A study published by the European Central Bank...finds that Sweden is on the tip of the Laffer curve when it comes to average taxes on incomes. This means that increasing taxes further on labour would have such a damaging effect on the economy that revenues would not increase. Tax rates in Denmark and Finland are also shown to be close to this extreme case....For capital taxation, Denmark and Sweden are shown to be on the wrong side of the Laffer curve. This means that capital taxes in the two countries are so damaging that reducing them would actually lead to more money being collected by the tax authorities....We've bolded the entirely un-unexceptional fact in the above paragraph.
Several other studies support the idea that Swedish taxes are at, or close to, the tip of the Laffer curve....economist Asa Hansson calculates the efficiency loss for each additional Swedish krona levied and spent by the government. This loss can, according to Hansson, be up to three additional krona [I.e., it's triple] if the money is spent on welfare payments which reduce the incentives for work....Consider the specific case of a Swedish worker paying the top marginal rate, and consuming all his income.
A payroll tax of 32 per cent is paid on the gross wage. There is then an average municipal tax of 32 per cent and a state tax of 25 per cent. Finally there is an average consumption tax of 21 per cent. A government report has calculated that the total effective marginal tax rate is 73 per cent. This is above the estimate of the top of the Laffer curve in the same report, indicating again that a lower tax rate could in fact lead to higher public revenues.Ditto for Denmark. And those are merely the short term disincentives. What about the longer term effects on decisions to invest in human capital?