effects of certain tax deductions. Since it was assumed that the current system encouraged neither work nor saving, but tax avoidance and

evasion, the legitimacy of the tax system was threatened. The new system of simple and uniform rules would facilitate rational economic decisions by strengthening incentives to work and save. The reform would increase fairness on the horizontal dimension of justice (incomes of the same size are treated equally). The vertical dimension of justice (the redistribution among different income levels) would be affected by changes in income and consumption taxes, but those of small means would be

compensated by increased housing allowances and child subsidies. In short, in tandem with increased macro-economic efficiency, everybody would be better off in the new tax system.

If the reform instead is mainly perceived as a marginal tax reform, then it is possible to see it more or less as fitting a right-wing political agenda. Korpi (1993) argues that the new economic policies initiated during the 1980s and the tax reform gradually alienated the core of the grass-root supporters. The Social Demo- cratic 'right-wing' turn combined with the difficulties in controlling the national economy led to the defeat in the 1991 general election. As

Korpi put it, 'The "Tax Reform of the Century" was a triumph for the Ministry of Finance (...) but it was a catastrophe for the Social Demo- cratic Party, and led to the rampage of the

century regarding the [1991] electoral support' (1993:17). In a similar vein, Aberg suggests that

...the Social Democrats had to pay the price for their political reorientation. Their voters did not

recognize their party and did not vote for it. The

decision to make the fight against inflation the primary goal of economic policy, which (...) meant cuts in welfare programmes and a tax reform which lowered taxes for high income earners, had been taken by the party elite. Their concept of reality differed dramatically from the way rank- and-file members and ordinary voters saw the world. (1994b:91)

3. Attitudes towards the 1991 Swedish tax reform

In this section various attitudes towards the tax reform will be analysed. The first is the question about the reform decision itself. The remaining five questions concern the expected or perceived outcomes of the reform. The first two ask whether respondents believe that they are winners or losers with the new tax system, and whether they think that the new tax system has contributed to an improvement or a deterioration of the Swedish economy. While the former deals with economic self-interest, the latter measures a form of rational collective economic interest. Furthermore, three questions concerning the legitimacy of the distribution of taxes were asked. The first measures whether respondents view the distribution of tax burdens in the new tax system as more or less fair than with the old tax system. The second question is about tax planning, i.e. whether the new tax system is more successful in closing unwanted loopholes than the old one was. The third question attempts to measure how citizens perceive the distribution of taxes

among different income groups. How then do citizens respond to the

reformation of the tax system? As shown in Table 1, attitudes tend to be remarkably stable on the aggregate level over time. We can observe that those in favour clearly outnumber those opposing the tax reform, while there is a

significant proportion of uncertain responses. Furthermore, public evaluations of the tax reform's effects vary. It is on the horizontal dimension of justice that least opposition towards the reform can be found. Very few citizens believe that the tax reform facilitates the avoidance of taxes.

Concerning the vertical dimension of justice (the distribution of taxes among different income groups), tax reform opposition tends to be stronger. On the question of whether the tax reform has improved or damaged the economy, citizens are less convinced that the tax reform




Table 1. Attitudes towards the tax reform and the distribution of taxes. March 1991, September 1991 and September 1992. Per cent.

Questions Responses 3/91 9/91 9/92

1. In 1991 a major tax reform was carried out in Sweden. Do

you believe that it was a good decision to implement the new tax system?

2. In connection with the change of the tax system, it was mentioned that some groups would lose and other groups would gain from it. Compared to others, do you believe that you belong to the winners or losers of the new tax system?

3. Do you believe that the new tax system has contributed to improving or hurting the Swedish economy?

4. Do you believe that the new tax system will make it more difficult or easier for people to lower their income tax by means of tax planning?

5. Do you believe that the new tax system distributes the tax burden more fairly or less fairly than the old one did?

6a. For those with high incomes, taxes are.

6b. For those with middle incomes, taxes are.

6c. For those with low incomes, taxes are.

Yes

No Don't know The winners

Neither the winners nor the losers

The losers Don't know Improve

Neither improve nor hurt

Hurt Don't know Easier

Neither easier nor more difficult

More difficult Don't know More fairly

Neither more fairly nor less fairly

Less fairly Don't know Too low About right Too high Don't know Too low About right Too high Don't know Too low About right Too high Don't know

45

20 35 28

26

24 22 32

14

15 39

45

20 34 27

33

23 17 32

15

15 39

9

16

32 43 22

12

46

15 38 25

37

23 15 23

16

30 32 10

15

35 40 25

13

36 32 31 30

47 27 11 16

3 52 32 14

1 18 67 14

3,535 3,439 3,262

Source: Tax reform time-series surveys (Edlund et al. 1998).

was beneficial for the economy between Sep- tember 1991 and September 1992. This change in attitude is understandable since the Swedish

economy worsened considerably during this

period. Another finding worth pointing out is the rather high level of neutral responses, which

may be a sign of a widespread uncertainty regarding the outcomes of the tax reform.

Finally, the public appears to be less than satisfied with the distribution of taxes among different income groups. The observed pattern may indicate a public desire for increased tax




Table 2. Correlation patterns among attitudes to the tax reform and tax progression. March 1991, September 1991 and

September 1992. Pearson's r ? 100. Coefficients > 30 in bold.

1. 2. 3. 4. 5. 6. 7.

