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Norway's Wealth Tax Is Backfiring. Are Americans Paying Attention?

22 points by chaosprint 2y ago

HL33tibCe7 2y ago
https://en.m.wikipedia.org/wiki/Laffer_curve https://en.m.wikipedia.org/wiki/Laffer_curve
- hiddencost 2y ago
  https://itep.org/debunkinglaffer/ https://itep.org/debunkinglaffer/ https://www.washingtonpost.com/politics/2019/06/01/trump-is-giving-arthur-laffer-presidential-medal-freedom-economists-arent-laughing/ https://www.washingtonpost.com/politics/2019/06/01/trump-is-... (Archive: https://archive.is/eVC1X https://archive.is/eVC1X ) "Economists tend to roll their eyes when the Laffer curve is mentioned. A panel of elite academic economists across the political spectrum found in 2012 that none of its respondents agreed that the United States was on the wrong side of the curve. Even George Stigler, a leader of the Chicago School of Economics who disliked taxes at least as much as Laffer, described the Laffer curve as “more or less a tautology.”"
  - ywvcbk 2y ago
    High taxes and strict regulation do have a negative impact on job and income growth in much of Europe, though.
    - atwrk 2y ago
      That seems wrong, as most high tax countries (Denmark, Norway, ...) have full employment and very high standards of living for decades now. Do you have a source for that? Eastern European countries catching up with development don't count, see Piketty.
      - ywvcbk 2y ago
        > as most high tax countries Yet you listed two relatively tiny countries. Which don’t even have (relatively) very high taxes. France, Spain, Italy, Portugal and Greece etc. all have higher taxes on labor https://www.oecd.org/en/data/indicators/tax-wedge.html?oecdcontrol-521118a96c-var1=DNK%7CNOR%7CITA%7CFRA%7CESP%7CGRC%7CPRT%7CUSA https://www.oecd.org/en/data/indicators/tax-wedge.html?oecdc... e.g. Denmark and Norway are closer to US than to France > have full employment and very high standards of living for decades now Yet those standards have barely improved over those decades. Prior to 2009 the gap between US and the EU was closing, not it is the complete opposite.
        atwrk 2y ago
        Well the tax wedge as defined on that page measures the sum of taxes and healthcare, pensions and social security combined, not the tax alone. For a working class wage in most EU countries, healthcare plus contributions for pensions and social funds will sum up to be larger than than income tax.
    - consteval 2y ago
      This is often a problem of metrics. US-centric economic views tend to favor metrics we're really good at, but that don't matter to the average person, like GDP. The US has an absurd GDP. But if you could compare the average American and, say, the average Norwegian, I don't think it would even be close in terms of quality of life. Particularly if we include things such as food, exercise, and education.
      - ywvcbk 2y ago
        > average Norwegian That’s the problem. You should comparing it only with states like Massachusetts, Connecticut etc. (and even then.. Norway is inflated by oil revenue, IMHO Denmark is a lot more impressive).
  - shiroiushi 2y ago
    It is a tautology, so I'm not sure why people get annoyed about it. If you look at the curve, it just says the government will get 0 revenue at either 0% or 100% taxes, and the maximum is somewhere in the middle. It doesn't say where, or make any judgments about current tax rates. Obviously it shouldn't be used for any kind of serious discussion about tax rates, other than pointing out the baseline obviousness that taxing too high is counterproductive.
    - mike_hearn 2y ago
      It's not obvious to quite a lot of people. The fact that government revenues can go down when taxes go up, or go up when taxes go down, is regularly treated as a shocking revelation in forums like the Guardian. As the article states, macroeconomic modelling has for a long time basically assumed that people won't react rationally in the face of government policy changes, sometimes because they implicitly assume global government (i.e. the models don't handle the possibility of people leaving).
      - shiroiushi 2y ago
        The possibility of people leaving really has little to do with the Laffer curve. It's just the simple observation that if taxes are extremely high, people will change their behavior: for instance, if you have a choice between staying in your stable job with mediocre pay and middle-of-the-road tax rates, or taking a big risk to start a new business, but be subject to such high tax rates if you succeed that you'll make no more money after taxes, very few people would even bother starting that new business.
  - Aeolun 2y ago
    So he was essentially saying it’s so correct that there’s no point in talking about it?
- ywvcbk 2y ago
  Almost entirely because of free movement of capital/people and not because the tax had a negative impact on productivity.
- sgt 2y ago
  Want to see my ... Laffer curve? https://en.wikipedia.org/wiki/Larry_Laffer https://en.wikipedia.org/wiki/Larry_Laffer
tonfa 2y ago
It currently wouldn't matter for the US, since it's one of the few country doing worldwide taxation of its citizens.
- danw1979 2y ago
  What if the tax is applied at the state level ?
