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Taxing unrealized gains has caused an entrepreneurial exodus in Norway

94 points by koevet 2y ago

exe34 2y ago
easy, impose an exit tax. capital doesn't need to be free when it's trying to evade justice. you pay tax on unrealised gains the same way the rest of us do when facing an unexpected bill that we can't afford - you sell your stuff.
- HeckFeck 2y ago
  You do realise they were taxing the entrepreneurs before their companies made a profit? What sort of "justice" is that?
  - emn13 2y ago
    Anybody earning a wage pays tax on revenue, not profit. Property taxes can be even be on value, not revenue or profit. For any given tax burden, I don't see the "justice" problem by shifting more of that towards value and revenue and less towards profit. You could argue that in a vacuum that it is more just because it slightly incentivized investment over saving. And I'm sure you could argue the reverse too. However, to me this mostly looks like a practical issue, and the traditional dogma that a broader tax base is a better one likely holds here too. Taxes should be on all three categories, and for both legal and real persons - and thus each specific category lower (and in particular thereby reducing the height of specific niche corners cases such as this one, and also reducing the opportunity to game the system). Also, it's interesting to listen to anecdotes like this, but caveat lector; the article's author's experience may not be the norm; and the issues they experienced may be due to the specifics of norway's taxation system or their personal choices, not the principles behind it; and last but not least as long as money can flow mostly freely between tax systems it's not enough for a system to be fair and well designed in a vacuum; it also need to consider how shifting wealth/income/profits across borders will affect outcomes. To my mind, this is all pretty orthogonal to justice. Clearly, you see that differently. Why does this smack of injustice to you?
    - cscurmudgeon 2y ago
      > Anybody earning a wage pays tax on revenue, not profit Not really though. You do have deductions in the US (though limited). https://www.irs.gov/credits-and-deductions-for-individuals https://www.irs.gov/credits-and-deductions-for-individuals And lots of places don't tax houses or real estate.
      - emn13 2y ago
        Those deduction in no way change the basics of income (and sales) tax, which is on revenue, not profit. A person that has a good wage will pay a significant amount in tax even if at the end of a year they have no more wealth than before it; i.e. no profit. And while of course there _exist_ places that don't work this way or don't tax real estate that doesn't diminish the fact that there exist places that _do_ work this way - which demonstrates the fact that there's no broad agreement that taxation must be limited to and occur after profits. Norwegian self-proclaimed entrepreneurs aren't unique in their "victimhood", which seems to be the angle of the original article. Consider a though experiment: In a fast-growing world, taxation limited to profits when honestly applied and without exploitable loopholes (not an obviously satisfied precondition) might be able to cover costs of shared concerns, i.e. government's primary business. But imagine for a moment that that growth were to significantly slow or even stop - without profits, taxation could fall to a trickle (limited to those niches that have zero-sum profits yet lack the ability to amortize over loss making periods and lack the ability to strike a deal to fiscally merge with a loss-making business for tax purposes). Clearly, that's not sustainable. I think it's hard to imagine that the the only "just" way to tax is one that is fundamentally dependent on permanent significant growth, even if we've been lucky enough to live in such a world for quite a while, at least on paper. Given how some costs (e.g. depletion of natural resources and pollution) aren't on the fiscal books, and that from an idealistic free market stance one might prefer to include those costs on the books, the true global growth is surely already lower than it looks on paper, even if it's still hopefully positive.
  - exe34 2y ago
    > Norway imposes a wealth tax that taxes unrealized gains at approximately 1% annually. Calculated on the full market value for publicly traded assets and the book value of private companies. On New Year's Eve, whatever your net worth - including illiquid assets - is subject to this tax. It doesn't matter if you're running a loss-making startup with no cash flow, if your investments have tanked after the valuation date, or even if your company has gone bankrupt—you still owe the tax. "unrealised gains". gains, not losses.
