ABSTRACT
The framework for this article is the contemporary policy debate in Sweden about family policy and the balance between the tax system and the system of benefits in the welfare state model. The restructuring of the public economy during the first half of the 1990s aiming at reducing the budget deficit and fighting inflation was a backlash against the old general welfare policy for which Sweden is renowned. Welfare state induced impoverishment, like unemployment and poverty traps for low-income and middle-income families, has escalated. An increase of gross income means, at best, a very modest increase and often even a decrease in the disposable income of families that have become trapped. The tax paid on the last dollar of earned income and the loss of benefits that occurs directly or indirectly because of that dollar, consume the increase of gross income. As the traps create disincentives to work, demands for a more consistent tax and benefit policy have been arisen.