1. Tax reform decision positive or negative 2. Belong to winners or losers

3/91 40 9/91 43 9/92 38

3. Swedish economy improve or hurt 3/91 46 29 9/91 48 31 9/92 37 24

4. Tax planning easier or more difficult 9/91 11 8 10 9/92 11 8 8

5. Tax distribution more fair or less fair 9/91 39 26 32 8 9/92 38 30 37 9

6. Tax progression index 9/92 -20 -22 -30 -6 -31

7. Minor tax reform index 9/92 -32

8. Major tax reform index 9/92 -36 95

Source: Tax reform time-series surveys (Edlund et al. 1998). Variables 1, 2, 3, 4 and 5 are three-point scales. Variables 6 and 8 are nine-point scales. Variable 7 is a seven-point scale. All variables range from -1 (negative to tax reform and tax progression) to 1 (positive to tax reform and tax progression). See Table 1 for question wording and number of respondents.

progression, since respondents tended to perceive that high-income earners are taxed too

lightly, while taxes imposed on those with low incomes are perceived as too high.

The next question to be examined is to what extent the different attitudes are correlated. Beginning with items 1 to 5 in Table 2, it can be observed that attitudes to the reform decision are quite strongly correlated with all other factors except the question about tax

planning.4 A positive attitude towards the reform decision tends to correlate with the

responses, 'winner', 'improve Swedish econ-

omy', and 'fair distribution of tax burdens'. It is interesting that the question of tax planning is not correlated with the others, since a major target of left-wing criticism of the tax system has been the many opportunities for tax deductions

among high-income earners. Furthermore, there are no signs of any

major changes in correlation patterns over time. Apart from small changes in correlation

coefficients, the observed patterns are similar in all three waves. The fairly strong correlation

among the attitudes suggests that Swedes tend to view the reform decision in light of perceived

effects (or vice versa). Therefore, an additive index labelled 'major tax reform index' (row 8)

consisting of items 1, 2, 3 and 5 can be constructed in which each positive evaluation

concerning the tax reform gets 1 point and each

negative one -1 point. Those who are uncertain or perceive no difference in the effects between the new and old tax systems are

assigned a zero value. This index ranges from ?4 to 4 (see table footnote), but has been transformed to range between ?1 and 1. In

addition, since the tax distribution question was not asked in the first survey, and since it is desirable to follow the attitudinal developments over the three time periods, a 'minor tax reform index' (row 7) was constructed following the

above principles, using items lf 2 and 3. The index in row 6 is constructed of two

questions (6a and 6c in Table 1). It is intended to capture attitudes towards tax progression, which is defined as the distance between the variable values for taxes on high and low

incomes.5 The higher the value, the more

sympathetic the respondent is towards a pro-

gressive distribution of taxes. The negative correlation coefficients indicate that those in




favour of increased tax progression tend to be more hostile towards the tax reform, particularly regarding its effects on the economy and the fairness of tax distribution.

This finding and the fact that the question of tax planning is not correlated with other attitudes may indicate that the public perceived the tax reform as a 'cutting marginal tax rates'

reform, rather than as a complete package with reduction of marginal tax rates together with more specific capital taxes and limited opportunities for tax deductions, an arrangement which, the Social Democrats argued, would

preserve the redistribution among different income levels in the end.

So far, the results clearly provoke some

questions about the distribution of tax attitudes,

questions that we will try to answer in what follows. It has been observed that attitudes on the aggregate level are stable over time. How-

ever, two different kinds of attitude changes may be hidden in aggregate stable attitude patterns. First, changes on the individual level may exist even if net changes are negligible. Second, attitudinal changes may exist within different social groups, but the flows cancel each other out on the aggregate level. The second notion is

clearly related to another question: among which social groups are support and opposition for the tax reform distributed? It will now be examined whether class, education, household

income, gender, age, sector of employment and

political choice are related to different concep- tions and preferences concerning the reformation of the tax system. Finally, as it has been observed that attitudes towards the tax reform are negatively correlated with demands for increased tax progression, it will be examined how attitudes towards tax progression have

developed in the aftermath of the tax reform, in terms of both aggregate level support and social divisions. Following this outline, we will proceed with an analysis of attitudes towards the tax reform over time on the individual level.

In Table 3, various measures of the structure and size of attitude flows are utilized.

Beginning at the top of the table with a single item, i.e. attitudes concerning the reform decision, the net changes (the positive sum of the marginal distributions divided by two) remain, as expected, small and stable in all three periods.

The gross changes (simply the proportion of respondents changing opinion between two

waves), in contrast, are fairly stable but much

larger. Between March and September 1991, 36

per cent of the respondents changed their attitudes towards the reform decision. The

gross change between the second and third time periods is quite similar, despite the differences in time elapsed. Perhaps even more

peculiar is that the gross change between the first and third time periods, 39 per cent, does not differ much from the previous change. We have thus observed small net changes and fairly large gross changes that cancel each other out on the

aggregate level. It is, however, important to

acknowledge that the majority of the public remains stable and loyal to their original preference over time.

Interestingly, the share of respondents who

change attitudes does not vary much over time, but is it possible to detect discernible patterns or flows of change? Because response categories are unequally distributed and changes on the

aggregate level are associated with lower-level

changes, it is desirable to use loglinear model-

ling, which controls for differences in marginal distributions (Knoke & Burke 1980; Hagenaars 1990). Two different loglinear models will be

applied. The independence model, used as a baseline model, assumes that attitudes at one time period (e.g. September 1991) are independent of the attitudes observed at another time

period (e.g. March 1991). As shown in Table 3, the ?2 values are

quite large with only 4 degrees of freedom,

indicating that this model does not represent the data in any of the observed time periods, as small ?2 values are associated with good models. Since the expected frequencies generated by the

independence model depart significantly from the actual cell entries, the model should be

rejected as an inadequate representation of the

relationships among the variables. An inspec- tion of the standardized residuals (not shown) suggests that public attitudes are far more stable than the model postulates.

The next model is a quasi-independence model in which stable attitudes are left aside.

Only changing attitudes between two time

periods are subject to analysis, and it is assumed that attitude change is independent over time. As the observed ?1 values are small in all of the observed pairs of time periods, the quasi- independence model appears to fit the data well. It may thus be concluded that there are no discernible patterns among those changing attitudes towards the reform decision.