    - HPsquared 2y ago
      Do they give a tax refund if the assets then lose (notional) value the next year?
      - asadotzler 2y ago
        Yes, well credit and other mechanisms keep the ledger balanced. Do you think you're the first person who thought of that criticism or that none of the economics professionals though to address it? What arrogance.
        HPsquared 2y ago
        Yikes. I'm interested to see how it handles that. The risk aspect is one reason capital gains are taxed at a lower rate than regular income. I guess it's not a tax on gains per se but specifically a wealth tax.
        exe34 2y ago
        I'm okay with a wealth tax if it stops the runaway growth of wealth inequality.
      - exe34 2y ago
        in many places you can claim the last few years worth of losses as offset on your profits before taxes.
  - psd1 2y ago
    You can avoid profit indefinitely - just ask uber. That's if we're sticking to the customary definition of "profit". So that you know, the practice in question is to open a line of credit on the value of your stock. This enables you to put large amounts of money in your pocket without "realising" your gains. It's a blatant tax dodge. "going into debt" lol no. Close the loophole.
- kingstoned 2y ago
  It's amazing to me that on a startup-oriented forum like this one you see these kinds of socialist comments when it comes to something that is harmful to startup founders and the entire ecosystem. Honestly curious to see what people who are hostile to entrepreneurship are even doing here.
  - no_wizard 2y ago
    It’s amazing to me that people think this is what socialism is. This isn’t seizing the means of production.
    - sandeepthroat 2y ago
      [flagged]
    - barbazoo 2y ago
      Wouldn't that be more communism than socialism?
      - no_wizard 2y ago
        The unpolluted definition of socialism is about public (e.g. social) ownership of the means of production. Technically, it’s not mutually exclusive of market systems, simply that participants are socially owned in some form. To be more specific about what I said, the roots of socialism called for the “seizing of the means of production” if governments and capital would not voluntarily convert to some form of social ownership Communism differs in that it takes this a step further advocating not only for social ownership but also the dissolution of of all private property ownership and its corresponding economic role, and distribution, and exchange that allocates products to everyone in the society based on need. For the record, I think communism is a dead end as it flys in the face of human nature. Market socialism might have legs though. I was being a bit tongue in cheek but taxes aren’t inherently socialism. Taxation has been levied under multiple periods of economic philosophy like in feudal Europe or during the age of mercantilism for example. Seems to be a hallmark of highly organized civilizations Something like an employee owned co-op is a valid socialist concept, for example. Social doesn’t automatically mean government. Though communists like Marx believed in revolutionary uprising and those tend to be inherently violent. It’s a shame that the only exposure people have to any form of socialist ideas is via Marx.
- occz 2y ago
  The article mentions the existence of such a tax.
- deleted 2y ago
  [deleted]
- Aloisius 2y ago
  Norway already has an exit tax which levies a 37.84% tax on unrealized gains. The "easy fix" isn't working for some reason. Perhaps a one-time tax is still preferable to an ongoing one.
  - exe34 2y ago
    you can also do what America does, if you're a citizen, you get taxed on your gains worldwide.
- cscurmudgeon 2y ago
  Law != justice. Else, you won't have the concept of unjust laws.
  - exe34 2y ago
    any law I agree with is justice though, almost by definition.
bryanlarsen 2y ago
> This creates a perverse scenario where business owners must extract dividends or sell shares every year just to cover their tax bill. With dividend and capital gains taxes at around 38%, you need to withdraw approximately 1.6 million NOK to pay a 1 million NOK wealth tax bill. Why wouldn't you just take a loan against the assets? A few percent of interest is a lot cheaper than 38%. In Canada you used to have to pay taxes on unrealized option gains, standard procedure was to take a loan to pay taxes. If the options gains disappeared, you'd use your next years tax refund to pay back the loan.
- SiempreViernes 2y ago
  If they took a loan then they would have to stay and waste this perfectly good excuse to do what they wanted to do anyway.
