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Debt

10 Apr

I am a very unusual creature in that I have no debts at all. No study loan, no apartment loan, no car loan, no credit cards. And for this I need to be punished. Allow me to explain.

In Sweden if you have a mortgage you get tax relief on the interest payments. It’s around 30% if I’m not mistaken. This can be a reduction in the region of 1500 Euros per year for the average person. However if, like me, you rent your apartment then you get a tax relief of zero.

So, as a buyer, you own the place you live in PLUS you are subsidised by the taxpayer so that you can afford a better place than you otherwise could. You are effectively being rewarded for being in huge debt.

I heard that in the 80s in Sweden the relief rate was much higher than 30%. The banks then would happily give mortgages that exceeded the value of your property and properties with mortgages attached were sought after, as a way to reduce your tax.

I must admit that I don’t understand this at all. Surely I should be getting a bonus for paying my way and not borrowing huge chunks of money? It’s almost as if the state wants me to borrow money. Which, of course, they don’t. Mmm, yeah.

Does this system exists in other countries, that the tax payer subsidises borrowing? Come on readers, tell me, as I have no idea. It’s all too adult for me. The more I find out about the world, the less I get it all.

Oh well, at least I get to gloat when the interest rates go up as then I am richer compared to most other people. And when I pop my clogs I might actually have money to give the family members I leave behind, instead of the huge debt that most of my contemporaries will be leaving after them. Debt, and real ugly houses.

/ paddy (still in the black)

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17 Comments

Posted by on April 10, 2011 in Ranting, Society

 

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17 responses to “Debt

  1. Rolf

    April 10, 2011 at 11:24 pm

    Borrowing money means investment. Investment is good for society. Also, if you own your home, and do not hire it, it can be taken away from you if you cannot pay your debt. Thats good. A rented room (hyreslägenhet) cannot be taken away from you that way.

    Also, what kind of clogpopper are you anyway, letting all your money into the estate that day? You and your children run the risk of losing a lot of it in taxes. And if, by that day, you do not have any relatives to inherit your money, the state will take it all. Thats good.

    By the way, what on Earth is a clogpopper?

    :-)

    cheers/Rolf

     
  2. anaglyph

    April 10, 2011 at 11:27 pm

    Yes, but I bet you don’t have a ginormous flatscreen, tv, a Porsche and pool. That’s what debt gets you. And everybody knows it’s a fact that those things make you HAPPY.

     
    • paddyK

      April 10, 2011 at 11:37 pm

      Where the hell would I put a pool?

       
      • anaglyph

        April 11, 2011 at 12:14 am

        Next to the garage where you park the Porsche. Sheesh, don’t you know anything?

         
  3. Rolf

    April 10, 2011 at 11:32 pm

    BTW – no credit cards? How do you get your money out of the ATM? Recently the swedish banks decided that if you have a bank account, and a withdrawal card for the ATM (money in the bank, no credit card needed to withdraw money from your own account), your withdrawal card is no longer valid. Now you have to have a credit card to get your own money out of the ATM.

    cheers/Rolf

     
    • paddyK

      April 10, 2011 at 11:38 pm

      Visa also makes debit cards, you know. I can access money that I actually have, and use it like a normal Visa. Except for the debt.

       
      • Rolf

        April 10, 2011 at 11:43 pm

        Free of charge? The card I had was totally free of charge. The card they offer me costs a few hundred swedish bucks per month…

        cheers/Rolf

         
      • paddyK

        April 12, 2011 at 7:21 am

        Free of charge? What’s free of charge these days? The common cold, maybe.

         
  4. Damon

    April 10, 2011 at 11:33 pm

    In the US you get to deduct mortgage interest from taxable income, so it’s an annual gift of interest times your tax rate. Governments encourage home ownership on the premise that it creates stability, repairs and investments in the property and better conditions than rentals, but another theory is that “debt incumbent home owners don’t strike” and so this policy was one step in the constant transfer of power from people to corporations.

     
    • paddyK

      April 10, 2011 at 11:39 pm

      I’m not really surprised that it was something like that.

       
  5. Anders

    April 11, 2011 at 7:59 am

    It’s not *really* a subsidation, it’s like this: You get your monthly wages after strugglin in the cole mine. Then you pay your taxes, THEN you pay your interests. Hence the money you use to pay interest, is already taxed once. Therefore, the .gov don’t make you pay taxes on money you can’t really spend on anything else. say 100% of your wages goes to interest. unlikeley, but anyway. what would you use to pay your taxes with then? Not that this aplies in all areas though, when you buy a Porche instead of pay interests, you also pay it with taxed money, and on top of that you have to pay 25% moms (sales tax). And on top of THAT you have your road taxes, tolls etc, but that is another story.

     
    • paddyK

      April 12, 2011 at 7:26 am

      I don’t really get what you’re saying. And if 100% of my wages went to my house payments, I think I would need a better accountant. Or a smaller house.

       
  6. FlashJonas

    April 11, 2011 at 4:35 pm

    Well.. what I heard was this:
    Sweden had (1980’s?) extreme taxes in “capital income”, for some high-earners 80% of the interest on their bank savings went to the taxman. But what if you had a bank loan as well? Then of course, to be fair, you could deduct 80% of the interest you paid! So pay 80%, get 80%, pay 30%? get 30%! So for the people with a high income, getting an 80% tax on your bank savings interest turned into free money from the state! YAY! You couldn’t get rich from bank interest, but you could afford a very very expensive home and car.

    Well.. someone realized this was pretty unfair and they decided that ALL capital income would be taxed with 30% for ALL citizens, and also that you could do a tax deduction on your bank interest with the same amount.

     
  7. FlashJonas

    April 11, 2011 at 4:37 pm

    Also, with the subsidies of owning a home, interest deduction etc. it will almost always be the best investment in Sweden to buy your own apartment/house! :)

     
    • paddyK

      April 12, 2011 at 7:28 am

      Sure, but it still doesn’t explain why it’s in any way fair or moral, to reward people for being in debt. And it feels a bit wrong to claim that owning property is a “good investment” when the value is falsely inflated by this tax break.

       
  8. andrew

    April 11, 2011 at 10:56 pm

    Hi PK,

    I live in neighbouring Norway, and yes, they have the same system. And in Norway, you have to pay tax on savings,investments etc. It’s called the formueskatt. So, to summize, you get rewarded for being in debt, and punished for saving money. What kind of a batshit-crazy society is this?

     
    • paddyK

      April 12, 2011 at 7:31 am

      In physics terms:

      National wealth = The amount of money * how fast it is changing hands.

       

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