An analysis of patterns of attitude change with a multi-item approach reveals that the net and gross changes in the minor and major tax




Table 3. Selected measurements of cross-time relationships concerning attitudes to the tax reform decision and tax reform indices. March 1991, September 1991 and September 1992.

3/91-9/91 9/91-9/92 3/91-9/92

Tax reform decision Net change .02 .04 .03 Gross change .36 .38 .39 Pearson's r .50 .40 .42

Independence model Level of significance .00 .00 .00

?2 886.11 403.55 178.36 d.f. 4 4 4

Quasi-independence model Level of significance .76 .40 .35

?2 .10 .72 .88 d.f. 1 1 1

Minor tax reform index Net change .02 .09 .07 Gross change .64 .69 .71 Pearson's r .63 .53 .48

Independence model Level of significance .00 .00 .00

?2 1,456.91 654.36 258.09 d.f. 36 36 36

Quasi-independence model Level of significance .00 .00 .00

?2 637.39 377.01 182.01 d.f. 29 29 29

Major tax reform index Net change .08 Gross change .73 Pearson's r .56

Independence model Level of significance .00

?2 784.27 d.f. 64

Quasi-independence model Level of significance .00

?2 461.61 d.f. 55

p 2.304 1.437 646

Source: Tax reform panel-data surveys (Edlund et al. 1998).

reform indices are more easily distinguished, not

surprisingly. First, both on aggregate and individual levels, changes are associated with the shift in attitudes regarding the tax reform's effects on the Swedish economy, which occurred between September 1991 and September 1992.

Second, the larger gross changes may be

explained by the fact that we are dealing with a larger number of response categories. What is

perhaps more interesting is the fact that the correlation coefficients appear to be stronger and neither the independence nor the quasi- independence models fits the data. Contrary to the above single-item analysis in which attitude

change appears to be statistically random on the

individual level, these results suggest that those

changing attitudes do not move randomly within the boundaries set by the tax reform

indices. How, then, may the patterns of mobility

among different positions within the tax reform

indices be described? An examination of stan-

dardized residuals (not shown) generated by the

different models suggests that the attitudinal

patterns observed among the changers are fairly

persistent over time, and that attitude change for most citizens is clearly related to their

preceding preferences. Those with positive attitudes towards the tax reform initially tend

to maintain a similar position over time, albeit




in varying degrees. Some change in a more

positive direction, others become slightly less

positive, but very few turn negative. A corre-

sponding pattern can be observed among those with negative attitudes towards the reform.

Thus, there seems to be some resistance among the changers to move from one pole to another.

Respondents located close to the median line in the indices also tend to maintain a similar

position over time. Among those changing attitudes, however, there is a clear tendency to move in a negative rather than positive direction, particularly between the second pair of waves.

Empirical evidence concerning public attitudes towards the tax reform decision thus

supports the interpretation that the public may be divided between those that are quite sure about their opinions and those with randomly distributed attitudes. However, empirical evidence from the multi-item approach suggests that most of the observed change may be

interpreted as minor modification of previous attitudes. In this perspective, attitudes are

constantly being remodelled, but this remodel-

ling is often marginal rather than a major change of form. People may not have perfectly stable attitudes to the tax reform, but they do not change attitudes randomly either. The

single-item approach fails to recognize this.6

4. Social divisions and attitudes towards the tax reform

In this section we will attempt to analyse among which social groups support and opposition for the tax reform are most prevalent. For reasons

pointed out in section 2, and because empirical evidence suggests that public perceptions of the tax reform are related to views concerning the distribution and fairness of taxes, it is particularly interesting to examine how the social strata, which traditionally have supported the Social Democratic Party, have perceived and reacted to the tax reform, and to what extent, if

any, they tend to deviate from other, more affluent social strata. Three indicators of position within the social stratification system will be utilized.

The first indicator, social class, is assessed on the basis of the Swedish socio-economic classification of occupations: SEI (SCB 1982). The SEI schema shows apparent similarities with the widely used Erikson/Goldthorpe classification of occupations, a class schema which

has proven fruitful in a number of studies

preoccupied with class-related social issues, such as voting and social mobility (Erikson &

Goldthorpe 1992; Nieuwbeerta 1996). The classification used in this paper distinguishes among six classes. The second indicator is

education, which is categorized into three levels. Household income, expressed as monthly income in SEK, is the third indicator. In order to correct for differences in household size, the income registered in households with two adults has been divided by two. This is obviously a

simplification, but available data does not

permit finer-grained weighting. However, other approaches within the field

of welfare policy have suggested that changing occupational structures and living conditions inherent in the transition from industrial to

post-industrial society, which in many cases are

specifically linked to the emergence and establishment of the welfare state, tend to generate other types of social cleavages which will

replace or complement class divisions. One of these is gender (Orloff 1993; Salis-

bury 1994). Arguments are built either upon self-interest, as women are seen as more

dependent on the state in terms of employment, benefits and services (Hernes 1987; Borchorst & Sum 1987), and/or upon different forms of socialization among men and women (Waer- ness 1987). Another potential source of con-

flict, it has been argued, is sector of

employment. As with gender, arguments can be grouped under two main headings: socialization and self-interest (Hoel & Knutsen 1989).