- dayjah 2y ago
  … on incomes. This article is talking about wealth tax. And specifically mentions policies around unrealized capital gains tax. So it would matter a lot for many people in America, and California specifically.
  - ghusto 2y ago
    Unfortunately, I think that's right. I've always thought this policy outrageous, but in this context I think it could make sense the other way around; don't double-tax income, but wealth.
- sgt 2y ago
  Only if you make a very decent amount of money, like more than $100k USD a year. In the US this may not seem like much, but you'd be surprised how little e.g. developers make in countries like Germany or Poland.
- mythz 2y ago
  Sure it does, you can always rescind your citizenship / green card if you have no intentions of returning to live in the US.
  - shiroiushi 2y ago
    It costs thousands of dollars to renounce US citizenship. There's also an "exit tax", though that doesn't come into play unless you have millions in assets.
shiroiushi 2y ago
I don't think this is comparable to the US. First, the US has worldwide taxation for its citizens. No matter where you go, they can track your bank accounts (through FATCA) and tax you. It really sucks if you're just a middle-class expat somewhere, but the system was really designed to make sure rich Americans were paying their taxes. However, it's causing a growing number of not-rich Americans living overseas to renounce their citizenship. Regardless, it can still be used here. The billionaires would have to not only move out, but also renounce, and doing this currently carries a large "exit tax" if you have huge assets. Secondly, where exactly are super-rich Americans going to go? Super-rich Norwegians have lots of options a very short trip away, since they live right next to the EU. It's not that hard for them to pack up and move to Sweden or Denmark where the taxes are still quite high, but without the explicit wealth tax. With super-rich Americans, it's not quite so simple: other desirable countries will have significantly higher overall taxation, even if there's no explicit wealth tax, so it would really depend on exactly how high this new tax is. Sure, they could move to Russia, but I don't think that's a place that American billionaires want to move to.
- danw1979 2y ago
  Canada ?
  - shiroiushi 2y ago
    I'm pretty sure Canada has higher taxes than the US for people in this tax bracket. And again, they'd have to move all their assets and renounce their citizenship, after somehow acquiring Canadian citizenship.
  - TMWNN 2y ago
    The last time I did the calculation, a Canadian is about 27 times more likely to move to the US than an American is to move to Canada. About one sixth of *all* Canadian scientists and engineers move to the US. (Not one sixth of Canadian scientists/engineers who leave their country moving to the US. One sixth of all.) The number of wealthy Americans that move to Canada is, to the first approximation, zero.
- 2y ago
ZeroGravitas 2y ago
Maybe we should put rich people's money in cages when it crosses borders rather than poor people? Admit it, it would be more fun to see a billionaire strapping life vests to stacks of cash in the hope of seeing it arrive safely via a shoddy inflatable craft than to see drowned small children face down in the sand.
Aeolun 2y ago
Wasn’t there like a country with some absurd exit tax like 50% or something? That would stop capital flight too.
pikseladam 2y ago
rich people escaping the country is never a good thing. never. wealth gap can be solved in different ways.
stfp 2y ago
I feel like this calls for harmonizing tax rules within europe and plugging loopholes more than let’s not even dare ask billionaires to pay their fair share.
qprofyeh 2y ago
How many stayed?
enriquto 2y ago
It doesn't sound like it's "backfiring", does it? Removing these ultra-rich people from the country will certainly decrease the wealth gap between the rich and the poor, which is probably one of the main goals of the tax. The unsourced assumption of TFA is the consideration of these ultra-rich people as "wealth creators" instead of "extractive elites" (or, in plainer language "filthy parasites"). The net balance of the policy would need to take that into account, but this is not done on this highly ideological article. It seems to me that, as long as the ultra-rich that moved out of the country cannot carry on with their wealth extraction, it's a win-win for everybody involved.
- Tor3 2y ago
  The problem is not their personal fortune. Nobody has a problem about taxing their bank account. The problem here is that they're taxed as if the value of their company is a personal fortune. Thus, money that actually exist in the company will have to be extracted in order to pay a personal fortune tax. You can't actually start to sell off doors and windows to pay taxes. But that's what sometimes happens - otherwise there's no money. And where there's money, there's less money for research and investments etc.
  - xyzzy123 2y ago