- ivanche 2y ago
  And how would they pay back a loan?
  - vidarh 2y ago
    If their business grows at a rate higher than interest, there's no reason why the bank wouldn't be happy to add the interest to the loan. If their business is growing at a rate lower than interest, it's a poor investment and they ought to sell it off and put their money somewhere else. Such as lending it out.
    - ag56 2y ago
      > sell if off To who? How?
      - vidarh 2y ago
        If you can't find a buyer, then close it down and sell the assets. The point being that if your business isn't capable of raising capital equivalent to 1% of its taxable value, then this generally isn't a reasonable business. The valuation for tax purposes of unlisted companies is the taxable valuation of the company assets excluding goodwill [1]. In practice this usually means the taxable value of e.g. a startup tends to be quite low. [1] https://www.skatteetaten.no/rettskilder/type/handboker/skatte-abc/gjeldende/a-4-aksjer--formue/A-4.015/A-4.016/ https://www.skatteetaten.no/rettskilder/type/handboker/skatt...
jplrssn 2y ago
Not surprising that an Atlas Shrugged reading entrepreneur dislikes taxation. But government services cost money, and by other accounts [0] Norway are doing pretty well: Norway performs well in many dimensions of well-being relative to other countries in the Better Life Index. Norway outperforms the average in jobs, work-life balance, education, health, environmental quality, social connections, civic engagement, safety and life satisfaction. [0] https://www.oecdbetterlifeindex.org/countries/norway/ https://www.oecdbetterlifeindex.org/countries/norway/
- SiempreViernes 2y ago
  Careful, did you pay him the three dollars it costs to quote his text?!
- jjtheblunt 2y ago
  Does Norway perform well in various well-being metrics essentially because Norway is extremely oil rich? (I don't pretend to know the answer, and ask because I don't see how to figure that out)
  - mediaman 2y ago
    Yes, they're just a petrostate. Over half their economy is oil and mining.
    - currymj 2y ago
      they separate out oil activities in their national accounts. “Mainland Norway” GDP is also not bad compared to neighboring countries. although it doesn’t measure indirect effects of oil wealth on other sectors. but still, “petrostate” isn’t really accurate.
  - jplrssn 2y ago
    It's a good question. If that were the case, I would have expected to also see other oil rich countries at the top of those rankings.
fragmede 2y ago
The references to Atlas Shrugged and the trains not running on time, and the bit about healthcare costs do not bolster any argument against a tax on unrealized gains, so this comes off more as ideologically motivated bit, rather than than an argument against the specific tax. Taxing unrealized gains is really problematic, as anyone in the startup scene who's been granted stock options in a rising startup in Silicon Valley can attest to. Paying a million dollars to the IRS because of AMT means you got a big payday, except for the fact that if you don't actually have a million dollars, you then have a problem. Most people don't have a million dollars to begin with so you can't pay that bill and you take a loan from sketchy loan shark, whole repeating the mantra, 100% of $0 is $0. 70% of a big number is still a big number. Looking at the US, rasing taxes on the rich and doing more against unrealized gains won't happen for at least four years, so we don't have to worry about that, at least.
- no_wizard 2y ago
  Taxing unrealized gains in a blanket way is bad but a more targeted threshold, such as taxing them when used in loan arrangements in which someone borrows against their holdings to avoid paying taxes on realizing the gains, seems like it would achieve the spirit of such a tax
  - Aloisius 2y ago
    Taxing people for going into debt certainly an... interesting idea.
    - no_wizard 2y ago
      That’s not it. That’s too general. Applying a tax when the financial purpose of the loan is solely to avoid paying any taxes on realizing the gains is what I’m talking about. This is demonstrably a vehicle of tax avoidance used by wealthy individuals to avoid taxes on what they would otherwise have to because they would have to sell the asset otherwise
      - Aloisius 2y ago
sandeepthroat 2y ago
[flagged]
SiempreViernes 2y ago
Holy shit, this blog tries to sell me the the right to highlight text! This gotta be the most extreme instance of NFT brain I've ever encountered...
