The municipalities need municipal income tax and taxes from the rich

“The rich and powerful have evaded tax payments in recent years and decades, and that has undermined the welfare systems and the operations of municipalities. Although the Reykjavík City Council cannot impose taxes without laws from parliament (Alþingi), it must fight for the restoration of the tax system and for the rich to pay taxes,” says Sanna Magdalena Mörtudóttir, the leader of the socialists in Reykjavík.

The socialist candidacies in Reykjavík and Kópavogur emphasize the restoration of the tax system with the aim of easing taxes on wage earners but increasing taxes on companies, capital owners, and the rich. The first goal is to reverse the impasses of neoliberalism, to re-impose the taxes that the government eased on companies and the very wealthiest.

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“During the neoliberal years, the tax system was undermined by abolishing taxes for the rich,” says Arnþór Sigurðsson, the first person on the socialist list in Kópavogur. “This tax concession undermined the welfare system of both the state and municipalities. The hands of municipalities are tied by laws from parliament, but municipal councils should fight for taxes to be re-imposed on the rich. Without contributions from the best-off, the municipalities cannot build a strong and good society. Ordinary wage earners alone cannot sustain the services of the municipalities.”

During the neoliberal era, the corporate establishment fee was abolished. It was a significant part of the municipalities' revenue stream, a kind of municipal income tax for companies. The establishment fee generated revenue that was almost half of the municipal income tax from wage earners. Now companies pay nothing into the municipal fund.

With the financialization of the neoliberal era, the incomes of the very wealthiest became almost exclusively capital income. And capital income bears no municipal income tax, unlike wage income. The highest-income people in Reykjavík and Kópavogur, many of the wealthiest people in the country, therefore do not pay a single króna to the municipality they live in.

“The socialist candidacy in the municipal elections is part of the struggle of the worst-off for their interests,” says Sanna Magdalena. “We will fight within trade unions, within municipalities, in parliament, in public interest organizations, and wherever we deem necessary. One of the fundamental tenets of this struggle is to undo the destruction of the tax system. To rebuild society, we need to restore the tax system and re-impose taxes on companies and capital owners.”

To compensate for revenue loss due to lower tax revenues from companies and the rich, the municipalities have, among other things, increased property taxes. These are levied equally on debts and assets and are therefore an unfair taxation. The municipalities have also compensated for the revenue loss by selling off assets. Previously, building plots were allocated, as they were common and shared goods of the residents, but during the neoliberal era, plots began to be sold and most often to the highest bidder. Individuals were then excluded as developers, unable to compete with contractors for the plots. Contractors then passed the plot price onto the housing price. And so it is apartment buyers and renters who ultimately pay the plot price. With this system, the public is effectively subsidizing the tax breaks for companies and the rich.

“It is strange to hear the majority in the city celebrate the good performance of the city treasury, which primarily relies on increased asset sales,” says Sanna Magdalena. “Good management of the city treasury must be based on healthy taxation and good operations. Good performance due to asset sales during prosperity is actually not good news. In the next crisis of capitalism, the city treasury will be powerless to deal with the problems of the public. To strengthen the city, the city treasury must therefore be strengthened, and that cannot be done except by reclaiming taxes from the rich.”

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“It is wrong to claim that corporate taxation reduces their ability to invest or operate well,” says Arnþór. “Corporate taxation only reduces the owners' ability to pay themselves dividends. Before dividends are paid, however, the owners must pay to society, which is always the foundation of the operation.”

“It is also unacceptable that the wealthiest people pay nothing to the municipality where they live,” says Sanna. “Municipal income tax must be imposed on capital income. Extremely wealthy people who have no wage income and only capital income should demand to be allowed to pay to the municipality like other residents. These people must be ashamed to use all the services of the municipality that people who are much worse off pay for. If they even know how to be ashamed.”

The picture at the top of the news is from the general meeting of the Confederation of Icelandic Enterprise (Samtök atvinnulífsins), a powerful interest group of the rich. They have achieved the result that nowhere in our part of the world do companies pay lower income tax than in Iceland and capital owners pay lower capital gains tax.