    Most (but OK, not all) ultra-rich people will be diversified and hold some of their wealth in securities, real estate and other assets. They'll have family offices and expected rates of return, they can arrange for enough of their wealth to be liquid to pay the taxes... they just don't want to. Given that wealth tends to appreciate around 4-5% (ok that's Piketty - but pick your favourite number) a 1% wealth tax is a "moderate headwind" on wealth growth for the very rich. On the other hand, I agree the founder on 1st company with most of their wealth tied up in it is in the worst position, and also that the threshold in Norway seems very low (170k USD) and would hit many small business owners - who also will find it much more difficult to change their tax residency than the truly wealthy :/
    - mike_hearn 2y ago
sehansen 2y ago
Weird article. The tone of the article is as if the wealth tax has been a huge disaster for Norway, but the only concrete problem the they spell out is that the wealth tax will only bring in $594 million instead of the expected $1.46 billion. The article fails to mention that this is still an improvement over the $0 dollars before the wealth tax. In the bottom of the article it says "The Daily Economy is the news outlet of the American Institute for Economic Research". If you look up "American Institute for Economic Research" on Wikipedia you learn that "It has promoted climate change denial, and was known for the Great Barrington Declaration and misinformation during the COVID-19 pandemic."
- otuutti 2y ago
  "Norway collected about $1.46 billion on its wealth tax in 2019. But the exodus of the wealthy will result in an estimated $594 million in lost revenue." ie. Status quo for the Wealth Tax, that exists, is +1.46 billion, it was projected to increase by ca 10% due to the tax hike, but instead trends towards decreasing to 0.87 billion, ie a loss of 594 million vs current tax income from the (lower) wealth tax
CYHSM 2y ago
That argument might hold for other countries but not for Norway, which is one of the richest in the world. Norway values equality over tax revenue, so when billionaires leave, it actually enhances the country's equality.
- big-green-man 2y ago
  That sounds like a really messed up set of incentives. These are Norwegians, they have a right by birth to live in Norway and do business with their countrymen, and their government is saying "go find another tribe to join, we don't want you." That's a really fucked up thing to do, kick people out of their nation because they are financially better off than the average just to improve the government's quarterly report on wealth inequality.
timthelion 2y ago
Perhapse the tax shouldn't be based on residency but rather capital within the country...
Tor3 2y ago
The issue is a very specific one in this case. Maybe not as much for the person mentioned first in the article, the problem is more easy to see for a bunch of the other emigrants (and is a continuing problem for the many more who can't or won't emigrate). The tax is a fortune tax, not an income tax, and those affected are often people who actually live off a "normal" (sometimes very high, but sometimes surprisingly standard) salary from their company. However, because the company has a certain (typically large) value, the owner gets taxed as if that were actual real money. The owner then has to either extract more money from the company in order to pay their personal tax (leaving little or nothing for investments), or even sell off stuff in order to pay. Obviously this is backfiring, and obviously the specific politicians who went for this are doubling down on it.
mcv 2y ago
The bias of the article is pretty blatant: "wealth creators" rather than "wealth hoarders", "Atlas Shrugged", etc. Of course the issue is an important one. Rich people can move their wealth really easily, so attempts to tax them need to take that into account. International tax measures are more effective than local ones. But it might also be more effective to tax people not on where they live, but on where their property exists.
- big-green-man 2y ago
  Define "hoarding" in this context?
aurea 2y ago
It's worth noting that the article starts with the mention of Kjell Inge Røkke leaving for Switzerland, a country in which there is wealth tax. The only reason Røkke might still be interested is that as a foreigner he is able to "cut a deal" with the Government [1]. For non-UHNWI, you can have a wealth tax of 0.6% (this varies between cantons, and I'm already taking into account here cantonal and communal wealth tax). [1] https://www.knightfrank.com/research/article/2021-03-08-why-switzerland-is-back-in-the-spotlight https://www.knightfrank.com/research/article/2021-03-08-why-...
duggan 2y ago
I think lesson here may just be that wealth tax, like corporation tax, will be most effective as an OECD-wide tax[1]. 1: https://www.oecd.org/en/about/news/press-releases/2024/07/new-oecd-data-highlight-stabilisation-in-statutory-corporate-tax-rates-worldwide.html https://www.oecd.org/en/about/news/press-releases/2024/07/ne...
- goalieca 2y ago
  It would be harder to evade but that wouldn’t make it effective. If you hit your wealth creators too hard then they will cease being able to create wealth. Perhaps we have to stop seeing people as leeches and start questioning the government for poor investments.
  - consteval 2y ago