- barbazoo 2y ago
  You misunderstand. You pay to "collect this highlight to permanently own it", not just highlight it.
- Analemma_ 2y ago
  It's hilariously self-defeating how I'm encountering this """"feature"""" for the first time on an article complaining about taxation. Like, you might have done a better job convincing me of the evils of government, if it wasn't directly alongside your vision of an ultra-capitalist nightmare hellscape where I have to pay to highlight text!
- zzz999 2y ago
  [dead]
DataDaoDe 2y ago
Here's a thought: as long as some countries somewhere have enough freedom to innovate, and entrepreneurs can leave their countries and get to the freer ones, countries like Norway can piggyback off all the innovation from others (or outsource it). I think it would only be a problem if for some reason there was technology that couldn't be copied.
- freefaler 2y ago
  How will they pay for that technology they need to import when the oil ends? They'd need to barter something for something else.
  - asadotzler 2y ago
    How will any oil-dependent finances deal with the end of oil? By saving and diversifying. Norway's got the savings down good, and in a few decades they should start thinking about diversifying. Until then, they're in a great position because they didn't spend all their oil money on weapons and instead put it into savings for their people.
freefaler 2y ago
This is a bad solution to taxation. It brakes the long-established tax practice of "realization principle". Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price. You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay and if you don't you'll be in big trouble, because you owe the money to the government. So independently of your own actions & impossible to predict you will need to plan for this expense. How many homeowners and rentiers would like that? The "realization principle" in tax law specifies that income is not subject to tax until it is "realized" through a taxable event, such as the sale or exchange of an asset. In the US this was established in early 20th-century U.S. Supreme Court cases such as Eisner v. Macomber (1920). In this case it was established that mere appreciation in value does not constitute taxable income until a sale or exchange occurs. Europe is not very business friendly. This regulation will make creating businesses even harder. When governments need more revenue they need to create more opportunities to create that revenue, not squeeze the current business tighter and tighter. Startups are risky, adding additional risk would just kill more of them sooner. BTW, it's easy to fix "loan against my equity" evasion by classifying the "money has been loaned" as a "realization" event.
- HPsquared 2y ago
  The other thing is what happens when the notional value goes down a year later? Do they get a tax refund?
  - freefaler 2y ago
    At most you'd get a rebate of your future tax payment as is the current practice.
  - novok 2y ago
    Usually, you get a credit or deduction that can only apply to future tax liability in the same category. Ex: Capital losses are stuck with capital gains in the USA and can only be applied to $3000 of your income per year otherwise. These rule systems are usually incredibly self-serving.
mediaman 2y ago
Norway doesn't care. It is a country with a reputation for good governance and northern-European economic strength. But economically, it is a country that is largely a gas station: like a democratic Russia with more competent governance. Over half its economy is based on oil and mining. It has failed to develop meaningful economic diversification, and, because it has wisely banked so much of the proceeds of its oil (over US$300k per capita), there's not a lot of pressure to adapt. Norway will not be a center of innovation anytime soon, except in oil-related fields. Eventually, as oil gets replaced as a source of energy, they may feel more pressure to change. But for now, they suffer from a more sophisticated version of the resource curse. Sweden is an interesting counterexample, which has a lower GDP per capita but a much more diversified economy. Sweden abolished a wealth tax they used to have almost 20 years ago.
- formerly_proven 2y ago
  In a nutshell, Norway can afford to have some mildly self-sabotaging economic policies. The rest of europe absolutely cannot (but that won't stop them, just like with rent control).
- wrp 2y ago
  Is this tax because the state needs the money or is it social engineering?
  - psd1 2y ago
    All tax regimes, including zero tax, are social engineering.
- msoad 2y ago
  Norway has a good oil refinery industry though. They refine oil from other places because they're so good at it.