In comparative research it has been argued that these two factors may be particularly important in Sweden. Due to the heavily gender-segregated labour-market and the significant job expansion in the public sector,

Esping-Andersen (1990) suggests that conflicts around welfare policies will arise along the

highly gender-segmented private-public sector axis. From this perspective it can be assumed that those employed in the male-dominant

private sector tend to be more supportive of the tax reform compared to public sector,

predominantly female, employees. Another factor that may be relevant is age,

in terms of both life cycle and cohort effects. In the former case, we would expect the lowest level of support for the tax reform to be located

among the youngest and the oldest cohorts, due to their relatively weak market position and

dependency on state welfare, respectively. Sec-

ondly, the generational theory suggested by




Inglehart (1990) implies that younger generations have different views and priorities com-

pared to older generations, due to their different formative experiences concerning material well-

being. Drawing on Inglehart's (1997:108-130)

later work, it is, however, not clear whether levels of support for the tax reform are supposed to differ between generations, since the thesis there emphasizes priorities, not levels. With this in mind, we might, with some caution, expect younger generations to be more supportive of the tax reform, since traditional left political programs (e.g. economic inequality and redis-

tribution) are presumed to be less appealing to the young than to the middle-aged and elderly (Inglehart 1990:12).

Finally, the relationships between party affiliation and attitudes towards the tax reform will be examined. Some shortcomings of the data in this respect should be mentioned. The

survey question only discriminates between those supporting the Bourgeoisie government (centre-right coalition) that came into power after the 1991 general election and those who

prefer another government. However, in practice these latter are probably in favour of a Social Democratic-led government.7 Furthermore, the

question was only posed in the third survey, in

September 1992. One advantage, however, is that the Social Democratic Party at that time seems to have recovered from the sharp decrease in support that began in 1988 and reached its lowest level in the first quarter of 1991 (?berg 1993; Korpi 1993). Nevertheless, these potential sources of measurement error should be kept in mind when interpreting the results.

In order to analyse to what extent these various background variables are related to attitudes towards the tax reform, the minor tax reform index is divided into two separate indices. The first, labelled 'Minor positive tax reform index', measures the support for the tax reform and consists of items 1, 2 and 3 in Table 1. Each positive evaluation of the tax reform

gets 1 point; all other responses are assigned a zero value. Those obtaining a maximum value on the index have positive attitudes to the reform decision, regard themselves as winners and believe that the tax reform has contributed to improving the economy. The index ranges from 0 and 3, but has been altered to range from 0 to 1. The second, labelled 'Minor negative tax reform index', measures the opposition to the tax reform following the schema outlined above.

In Table 4, using Multiple Classification

Analysis (MCA), the impact of the above described structural determinants on attitudes towards the tax reform during three time

periods is examined.8 MCA is a statistical method appropriate to multivariate analysis when the independent variables are categorical and the dependent variable is at least on an interval scale level (Andrews et al. 1973). The MCA output in Table 4 is restricted to coefficients controlled for other independent variables.

Beginning with columns 1-3, in which the

support for the tax reform during the three

periods is shown, the impact of the various structural factors appears to be quite persistent over time. Three factors, social class, household income and gender, are particularly important. Those in favour of the tax reform are mostly higher-level non-manual workers, high-income earners and men. Furthermore, we can observe

significant differences between private and

public sector employees, and between those with a university degree and those with less education. These divisions tend, however, to be weaker than those mentioned above.

It has been observed that the strongest support for the reform is found among higher- level non-manual workers, high-income earners and men. Is opposition, then, mostly found

among other workers, low-income earners and women? As shown in columns 4-6, the answer is not straightforward. Class differences are smaller and appear to be vaguer. Not until the third wave do we observe a clearer class pattern.

Moreover, the observed differences between men and women are not large. Household

income, on the other hand, shows an expected pattern, mostly due to the fact that high-income earners are less willing to oppose the reform

than other income groups. When it comes to sector and education, divisions appear to

increase over time. In the third wave, public sector employees and those with primary education are significantly more opposed to

the tax reform than those employed in the

private sector and university educated citizens.

Age differences, which turned out to be

virtually non-existent in the data on tax reform

support, are more pronounced when it comes to

opposition. However, the observed patterns are

less than clear-cut and are not easy to interpret from either life cycle or generational perspec- tives.

The main impression is that attitudes

towards the tax reform are characterized by




Table 4. Attitudes to the tax reform by vanous structural determinants. Minor positive and negative tax reform indices. March 1991. September 1991 and September 1992. Multiple classification analysis (MCA). Beta coefficients in bold. Adjusted group deviations from the grand mean.

Minor positive tax reform index

3/91 Beta

9/91 Beta

9/92 Beta

Adjusted Adjusted Adjusted deviations deviations deviations

Minor negative tax reform index

3/91 Beta

9/91 Beta

9/92 Beta

Adjusted Adjusted Adjusted deviations deviations deviations

Grand mean Class

Unskilled worker Skilled worker Routine non-manuals Intermediate non-manuals Higher non-manuals Self-employed

Education Primary Secondary University

Household income Less than 8,000 8.000-12,000 12,000-16,000 16,000-20,000 20,000 or. more

Gender Male Female

Age 16-29 30-39 40-49 50-59 60-65

Sector Public Private

.37

.13*** -.04 -.04

.01

.03

.11

.03 .05*

-.03 .00 .02 .21***

-.09 -.05

.02

.14

.18 JO*** .07

-.07 .02 .00 .00 .01

-.01 -.02

.05* -.02

.01

.165 2.804

.38

.20*** -.05 -.07 -.01

.04

.17

.06

.07** -.04

.01

.02 ?2***

-.08 -.06

.02

.12

.27

.19***

.07 -.07

.01

.00

.00

.00

.00 -.01

.05** -.02

.02

.202 2,683

.33

.16*** -.05 -.06

.02

.05

.09

.01

.08*** -.04

.00

.03

.24*** -.06 -.07

.00

.11

.23

.19***

.06 -.06

.04 .00

-.02 .00 .02 .00 .06**

-.02 .02 .203

2,446

.18

.08** -.01 -.01

.04 -.01 -.02

.03

.04

.02 -.01 -.01

.14***

.04

.04 -.02 -.06 -.08

.03 -.01

.01 .07*

-.03 .02 .00 .01 .03 .04 .01

-.01 .039

2,804

.19 .08* .00 .01 .04

-.03 -.04

.02

.04

.02

.00 -.02

.12***

.03

.03 -.02 -.05 -.09

.04 -.01

.01

.09*** -.04

.02

.01

.01 -.01

.03

.01 -.01

.040 2.683

.23 .11** .03 .04

-.01 -.04 -.04

.01

.09**

.04

.00 -.04

.10*** -.02

.02

.02 -.05 -.06

.05* -.01

.01

.10*** -.04

.02

.03 -.01

.03

.08***

.03 -.02

.064 2,446

Source: Tax reform time-series surveys (Edlund et al. 1998). Significance levels: level.