    The tricky part is a lot of wealthy people or companies make their wealth by extracting it from others. Typically those "others" are held captive in some way, so they have no choice but to pay. Obvious example, tobacco, alcohol, motor vehicle repair. Non-obvious examples, hotels, vets, dentists, physical therapy. It's a HUGE problem in the US. Lots and lots of companies are huge, owning big parts of their domain, and they're extremely scammy. It's to a point where even big-name brands employ scammy techniques.
  - duggan 2y ago
    There's a path to tread on taxation, certainly, but it's far from either treating the wealthy as leeches or solitary engines of the economy. There will be folks who want to avoid (or evade) taxation at all costs, but those may end up being a minority of ideologues. I think most will end up being more practical about it[1]. 1: https://proudtopaymore.org https://proudtopaymore.org
politelemon 2y ago
Poor article with a huge unfounded bias. Article fails to demonstrate how 500m less revenue constitutes backfiring, the country can afford it just fine. If anything this is better as it reduces wealth inequality.
- spwa4 2y ago
  Personally I would demand of "reducing wealth inequality" that it makes everyone richer, not poorer. If this is the sort of equality you want ... what's the goal? Let's all be dirt poor? By all goals set for this tax when introducing it, it's a failure. It did not change anything, made everyone poorer and reduced the state's ability to do anything about it.
burnt-resistor 2y ago
And the mainstream media provides them cover with this sort of yellow journalism FUD.
Gud 2y ago
What is seldom discussed is that instead of taking money from the rich via taxes, thus increasing the power of the government bureaucracy at the expense of private enterprise, another possibility is to simply give shares of the companies to the citizens. A scheme I’ve thought could potentially work is to mint new shares of publicly traded companies and give them to the citizens in instalments, from the 18th birthday up until the 30th, thus bridging the gap between rich and poor. A substantial amount of stock of let’s say, 100,000 USD could be paid out like this, together with good wealth management schooling. Many advantages, what are the disadvantages??
- big-green-man 2y ago
  The disadvantage is the same as with 401ks and the like: such a system would require every citizen to have a relationship with a fund manager. At least 401k is opt in and voluntary. Wall street would love such an arrangement, and they get guaranteed capital locked up in their shenanigans, and guaranteed management and brokerage fees from every adult citizen. And, the actual capital for these investments is still what it is, so they'll find a way to make sure that people holding these default free shares don't benefit from them significantly.
  - Gud 2y ago
    No, the money would be totally in control of the citizen. How would it then benefit wall st? Also consider that there are more countries in the world than the US. I think it would work great in Scandinavia and Switzerland.
ghusto 2y ago
Totalitarian dictatorship point of view, but bear with me: Would it be wrong to simply stop them doing this? As in; you're free to leave, but the money you made in this country stays in this country. Of course I understand that may not be feasible given how complicated it would be to work out, but just on a hypothetical moral basis, would it be wrong?
- big-green-man 2y ago
  Well, the money they made in that country was the result of services they provided to the people of that country. The country already benefitted and to lay claim to the return they got for doing that is to say that they were slaves when providing such services. To put terms on the use of what's presumably theirs that they've earned is to say "you're not the owner of it, and you're not the owner of yourself either." A wealth tax is "you did great in this country, and you brought wealth to the people here such that they paid you for what you've done, and that's great. If your continued relationship with this country is valuable to you, we are going to need a cut of that as long as you want to maintain that relationship but if it isn't worth it to you, youre free to end that relationship." Still, to me, the nation-state level of scumbag behavior, but at least nobody is being held hostage.
ghusto 2y ago
Am I right in thinking that this has no bearing on America due to their double-tax policy? i.e. You can leave, but we still want our taxes.
pasttense01 2y ago
So what taxes are there that don't have problems with tax avoidance? For example the U.S.has a shadow economy of about 10% of GDP where people are not paying income, sales, social security taxes.
nojvek 2y ago
Property taxes are wealth taxes right? And they work great since everyone pays a small % to what the property appraiser thinks the property is worth. Property taxes are on unrealized gains. There are separate taxes on realized gains when the property is sold. IMO the bigger problem is capital gains tax rate is much lower than normal income tax rate. Income is income and should be taxed at the same rate. However as the article suggests - people make rational decisions for personal gain and lawmakers have a lot of wealth tied up in stocks. So they will never vote majority to touch that golden goose.