- vidarh 2y ago
  Over half of the value of exports is oil and mining, but oil production, mining and quarrying directly employ only about 23,000 people, compared to 190,000 in manufacturing for example. Because such a large portion of the oil proceeds are banked, it also distorts the rest of the economy far less than it otherwise would. Unless you live in very specific parts of Norway, you can go your entire life with hardly any exposure to the oil industry directly, or secondary interactions with major suppliers to the oil industry.
digibeet 2y ago
Is this satirical? If it is, well done you could've fooled me with the whole Norwegian perspective. If it isn't, damn how much of a caricature can you be.
seryoiupfurds 2y ago
If you ask a socialist to describe their ideal world, it is one in which everyone is equally poor. They see "taxing the rich" first and foremost as punishing an ideological enemy, with little thought given to actually maximizing the tax revenue they can collect from them over time.
- asadotzler 2y ago
  If you build strawmen it's easy to knock them down. Socialist mostly want a floor so people don't starve to death or lose their roof to medical bills. That floor would be quite easily to establish at a comfortable life for 10 billion people on this planet while still allowing for more than enough many times over millionaires.
  - seryoiupfurds 2y ago
    And yet socialist countries starved millions, and their only periods of relative prosperity were when they loosened their ideology and allowed limited market reforms.
j7ake 2y ago
It’s not surprising, but I don’t think people of Norway care about entrepreneurs so it doesn’t matter.
vidarh 2y ago
I've started several companies in Norway. When I moved to the UK, the wealth tax was not even remotely a consideration, even though my shares were at the time valued in the millions - we moved because getting the size investment we needed to grow in Norway was too hard at that time. Yes, it can be a challenge for fast-growing startups where the secondary market is not very liquid, and is something people need to be aware of. It's not generally a major problem, in that if you can't find ways of structuring deals in ways that allow for ensuring the founders can afford the tax bill, the company just isn't doing very well.
- karencarits 2y ago
  Note that the total tax burden has, at least seemingly, increased significantly under the current government [1]. So the conditions may have changed [1] https://www.nho.no/tema/privat-eierskap/ny-menon-rapport-kraftig-okning-i-norsk-eierbeskatning/ https://www.nho.no/tema/privat-eierskap/ny-menon-rapport-kra...
  - vidarh 2y ago
    It's a creative presentation that presents it in terms of percentages of taxation of ownership while assuming most wealth tax would be paid with dividends (which makes sense in a mature company, not in a startup, where you might be more likely to find other approaches). It's not changed enough to make much difference from when I dealt with it.
karencarits 2y ago
Please note that the main criticism in the Norwegian debate is currently how this kind of taxation discriminates Norwegian ownership and gives a disadvantage in terms of competition, in comparison to foreign business owners
greyw 2y ago
The funniest part about Norway rising the wealth tax rate so extremly is that bow revenue from that tax drastically fell. I guess they need to read up on the Laffer curve. The second funniest thing is that a huge chunk of rich norwegiens left for Switzerland a country, one of very few, that also has wealth taxation on all assets. The difference is only that its an order of magnitude lower.
zorobo 2y ago
I’m okay with taxes on unrealized gains if I can get money from unrealized losses (and not just tax credits).

94 points by koevet 2y ago

easy, impose an exit tax. capital doesn't need to be free when it's trying to evade justice. you pay tax on unrealised gains the same way the rest of us do when facing an unexpected bill that we can't afford - you sell your stuff.

HeckFeck 2y ago
You do realise they were taxing the entrepreneurs before their companies made a profit? What sort of "justice" is that?