' .001 level; ** .01 level; * .05

fairly stable group differences, but there seems to be a trend that class-based conflicts, as well as divisions between private and public sector

employees, tend to increase over time (Table 5). The increased proportions of explained variance observed over time add further support to this notion. Furthermore, we have observed that support is often found among the more affluent social strata and men. Since opposition is less clearly structured along the above lines of demarcation, it can be concluded that women, low-income earners and workers are over-

represented among those expressing uncertain attitudes.

It is apparent that the social strata, whose electoral support the Social Democrats tradi-

tionally have relied on, do not endorse the reformation of the tax system to the same extent as more affluent social strata. Does this also

imply that attitudes towards the tax reform

diverge between those affiliated with Bourgeoi- sie parties and those preferring a left-wing government? As shown in Table 5, the attitudinal differences are easily distinguishable.




Table 5. Attitudes to the tax reform decision (per cent) and minor tax reform index (group index means) by political choice. March 1991, September 1991 and

September 1992.

Preference for... government

Left-wing Bourgeoisie

Do you believe that it was a good decision to implement the new tax system?

Yes 3/91 41 58 9/91 43 60 9/92 41 68

No 3/91 21 17 9/91 26 18 9/92 26 8

Minor tax reform index Positive 3/91 .34 .48

9/91 .33 .45 9/92 .25 .46

Negative 3/91 .21 .17 9/91 .22 .16 9/92 .35 .14

p 293 234

Source: Tax reform panel-data surveys (Edlund et al. 1998).

Among those in favour of a Bourgeoisie government, support for the reform is much more prominent compared to those with left-

wing preferences. Moreover, the attitudinal gap increases substantially between September 1991 and September 1992.

Some implications of these results will be discussed in the final section of this paper. First, however, we will examine how public attitudes towards the distribution of taxes have advanced

during the years after the introduction of the new tax system, an important issue in light of the above empirical findings.

5. Attitudes towards progressive taxation 1991-96

During the years subsequent to the reform, Sweden faced a severe economic recession.

Rising unemployment and decreasing tax revenues put the welfare state under substantial

pressure. During this period the effects of the tax reform on the Swedish economy returned to the centre of public debate. The critics argued that the tax reform had not fulfilled two of its main

objectives. First, contrary to previous expecta- tions, income distribution had not been pre-

served, since changes in disposable income

pointed towards a more non-egalitarian distribution. Second, arguments arose which partly blamed the tax reform for both the financial

problems and the cutbacks in welfare programmes. The non-appearance of 'dynamic effects' in the labour-market and the revenue losses caused by the income tax changes indicated, the critics argued, that the tax reform relied on inaccurate assumptions and, accord-

ingly, was not fully financed.9 In 1994, the Social Democrats returned to

power. The government attempted to solve the financial problems of the state through con- secutive reforms, which consisted of a combination of cutbacks in replacement levels, reduced social services and changes in tax legislation (Stephens 1996; Palme & Wennemo 1998). These changes involved an additional 5 per cent tax on top of the marginal income tax rate, and an increase in social security contributions paid by employees, a revenue source that had

previously been virtually non-existent in Sweden.

With these institutional changes in mind, it can be asked in what directions public attitudes and preferences towards the distribution of taxes have progressed in the years succeeding the reformation of the tax system. From one

perspective, it can be hypothesized that citizens have become less willing to increase tax

progression. The assumptions underlying such a scenario are at least two. First, the highest marginal tax rate has actually increased 5

percentage points. Second, over time citizens

may gradually have come to accept the reason-

ing behind the tax reform and, thus, become less

willing to increase tax progression. On the other hand, it may be argued that a

trend towards increased demands for tax

progression is likely. The combination of cutbacks in welfare programmes and increasing taxes in the form of social security contributions

paid by employees, as well as the trend towards less egalitarian income distribution (as pointed out in Agell et al. 1995), may contribute to

augment public proposals for a more redistributive profile of the tax burden.

It is also of interest to examine whether attitudes towards progressive taxation are

characterized by similar social divisions as in

the case of the tax reform, and to what extent these attitudes change over time. Considering the latter, it is likely that increased demands for

tax progression are coupled with increasing

group conflicts, while in the former the appear-




Table 6. Attitudes towards the distribution and leveL? of taxes. March 1991, March 1992 and March 1996. Percent.

1991 1992 1996

la. For those with high incomes, taxes are... Too low 42 53 57 About right 26 26 18 Too high 21 17 18 Don't know 11 5 7

lb. For those with middle incomes, taxes are... Too low 12 3 About right 40 52 50 Too high 49 43 41 Don't know 10 4 6

lc. For those with low incomes, taxes are... Too low Oil About right 15 19 16 Too high 77 77 77 Don't know 8 3 6

? 907 1,508 1.336

Source: Stenberg & Svallfors (1992); Sundstr?m & Svallfors (1995); Edlund et al. (1997).

ance of diminishing or status quo divisions seems more probable.

In Table 6, public perceptions and preferences towards the level of taxes paid in different income groups are shown. While most citizens believe that taxes are too high for low-income

earners, the taxes paid by middle-income earners are perceived as either legitimate or too high. When it comes to taxes for high- income earners, a clearer variation in response patterns can be observed. The belief that taxes are too low is fairly widespread, but notable

proportions of respondents also view the level of taxes as either appropriate or too high.

