Higher taxes lead to many people only working part-time, with smart men being particularly likely to make this choice. A study by the Research Institute for Industrial Economics (IFN) has examined the impact of higher income taxes on working hours in Sweden. While tax increases can bring in higher revenues for states, they can also discourage people from working. Sweden is one of the high-tax countries, with income tax going to municipalities first. If income exceeds €52,000 per year, the amount above this threshold is taxed an additional 20%, which goes directly to the state. Many people in Sweden choose to earn a maximum of €52,000 per year, even though this is an income range where additional money significantly affects life satisfaction, according to a study by the University of Pennsylvania.
The study found that intelligent Swedes are more likely to react to tax regulations and are more inclined to work part-time to avoid higher taxes. The results show that the smartest Swedes are discouraged from the labor market by tax regulations. Professions such as doctors, dentists, and scientists are particularly affected. The study mainly focuses on men, as only men were subject to conscription in Sweden for a long time, and therefore, there is little data on women. However, the researchers were able to analyze the grades of some female taxpayers and found that it was primarily men with good grades who reduced their income to the tax threshold. Women, regardless of their academic performance, seemed unaffected by tax rates.
In conclusion, the study highlights the impact of higher taxes on working hours and the labor market. It shows that intelligent individuals are more likely to react to tax regulations and work part-time to avoid higher taxes. The study also suggests that tax regulations can discourage people from pursuing certain professions, such as doctors, dentists, and scientists. The findings of this study can be useful for policymakers in designing tax policies that encourage people to work and pursue their desired professions.
