Why the rich don’t pay taxes

Lars Syll

Beneath the civic ideal of taxation as a collective, equitable endeavour lies an entrenched hypocrisy: the architecture of modern tax codes serves not the public good but the consolidation of private wealth. The progressivity of income tax is hollowed out at the uppermost tiers, where income is largely derived from capital – taxed at preferential rates that reward private ownership over labour. This inequity is compounded by the affluent’s access to lawyers and financial advisers.

For the wage-earning majority, such privileges are unattainable. The system is rigged in a vicious cycle: wealth buys power, power writes the rules, and the rules protect the wealth. The result is a regressive system that shifts the tax burden onto ordinary citizens, starving public services and undermining the foundations of democracy.

The rhetoric of progressive taxation conceals a fundamental contradiction. While nominally designed to impose higher tax contributions on higher incomes, tax systems in practice privilege the composition of wealth held by the rich. Capital gains, dividends, and carried interest – the principal sources of elite income – are taxed at markedly lower rates than wages and salaries.

As Thomas Piketty demonstrated in his book Capital in the Twenty-First Century: when returns on capital consistently outpace the growth of the economy, taxation that favours capital inevitably deepens inequality. What is presented as fiscal neutrality in reality reproduces class hierarchy under the guise of fairness.

In 1991, Sweden implemented what has since been referred to as the tax reform of the century. This reform constituted a profound restructuring of the Swedish tax system, resulting in a substantial reduction of the overall tax burden. The rate of corporation tax, which had stood at approximately 60 per cent in the late 1980s, was gradually reduced and is now around 21 per cent.

A central feature of the reform was the separation of taxation on capital income from that on earned income. For certain categories of capital income, the applicable tax rate was lowered to 20 per cent. In parallel, wealth and inheritance taxes were abolished, and property tax was transformed into a near flat-rate levy. The introduction of the investment savings account (ISK) further diminished effective taxation of capital income derived from stock market investments.

Collectively, these measures produced a marked decline in both corporate and capital taxation, contributing to a significant decrease in Sweden’s overall tax ratio – from roughly 50 per cent of GDP in 1990 to approximately 40 per cent in the present day.

Unsurprisingly, these changes have disproportionately benefited corporations and holders of capital, while the financial burden of these neoliberal ‘reforms’ has, overwhelmingly, been borne by ordinary wage earners.

Source: RWER blog, 28 Oct 2025 https://rwer.wordpress.com/2025/10/28/why-the-rich-dont-pay-taxes/#more-46788

Lars Syll has PhDs in economics and economic history and is a professor at Malmo University, Sweden.