Furthermore, the stability in attitudinal

patterns towards taxation levels is quite palp- able over time. Two tendencies may be distin-

guished. First, discontent with the tax paid by middle-income earners tends to decrease, albeit

slightly, between 1991 and 1992. Second,

respondents tend to be more inclined to promote increased taxes for high-income earners over time. There seems, thus, to be a trend of

increasing demands for progressive taxation. Have these increased demands also led to more

pronounced social divisions, or is there a

general consensus among groups to increase tax progression?

In Table 7, the measure of tax progression previously utilized in Table 2 is applied. It varies between ?1 and 1. The higher the value, the

more the respondents favour increased tax

progression. Model I shows the bivariate rela-

tionships among the various background variables and attitudes towards progressive taxation. In model ?, all independent variables

except political choice are entered into multivariate analysis.

The main reasoning behind this strategy is

that the political party variable does not indicate a structural position like the other

independent variables do. It may, therefore, be desirable to leave out the political party variable from the multivariate analysis since, if strong links exist between party affiliation and attitudes towards tax progression, relationships among other variables rooted in structural conditions and attitudes towards taxation may be distorted. However, the results from additional analysis in which the political party variable is included are reported in the second measure of explained variance. The first measure of explained variance pertains to model ?.

The changes in grand mean indicate that

support for progressive taxation tends to

increase over time. Furthermore, attitudinal differences are distinguished by social class and class-related divisions. The divergent views between the groups comprising workers, those with lower education and low-income earners and those located in higher brackets within the stratification system are quite prominent. A closer examination of these

relationships reveals that higher non-manual workers and those located in the highest income bracket tend to deviate much more clearly from other strata in 1996 compared to previous years.

Other structural determinants seem to be

less important. Contrary to the large differences in tax reform support, gender divisions con-

cerning progressive taxation are insignificant. However, women gradually come to view

progressive taxation more favourably than do men.

The impact of age is not great, but there seems to be a general pattern, persistent over

time, that the youngest cohort is less in favour of

progressive taxation than other age groups. Furthermore, cleavages between public and

private sector employees tend to increase in

the aftermath of the tax reform. Attitudinal relationships between political

affiliation and progressive taxation are revealed

by clear and stable differences between those

supporting left-wing and those advocating

right-wing parties. These strong associations




Table 7. Attitudes to tax progression by various structural determinants. March 1991, March 1992 and March 1996.

Multiple classification analysis (MCA). Model 1: bivariate analysis. Model U: Multivariate analysis. Eta and beta

coefficients in bold. Empirical and adjusted group deviations from the grand mean.

1991 1992 1996

Eta Beta

Empirical Adjusted deviations deviations

Eta Beta


Eta Beta


Grand mean Class

Unskilled worker Skilled worker Routine non-manuals Intermediate non-manuals Higher non-manuals Self-employed

Education Primary Secondary University

Household income 1st quintile 2nd quintile 3rd quintile 4th quintile 5 th quintile

Gender Male Female

Age 29 years or less 30-39 40-^9 50-59 60 years or more

Sector Public Private

Political choice Left Centre Right No preference/other party

R2 R2a

.33 30 .10 .09 .03

-.09 -.18 -.04

21 .12

-.01 -.15

?5 .06 .10 .00 .00

-.13 .03 .01

-.01 .12

-.03 .00

-.04 .01 .08 .04 .01

-.01 30 .12

-.09 -.16 .05

.33

.21***

.06

.07

.03 -.05 -.12 -.08

.13? .07

-.02 -.05

.15* .01 .07 .00 .00

-.07 .06 .02

-.02 .11

-.07 .02 .01 .00 .04 .06 .02

-.02

.38

.24

.09

.08 -.03 -.06 -.12 -.10

JA .11

-.01 -.12

21 .06 .08 .04

-.03 -.19

.06 -.02

.02

.15 -.06 -.03

.02 -.02 .09 .14 .05

-.05 31 .13

-.04 -.21 .03

.38

.14***

.03

.07 -.04 -.01

.00 -.11

.15***

.06

.00 -.08

.22***

.04

.07

.04 -.02 -.16

.03 -.01 .01 .15***

-.08 -.02 .06 .00 .04 .12*** .04

-.04

.41 36 .11 .11 .01

-.01 -.29 -.11

34 .17 .00

-.17 37 .09 .12 .05

-.04 -.29

.09 -.03

.04

.13 -.05 -.04 -.02

.02

.08 .12 .05

-.04 35 .10

-.08 -.24

.06

.41

.20***

.03

.08

.00

.03 -.14 -.12

?1*** .11

-.02 -.09

.23***

.06

.07

.02 -.01 -.18

.05 -.02

.02

.08 -.06 -.02

.01

.01

.03

.11***

.05 -.04

.144

.197 712

.158

.232 1.323

.244

.291 1.053

Sources: Stenberg & Svallfors (1992); Sundstr?m & Svallfors (199 5); Edlund et al. (1997). a

Explained variance if political choice is included. Significance levels for variables (model ? only); *** .001 level;

.01 level; * .05 level. Variables not included in models are marked with -.

are perhaps not too surprising, but they indicate that progressive taxation continues to be a

watershed between voters on the left and the

right. The main conclusion from Table 7 is that

class-related divisions tend to be more salient

compared to other potential structural clea-

vages and that group differences in general are

characterized by cross-time stability. However,

considering the increasing proportions of

explained variance, it is apparent that the

above structural determinants tend to explain




more of the variation towards progressive taxation in 1996 than in 1991, largely because of sharpening divisions between those with

comprehensive and university education, between different income groups and, finally, between private and public sector employees.