22 points by chaosprint 2y ago

HL33tibCe7 2y ago

https://en.m.wikipedia.org/wiki/Laffer_curve https://en.m.wikipedia.org/wiki/Laffer_curve

hiddencost 2y ago
https://itep.org/debunkinglaffer/ https://itep.org/debunkinglaffer/ https://www.washingtonpost.com/politics/2019/06/01/trump-is-giving-arthur-laffer-presidential-medal-freedom-economists-arent-laughing/ https://www.washingtonpost.com/politics/2019/06/01/trump-is-... (Archive: https://archive.is/eVC1X https://archive.is/eVC1X ) "Economists tend to roll their eyes when the Laffer curve is mentioned. A panel of elite academic economists across the political spectrum found in 2012 that none of its respondents agreed that the United States was on the wrong side of the curve. Even George Stigler, a leader of the Chicago School of Economics who disliked taxes at least as much as Laffer, described the Laffer curve as “more or less a tautology.”"
- ywvcbk 2y ago
  High taxes and strict regulation do have a negative impact on job and income growth in much of Europe, though.
  - atwrk 2y ago
    That seems wrong, as most high tax countries (Denmark, Norway, ...) have full employment and very high standards of living for decades now. Do you have a source for that? Eastern European countries catching up with development don't count, see Piketty.
    - ywvcbk 2y ago
      > as most high tax countries Yet you listed two relatively tiny countries. Which don’t even have (relatively) very high taxes. France, Spain, Italy, Portugal and Greece etc. all have higher taxes on labor https://www.oecd.org/en/data/indicators/tax-wedge.html?oecdcontrol-521118a96c-var1=DNK%7CNOR%7CITA%7CFRA%7CESP%7CGRC%7CPRT%7CUSA https://www.oecd.org/en/data/indicators/tax-wedge.html?oecdc... e.g. Denmark and Norway are closer to US than to France > have full employment and very high standards of living for decades now Yet those standards have barely improved over those decades. Prior to 2009 the gap between US and the EU was closing, not it is the complete opposite.
      - atwrk 2y ago
        Well the tax wedge as defined on that page measures the sum of taxes and healthcare, pensions and social security combined, not the tax alone. For a working class wage in most EU countries, healthcare plus contributions for pensions and social funds will sum up to be larger than than income tax.
  - consteval 2y ago
    This is often a problem of metrics. US-centric economic views tend to favor metrics we're really good at, but that don't matter to the average person, like GDP. The US has an absurd GDP. But if you could compare the average American and, say, the average Norwegian, I don't think it would even be close in terms of quality of life. Particularly if we include things such as food, exercise, and education.
    - ywvcbk 2y ago
      > average Norwegian That’s the problem. You should comparing it only with states like Massachusetts, Connecticut etc. (and even then.. Norway is inflated by oil revenue, IMHO Denmark is a lot more impressive).
- shiroiushi 2y ago
  It is a tautology, so I'm not sure why people get annoyed about it. If you look at the curve, it just says the government will get 0 revenue at either 0% or 100% taxes, and the maximum is somewhere in the middle. It doesn't say where, or make any judgments about current tax rates. Obviously it shouldn't be used for any kind of serious discussion about tax rates, other than pointing out the baseline obviousness that taxing too high is counterproductive.
  - mike_hearn 2y ago
    It's not obvious to quite a lot of people. The fact that government revenues can go down when taxes go up, or go up when taxes go down, is regularly treated as a shocking revelation in forums like the Guardian. As the article states, macroeconomic modelling has for a long time basically assumed that people won't react rationally in the face of government policy changes, sometimes because they implicitly assume global government (i.e. the models don't handle the possibility of people leaving).
    - shiroiushi 2y ago
      The possibility of people leaving really has little to do with the Laffer curve. It's just the simple observation that if taxes are extremely high, people will change their behavior: for instance, if you have a choice between staying in your stable job with mediocre pay and middle-of-the-road tax rates, or taking a big risk to start a new business, but be subject to such high tax rates if you succeed that you'll make no more money after taxes, very few people would even bother starting that new business.
- Aeolun 2y ago
  So he was essentially saying it’s so correct that there’s no point in talking about it?
ywvcbk 2y ago
Almost entirely because of free movement of capital/people and not because the tax had a negative impact on productivity.
sgt 2y ago
Want to see my ... Laffer curve? https://en.wikipedia.org/wiki/Larry_Laffer https://en.wikipedia.org/wiki/Larry_Laffer

tonfa 2y ago

It currently wouldn't matter for the US, since it's one of the few country doing worldwide taxation of its citizens.

