The much celebrated Swedish economic model — the Swedish economic system with high taxes and a big welfare state- is being liberalised by the present Center-right alliance led by Moderate Party leader Fredrik Reinfeldt who won power in Sweden six months back, ending 12 years of Social Democrat rule. They have decided to abolish the property tax, and very symbolically, the wealth tax.
The problem with the welfare state is that it fundamentally changes the way people live. Hospitals provide free medical care, thus depriving the incentive to live a healthy lifestyle. The moral responsibility of looking after parents shifts from family to the state.
The high rate of income taxes deters the enterprenial spirit to create and grow efficient businesses. The guaranteed welfare system only makes the society dependent on politicians and big businesses as the incentive for public saving is destroyed. The problem with welfare is that once it is given as a handout, it is very hard to pull back.
This interesting article describes the successes and the myth surrounding the Swedish economic model.