6. Conclusions

The overall political context in which the 1991 tax reform was discussed and passed was very dynamic, as was the time period in which the three surveys were conducted. There is no doubt that Sweden experienced notable changes at the societal level. In September 1991, the same month as the second survey was conducted,

general elections were held during which the Social Democrats received their weakest electoral support since the 1920s. The severe economic recession in Sweden, which coincided with the time of the surveys, was not apparent to most citizens at the beginning of 1991.

However, in September 1992, when the third

survey was conducted, most people were aware that the economic recession was deep and serious.

Taking into account the significant changes in Swedish politics during these years, one of the most striking results is the overall

stability in attitudinal patterns to the tax reform. On the aggregate level, the strength of

support is approximately the same in all three waves. The somewhat lower support observable in the third wave appears to be a consequence of

declining confidence in the tax reform's effects on the Swedish economy. Moreover, correlation

patterns among different attitudes concerning the reform are strikingly similar over time. On the individual level, attitudes appear to be somewhat less stable. Most of the observed

change, however, may be described as a modest attitudinal modification rather than a major change of form.

There are some indications that beliefs

concerning the fairness of taxes are central to the legitimacy of the tax system. It has been demonstrated that those opposing the tax reform view the changes in tax distribution more negatively than its supporters. Likewise,

opponents of the reform are clearly more inclined to increase tax progression compared to those supporting the reform. How, then, have attitudes towards the distribution of taxes

progressed in the aftermath of the tax reform?

During this period, Sweden experienced an

economie recession, which put the welfare state under severe economic strain, a situation to which the government responded with a combination of tax increases and cuts in welfare

programmes. These policy changes have been

accompanied by increasing demands for aug- mented tax progression among the Swedish

citizenry. Another important empirical finding is the

observed cleavage patterns associated with tax

policy. Social conflicts over matters of taxation are foremost structured around class and class- related divisions such as income and education.

Support for the Social Democratic tax reform is

comparatively stronger among more affluent social strata than among workers and low- income earners. Although opposition is not as

clearly structured along class cleavages, as lower social strata are over-represented among those expressing uncertainty, there is nevertheless a tendency for class-based conflicts to increase over time.

When it comes to progressive taxation, the data point in a similar direction. Attitudinal differences also tend to be more sharply divided

by class, education and income in 1996

compared to the preceding years of observation. An interesting finding in this respect, which shares apparent commonalities with evidence

presented in Svallfors (forthcoming), which

analysed attitudes towards welfare policy, is that higher non-manual workers and high- income earners tend to distance themselves from other social strata, especially between 1992 and 1996.

This distance may indicate a trend towards

increasing disapproval of the principles of the welfare state among the most affluent social

strata, while support among other strata tends to increase. These findings are of obvious

pertinence in the perspective of class analysis. Recent claims about the diminishing relevance of class, manifested in titles such as The Death of Class (Pakulski & Waters 1996), appear to be difficult to justify, at least in a Swedish context.

If class still appears to be a prominent factor behind the creation of identities and attitudes among ordinary citizens, does this mean that theoretical assumptions pointing at

other, more horizontal cleavage dimensions lack

empirical support? Regarding age, the observed differences are generally either insignificant or difficult to interpret in accordance with the theoretical assumptions.

Concerning the thesis of emerging conflict lines structured along the dimensions of gender




and sector of employment, empirical evidence is not clear-cut. It is apparent that support for the tax reform is substantially stronger among men than women. However, because gender differences are negligible when it comes to tax reform

opposition and preferences towards progressive taxation, the importance of gender remains unclear.

By contrast, claims that divergent interests and attitudes towards welfare policy are likely to be found between public and private sector

employees receive empirical support. Although these differences appear to be less important than those of class, there is a clear indication that sector conflicts have intensified over time.

In light of the arguments set out in

previous sections of this paper, the observed attitudinal stability towards the reform and the

patterns of social divisions related to tax policy deserve some comments.

Beginning with the stability of attitudes, it

could, from a rational choice perspective not uncommon among policy-makers and econo-

mists, be assumed that citizens' attitudes to the tax reform are based on experiences of the

system's effects. While such assumptions con-

cerning the linkages between institutional

change and attitudes may provide adequate explanations in some instances, they appear nevertheless to be difficult to sustain in the context of the tax reform.

At the time of the first survey, the new tax

system had only been in effect for three months. It would have been almost impossible to obtain certain knowledge about societal effects at that

time; hence, one of the more conspicuous features of tax reform attitudes at the outset was a high degree of uncertainty. Thereafter attitude patterns did change, but only margin- ally. If people were 'rational' to the extent this view presupposes, then attitude patterns would most certainly have shown clear signs of

systematic change in the next two surveys. Attitudinal uncertainty and stability over time both indicate that the main mechanisms under-

lying the formation of attitudes towards the tax reform may have their origins in sources other than rational learning processes and experiences, at least - and this should be emphasized -

in the short run.10 From a polity-centred perspective, it might

be argued that rational explanations for the observed attitude patterns fail both because of the complexity of the tax reform and because the substantial impact of political elites and other organized interests, such as unions and

business interests, on public attitude formation tend to be disregarded (Sears & Citrin 1985; Svallfors 1991; Zaller 1992).

The high level of abstraction and complexity characterizing the reform accompanied by apparent difficulties in obtaining certain knowl-

edge about the reform's effects would, from this

perspective, suggest that public attitudes were framed and considerably influenced by the

political rhetoric and debate preceding its introduction. On the basis of available informa-

tion, citizens, influenced by their ideological predispositions, drew their conclusions about the tax reform. One of the reasons, then, why the resistance to the tax reform was rather weak and initially not clearly structured along social class cleavages may be that the Social Demo- cratic Party was responsible for the tax reform. Traditional Social Democratic voters became

disconcerted, as the message was that dramatic cuts in marginal tax rates would not affect the distribution of disposable income. They expressed uncertainty instead of opposing the reform.