danw1979 2y ago
What if the tax is applied at the state level ?
dayjah 2y ago
… on incomes. This article is talking about wealth tax. And specifically mentions policies around unrealized capital gains tax. So it would matter a lot for many people in America, and California specifically.
- ghusto 2y ago
  Unfortunately, I think that's right. I've always thought this policy outrageous, but in this context I think it could make sense the other way around; don't double-tax income, but wealth.
sgt 2y ago
Only if you make a very decent amount of money, like more than $100k USD a year. In the US this may not seem like much, but you'd be surprised how little e.g. developers make in countries like Germany or Poland.
mythz 2y ago
Sure it does, you can always rescind your citizenship / green card if you have no intentions of returning to live in the US.
- shiroiushi 2y ago
  It costs thousands of dollars to renounce US citizenship. There's also an "exit tax", though that doesn't come into play unless you have millions in assets.

shiroiushi 2y ago

I don't think this is comparable to the US. First, the US has worldwide taxation for its citizens. No matter where you go, they can track your bank accounts (through FATCA) and tax you. It really sucks if you're just a middle-class expat somewhere, but the system was really designed to make sure rich Americans were paying their taxes. However, it's causing a growing number of not-rich Americans living overseas to renounce their citizenship. Regardless, it can still be used here. The billionaires would have to not only move out, but also renounce, and doing this currently carries a large "exit tax" if you have huge assets. Secondly, where exactly are super-rich Americans going to go? Super-rich Norwegians have lots of options a very short trip away, since they live right next to the EU. It's not that hard for them to pack up and move to Sweden or Denmark where the taxes are still quite high, but without the explicit wealth tax. With super-rich Americans, it's not quite so simple: other desirable countries will have significantly higher overall taxation, even if there's no explicit wealth tax, so it would really depend on exactly how high this new tax is. Sure, they could move to Russia, but I don't think that's a place that American billionaires want to move to.

danw1979 2y ago
Canada ?
- shiroiushi 2y ago
  I'm pretty sure Canada has higher taxes than the US for people in this tax bracket. And again, they'd have to move all their assets and renounce their citizenship, after somehow acquiring Canadian citizenship.
- TMWNN 2y ago
  The last time I did the calculation, a Canadian is about 27 times more likely to move to the US than an American is to move to Canada. About one sixth of *all* Canadian scientists and engineers move to the US. (Not one sixth of Canadian scientists/engineers who leave their country moving to the US. One sixth of all.) The number of wealthy Americans that move to Canada is, to the first approximation, zero.
2y ago

ZeroGravitas 2y ago

Maybe we should put rich people's money in cages when it crosses borders rather than poor people? Admit it, it would be more fun to see a billionaire strapping life vests to stacks of cash in the hope of seeing it arrive safely via a shoddy inflatable craft than to see drowned small children face down in the sand.

Aeolun 2y ago

Wasn’t there like a country with some absurd exit tax like 50% or something? That would stop capital flight too.

pikseladam 2y ago

rich people escaping the country is never a good thing. never. wealth gap can be solved in different ways.

stfp 2y ago

I feel like this calls for harmonizing tax rules within europe and plugging loopholes more than let’s not even dare ask billionaires to pay their fair share.

qprofyeh 2y ago

How many stayed?

enriquto 2y ago

It doesn't sound like it's "backfiring", does it? Removing these ultra-rich people from the country will certainly decrease the wealth gap between the rich and the poor, which is probably one of the main goals of the tax. The unsourced assumption of TFA is the consideration of these ultra-rich people as "wealth creators" instead of "extractive elites" (or, in plainer language "filthy parasites"). The net balance of the policy would need to take that into account, but this is not done on this highly ideological article. It seems to me that, as long as the ultra-rich that moved out of the country cannot carry on with their wealth extraction, it's a win-win for everybody involved.

