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I'm not saying it's a good or bad thing. I'm just explaining why they've setup a sovereign fund and why reducing taxes instead doesn't always make sense. And th

I'm not saying it's a good or bad thing. I'm just explaining why they've setup a sovereign fund and why reducing taxes instead doesn't always make sense. And the point is that Norway is not funded by the oil directly, they're funded by the investment returns of the oil. They don't touch the principal. I agree the situation is very different from the US. I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. In usual accounting terms revenue has clear rules. If you sell long-term assets for the same value you had on your balance sheet already you record nothing in your income statement. You only record a gain or loss if the sale value is different from the book value, and even that goes straight to the bottom line and is not top-line revenue. Norway's oil is a long-term asset so converting it to cash is not revenue in the normal accounting sense.

paulddraper 7y ago
> I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. Yes that is the closest parallel. Though in the long-term it's all relative; funding is funding. The U.S. could sell its national assets to lower tax burden. Norway could sell its national assets to lower tax burden. Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits.
- pedrocr 7y ago
  >Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits. Both options are equally easy for the state to do, of course. The point is there's a sound argument for doing the fund when you have such a large asset that's otherwise useless to you, instead of returning the money as lower taxes. If you do the fund you're setting up your economy to be able to depend on the revenues from the fund forever as you are not depleting the capital. If you lower taxes you get an economy using asset sales to fund current expenses. Once those assets run out you get to deal with that somehow to go back to a balanced budget. Since most states tax incomes much more than wealth doing that would basically mean the current generation living large and passing on the problem to their children to solve. Which is effectively what is happening in a lot of the oil rich countries.

paulddraper 7y ago

> I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. Yes that is the closest parallel. Though in the long-term it's all relative; funding is funding. The U.S. could sell its national assets to lower tax burden. Norway could sell its national assets to lower tax burden. Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits.

pedrocr 7y ago
>Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits. Both options are equally easy for the state to do, of course. The point is there's a sound argument for doing the fund when you have such a large asset that's otherwise useless to you, instead of returning the money as lower taxes. If you do the fund you're setting up your economy to be able to depend on the revenues from the fund forever as you are not depleting the capital. If you lower taxes you get an economy using asset sales to fund current expenses. Once those assets run out you get to deal with that somehow to go back to a balanced budget. Since most states tax incomes much more than wealth doing that would basically mean the current generation living large and passing on the problem to their children to solve. Which is effectively what is happening in a lot of the oil rich countries.