While this interpretation takes into con- sideration the influence on public perceptions and interpretations exercised by political elites, other findings suggest that the prospects for

achieving attitudinal changes by means of

political strategies obviously in conflict with the attitudes shared by large fractions of the

public are circumscribed. As has been shown, the Social Democratic attempt to articulate the tax reform as a complete package, with reduced tax rates on income and a more effective treatment of other revenue sources, which, taken together, would not increase income

inequalities, was rather unsuccessful, as the reform was mainly perceived as a marginal tax reform. Furthermore, the Social Democratic

Party apparently had difficulty persuading its own voters about the necessity for this kind of tax reform.

Finally, on the basis of the empirical results, is it possible to claim that changes in tax policy have little impact on public opinion? While it is true that effects of tax reform in terms of

systematic attitude change appear to be small, it

may not be appropriate to embrace such a claim

wholeheartedly for at least two reasons. It can be argued that to establish the extent

of institutional influences on public attitudes, the time period studied is too short. The large proportion of citizens expressing uncertainty towards the tax reform supports this notion.

Moreover, while short-term effects are difficult




to detect, it may be argued that the tax policies enacted during the 1990s have contributed both to increased demands for a more progressive tax system and to reinforced tax distributive conflicts.

In conclusion, in characterizing public attitudes towards taxation, citizens may be

depicted neither as computers free of distorting political predispositions calculating effects of a

policy, nor as dancing marionettes of political elites. However, the observed cleavage patterns, mainly structured along the axes of social class and, to a lesser extent, sector of employment, do

suggest that sources and determinants of tax

policy conflicts should be sought among factors embodied in structures of employment.

First version received July 1998 Final version accepted November 1998

Acknowledgements This research was financially supported by the Swedish Council for Social Research (SFR) and the Swedish Council for Research in the Social Sciences and Humanities (HSFR). I thank Richard Coughlin, Walter Korpi. Stefan Svallfors. Joachim Vogel, Rune Aberg and two anonymous referees for valuable comments on a previous draft.

Notes

1 Following Levi's (1990:405) definition, a tax system is an

institution. 2 For a contrasting view, see Korpi (1992). 3 Some parts of the reform package resembled tax changes

proposed earlier by the Liberal Party, During the 1988 election campaign, in addition to not mentioning their own plans, the Social Democrats severely criticized the Liberals' proposal (?sard & Bennett 1992). 4 Additional analyses of correlation patterns result in similar patterns as those presented in Table 2.

5 The tax progression index (tpi) is denned as tpi = (h - 1)/ 2. in which h and 1 are the variable values for taxes on high (h) and low (I) incomes. The tpi ranges between -1 and 1.

6 Whether the public as a whole has real political preferences or not has been a hotly contested issue ever since Converse (1964, 1970) suggested that only a small segment of the population can be considered to have real political preferences. This phenomenon has been conceptualized as a dichotomy between 'blacks' (a large segment of apoliticals with attitudes in constant flux) and 'whites' (a smaller segment with stable attitudes). The results presented here support Inglehart's (1990) claim that such interpretations are difficult to justify using refined survey research methods. The major arguments in the debate can be found in Zaller (1992), Kinder (1983) and Inglehart (1990) and in works cited therein.

7 It is not permitted to ask direct questions about political affiliation in labour force surveys. 8 Additional analyses using the single reform decision item and the major tax reform index as dependent variables show similar results to those presented in Table 4.

9 Official reports (SOU 1995; Agell et al. 1995) evaluating the tax reform acknowledge that the reform constrained the redistributive effects of the tax system and the significance of the reform to the loss of tax revenues. However, taking into account the overall redistributive effects of transfers and taxes, they conclude that differences in disposable income before and after the tax reform have less to do with the reformation of the tax system than with rising inequalities in factor income.

10 Perhaps this is symptomatic within the field of taxation,

in several empirical studies it has been shown that rational assumptions based on utility and profit maximization concerning public behavioural responses to tax policy changes receive limited support (Slemrod 1990; Wahlund 1991; Haller?d 1993).

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Appendix

The data covering attitudes towards the tax reform consist of three surveys conducted as telephone interviews. Data were collected by Statistics Sweden as additional questions in the labour force studies (AKU). The first survey was conducted in March 1991, the second in September 1991 and the third in September 1992. The samples are nationally representative for the Swedish population between 16 and 64 years of age. Response rates for times series data are between 72 per cent and 78 per cent, with about 4,500 individuals in each gross sample. Sample sizes and response rates are lower in the panel data sets, particularly in the three-wave panel, in which 57 per cent of a gross sample of 1,125 respondents participated. Sample sizes and response rates in the panels covering two time periods each are, respectively, 68 per cent of 3,375 respondents (March and September 1991) and 64 per cent of 2,250 respondents (September 1991 and September 1992). However, the higher

non-response rates in the panel data sets appear not to be systematic. A comparative analysis of the results obtained from time series data and panel data shows negligible differences between the different data sets in terms of response patterns, correlations, and relationships among tax reform attitudes and various background variables. Additional information about the surveys is available in Edlund et al. (1998).

The data covering attitudes towards tax progression come from three nationally representative postal surveys covering Swedes between 18 and 76 years of age. These surveys were conducted in March 1991, March 1992 and March 1996. The response rates are, respectively, 63 per cent, 76 per cent and 68 per cent. Net sample sizes are 915 (1991). 1.516 (1992) and 1,360 (1996). None of the samples seems to be biased regarding gender (except in the 1992 survey, in which non-responses are slightly more common among women), age, taxable income or area of living. A general pattern, though, is that those with low incomes are slightly over-represented among non-respondents. For more thorough descriptions of the data, see Stenberg and Svallfors (1992); Sundstr?m and Svallfors (1995); Edlund et al. (1997).



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Attitudes Towards Tax Reform and Progressive Taxation: Sweden 1991-96