Democratic Socialists are rallying behind New York City mayoral candidate Zohran Mamdani, who has proposed raising taxes on millionaires. His plan includes an additional tax of 2 percentage points on those earning over $1 million annually. If enacted, this would elevate the city’s top income tax rate to 52 percent, making it one of the highest in the nation. While Mamdani’s ambitions have captured attention, the proposal hinges on state approval, which remains uncertain due to opposition from Governor Kathy Hochul.
Supporters of Mamdani’s proposal often reference the tax systems of Sweden and Denmark, viewing them as successful socialist models with progressive taxation. However, a closer examination reveals that these countries are not as socialist as commonly perceived, and their tax structures may differ significantly from what advocates suggest. While Sweden and Denmark are praised for their robust welfare states, their tax policies are not as steeply progressive as one might expect.
Mamdani’s plan would raise New York’s top combined federal, state, and city tax rate to one of the highest in the world. Proponents argue that a more progressive tax system is a matter of fairness. They often cite the Scandinavian model, which has garnered admiration from figures such as economist Paul Krugman and musician Bruce Springsteen. Yet, historical context is essential when evaluating these claims.
Both Sweden and Denmark have experienced the limits of high tax progressivity. In the 1970s, Sweden implemented extremely high taxes targeting entrepreneurs and investors. This led to a significant decline in business investment and prompted many successful individuals to relocate abroad. Notable figures such as the founder of IKEA moved to the Netherlands, while sports icons Björn Borg and Ingemar Stenmark opted for Monaco to escape high taxes. The fallout from this approach prompted Sweden to reform its tax code in 1990, adopting a flatter income tax structure.
The current Swedish tax system features a top personal income tax rate of 55 percent, one of the highest among developed nations. However, this rate applies to a relatively low income threshold, making the overall structure less progressive than it may seem. Similar trends can be observed in Denmark, where citizens contribute to social programs through broader tax bases rather than solely relying on high-income earners.
Recent studies from the Fraser Institute highlight that both Sweden and Denmark have some of the least progressive tax systems within the Organisation for Economic Co-Operation and Development (OECD). In contrast, some of the highest-tax states in the United States, including New York, maintain more progressive structures. This points to a critical distinction that those advocating for high taxes on the wealthy often overlook.
While it may be politically appealing to promise extensive social services funded by taxing the rich, the experiences of Scandinavian countries offer a cautionary tale. The notion that high taxes on a small group can sustain a comprehensive welfare state has proven flawed. As Mamdani and his supporters push for increased taxation, they must consider the complexities and historical lessons from countries they admire.