Tor3 2y ago
The problem is not their personal fortune. Nobody has a problem about taxing their bank account. The problem here is that they're taxed as if the value of their company is a personal fortune. Thus, money that actually exist in the company will have to be extracted in order to pay a personal fortune tax. You can't actually start to sell off doors and windows to pay taxes. But that's what sometimes happens - otherwise there's no money. And where there's money, there's less money for research and investments etc.
- xyzzy123 2y ago
  Most (but OK, not all) ultra-rich people will be diversified and hold some of their wealth in securities, real estate and other assets. They'll have family offices and expected rates of return, they can arrange for enough of their wealth to be liquid to pay the taxes... they just don't want to. Given that wealth tends to appreciate around 4-5% (ok that's Piketty - but pick your favourite number) a 1% wealth tax is a "moderate headwind" on wealth growth for the very rich. On the other hand, I agree the founder on 1st company with most of their wealth tied up in it is in the worst position, and also that the threshold in Norway seems very low (170k USD) and would hit many small business owners - who also will find it much more difficult to change their tax residency than the truly wealthy :/
  - mike_hearn 2y ago

sehansen 2y ago

Weird article. The tone of the article is as if the wealth tax has been a huge disaster for Norway, but the only concrete problem the they spell out is that the wealth tax will only bring in $594 million instead of the expected $1.46 billion. The article fails to mention that this is still an improvement over the $0 dollars before the wealth tax. In the bottom of the article it says "The Daily Economy is the news outlet of the American Institute for Economic Research". If you look up "American Institute for Economic Research" on Wikipedia you learn that "It has promoted climate change denial, and was known for the Great Barrington Declaration and misinformation during the COVID-19 pandemic."

otuutti 2y ago
"Norway collected about $1.46 billion on its wealth tax in 2019. But the exodus of the wealthy will result in an estimated $594 million in lost revenue." ie. Status quo for the Wealth Tax, that exists, is +1.46 billion, it was projected to increase by ca 10% due to the tax hike, but instead trends towards decreasing to 0.87 billion, ie a loss of 594 million vs current tax income from the (lower) wealth tax

CYHSM 2y ago

That argument might hold for other countries but not for Norway, which is one of the richest in the world. Norway values equality over tax revenue, so when billionaires leave, it actually enhances the country's equality.

big-green-man 2y ago
That sounds like a really messed up set of incentives. These are Norwegians, they have a right by birth to live in Norway and do business with their countrymen, and their government is saying "go find another tribe to join, we don't want you." That's a really fucked up thing to do, kick people out of their nation because they are financially better off than the average just to improve the government's quarterly report on wealth inequality.

timthelion 2y ago

Perhapse the tax shouldn't be based on residency but rather capital within the country...

Tor3 2y ago

The issue is a very specific one in this case. Maybe not as much for the person mentioned first in the article, the problem is more easy to see for a bunch of the other emigrants (and is a continuing problem for the many more who can't or won't emigrate). The tax is a fortune tax, not an income tax, and those affected are often people who actually live off a "normal" (sometimes very high, but sometimes surprisingly standard) salary from their company. However, because the company has a certain (typically large) value, the owner gets taxed as if that were actual real money. The owner then has to either extract more money from the company in order to pay their personal tax (leaving little or nothing for investments), or even sell off stuff in order to pay. Obviously this is backfiring, and obviously the specific politicians who went for this are doubling down on it.

mcv 2y ago

The bias of the article is pretty blatant: "wealth creators" rather than "wealth hoarders", "Atlas Shrugged", etc. Of course the issue is an important one. Rich people can move their wealth really easily, so attempts to tax them need to take that into account. International tax measures are more effective than local ones. But it might also be more effective to tax people not on where they live, but on where their property exists.

big-green-man 2y ago
Define "hoarding" in this context?

aurea 2y ago

It's worth noting that the article starts with the mention of Kjell Inge Røkke leaving for Switzerland, a country in which there is wealth tax. The only reason Røkke might still be interested is that as a foreigner he is able to "cut a deal" with the Government [1]. For non-UHNWI, you can have a wealth tax of 0.6% (this varies between cantons, and I'm already taking into account here cantonal and communal wealth tax). [1] https://www.knightfrank.com/research/article/2021-03-08-why-switzerland-is-back-in-the-spotlight https://www.knightfrank.com/research/article/2021-03-08-why-...

duggan 2y ago

I think lesson here may just be that wealth tax, like corporation tax, will be most effective as an OECD-wide tax[1]. 1: https://www.oecd.org/en/about/news/press-releases/2024/07/new-oecd-data-highlight-stabilisation-in-statutory-corporate-tax-rates-worldwide.html https://www.oecd.org/en/about/news/press-releases/2024/07/ne...

goalieca 2y ago
It would be harder to evade but that wouldn’t make it effective. If you hit your wealth creators too hard then they will cease being able to create wealth. Perhaps we have to stop seeing people as leeches and start questioning the government for poor investments.
- consteval 2y ago
  The tricky part is a lot of wealthy people or companies make their wealth by extracting it from others. Typically those "others" are held captive in some way, so they have no choice but to pay. Obvious example, tobacco, alcohol, motor vehicle repair. Non-obvious examples, hotels, vets, dentists, physical therapy. It's a HUGE problem in the US. Lots and lots of companies are huge, owning big parts of their domain, and they're extremely scammy. It's to a point where even big-name brands employ scammy techniques.
- duggan 2y ago
  There's a path to tread on taxation, certainly, but it's far from either treating the wealthy as leeches or solitary engines of the economy. There will be folks who want to avoid (or evade) taxation at all costs, but those may end up being a minority of ideologues. I think most will end up being more practical about it[1]. 1: https://proudtopaymore.org https://proudtopaymore.org

politelemon 2y ago

Poor article with a huge unfounded bias. Article fails to demonstrate how 500m less revenue constitutes backfiring, the country can afford it just fine. If anything this is better as it reduces wealth inequality.

spwa4 2y ago
Personally I would demand of "reducing wealth inequality" that it makes everyone richer, not poorer. If this is the sort of equality you want ... what's the goal? Let's all be dirt poor? By all goals set for this tax when introducing it, it's a failure. It did not change anything, made everyone poorer and reduced the state's ability to do anything about it.

burnt-resistor 2y ago

And the mainstream media provides them cover with this sort of yellow journalism FUD.

Gud 2y ago

What is seldom discussed is that instead of taking money from the rich via taxes, thus increasing the power of the government bureaucracy at the expense of private enterprise, another possibility is to simply give shares of the companies to the citizens. A scheme I’ve thought could potentially work is to mint new shares of publicly traded companies and give them to the citizens in instalments, from the 18th birthday up until the 30th, thus bridging the gap between rich and poor. A substantial amount of stock of let’s say, 100,000 USD could be paid out like this, together with good wealth management schooling. Many advantages, what are the disadvantages??

big-green-man 2y ago
The disadvantage is the same as with 401ks and the like: such a system would require every citizen to have a relationship with a fund manager. At least 401k is opt in and voluntary. Wall street would love such an arrangement, and they get guaranteed capital locked up in their shenanigans, and guaranteed management and brokerage fees from every adult citizen. And, the actual capital for these investments is still what it is, so they'll find a way to make sure that people holding these default free shares don't benefit from them significantly.
- Gud 2y ago
  No, the money would be totally in control of the citizen. How would it then benefit wall st? Also consider that there are more countries in the world than the US. I think it would work great in Scandinavia and Switzerland.

ghusto 2y ago

Totalitarian dictatorship point of view, but bear with me: Would it be wrong to simply stop them doing this? As in; you're free to leave, but the money you made in this country stays in this country. Of course I understand that may not be feasible given how complicated it would be to work out, but just on a hypothetical moral basis, would it be wrong?

big-green-man 2y ago
Well, the money they made in that country was the result of services they provided to the people of that country. The country already benefitted and to lay claim to the return they got for doing that is to say that they were slaves when providing such services. To put terms on the use of what's presumably theirs that they've earned is to say "you're not the owner of it, and you're not the owner of yourself either." A wealth tax is "you did great in this country, and you brought wealth to the people here such that they paid you for what you've done, and that's great. If your continued relationship with this country is valuable to you, we are going to need a cut of that as long as you want to maintain that relationship but if it isn't worth it to you, youre free to end that relationship." Still, to me, the nation-state level of scumbag behavior, but at least nobody is being held hostage.

ghusto 2y ago

Am I right in thinking that this has no bearing on America due to their double-tax policy? i.e. You can leave, but we still want our taxes.

pasttense01 2y ago

So what taxes are there that don't have problems with tax avoidance? For example the U.S.has a shadow economy of about 10% of GDP where people are not paying income, sales, social security taxes.

nojvek 2y ago

Property taxes are wealth taxes right? And they work great since everyone pays a small % to what the property appraiser thinks the property is worth. Property taxes are on unrealized gains. There are separate taxes on realized gains when the property is sold. IMO the bigger problem is capital gains tax rate is much lower than normal income tax rate. Income is income and should be taxed at the same rate. However as the article suggests - people make rational decisions for personal gain and lawmakers have a lot of wealth tied up in stocks. So they will never vote majority to touch that golden goose.