- emn13 2y ago
  Anybody earning a wage pays tax on revenue, not profit. Property taxes can be even be on value, not revenue or profit. For any given tax burden, I don't see the "justice" problem by shifting more of that towards value and revenue and less towards profit. You could argue that in a vacuum that it is more just because it slightly incentivized investment over saving. And I'm sure you could argue the reverse too. However, to me this mostly looks like a practical issue, and the traditional dogma that a broader tax base is a better one likely holds here too. Taxes should be on all three categories, and for both legal and real persons - and thus each specific category lower (and in particular thereby reducing the height of specific niche corners cases such as this one, and also reducing the opportunity to game the system). Also, it's interesting to listen to anecdotes like this, but caveat lector; the article's author's experience may not be the norm; and the issues they experienced may be due to the specifics of norway's taxation system or their personal choices, not the principles behind it; and last but not least as long as money can flow mostly freely between tax systems it's not enough for a system to be fair and well designed in a vacuum; it also need to consider how shifting wealth/income/profits across borders will affect outcomes. To my mind, this is all pretty orthogonal to justice. Clearly, you see that differently. Why does this smack of injustice to you?
  - cscurmudgeon 2y ago
    > Anybody earning a wage pays tax on revenue, not profit Not really though. You do have deductions in the US (though limited). https://www.irs.gov/credits-and-deductions-for-individuals https://www.irs.gov/credits-and-deductions-for-individuals And lots of places don't tax houses or real estate.
    - emn13 2y ago
      Those deduction in no way change the basics of income (and sales) tax, which is on revenue, not profit. A person that has a good wage will pay a significant amount in tax even if at the end of a year they have no more wealth than before it; i.e. no profit. And while of course there _exist_ places that don't work this way or don't tax real estate that doesn't diminish the fact that there exist places that _do_ work this way - which demonstrates the fact that there's no broad agreement that taxation must be limited to and occur after profits. Norwegian self-proclaimed entrepreneurs aren't unique in their "victimhood", which seems to be the angle of the original article. Consider a though experiment: In a fast-growing world, taxation limited to profits when honestly applied and without exploitable loopholes (not an obviously satisfied precondition) might be able to cover costs of shared concerns, i.e. government's primary business. But imagine for a moment that that growth were to significantly slow or even stop - without profits, taxation could fall to a trickle (limited to those niches that have zero-sum profits yet lack the ability to amortize over loss making periods and lack the ability to strike a deal to fiscally merge with a loss-making business for tax purposes). Clearly, that's not sustainable. I think it's hard to imagine that the the only "just" way to tax is one that is fundamentally dependent on permanent significant growth, even if we've been lucky enough to live in such a world for quite a while, at least on paper. Given how some costs (e.g. depletion of natural resources and pollution) aren't on the fiscal books, and that from an idealistic free market stance one might prefer to include those costs on the books, the true global growth is surely already lower than it looks on paper, even if it's still hopefully positive.
- exe34 2y ago
  > Norway imposes a wealth tax that taxes unrealized gains at approximately 1% annually. Calculated on the full market value for publicly traded assets and the book value of private companies. On New Year's Eve, whatever your net worth - including illiquid assets - is subject to this tax. It doesn't matter if you're running a loss-making startup with no cash flow, if your investments have tanked after the valuation date, or even if your company has gone bankrupt—you still owe the tax. "unrealised gains". gains, not losses.
  - HPsquared 2y ago
    Do they give a tax refund if the assets then lose (notional) value the next year?
    - asadotzler 2y ago
      Yes, well credit and other mechanisms keep the ledger balanced. Do you think you're the first person who thought of that criticism or that none of the economics professionals though to address it? What arrogance.
      - HPsquared 2y ago
        Yikes. I'm interested to see how it handles that. The risk aspect is one reason capital gains are taxed at a lower rate than regular income. I guess it's not a tax on gains per se but specifically a wealth tax.
        exe34 2y ago
        I'm okay with a wealth tax if it stops the runaway growth of wealth inequality.
    - exe34 2y ago
      in many places you can claim the last few years worth of losses as offset on your profits before taxes.
- psd1 2y ago
  You can avoid profit indefinitely - just ask uber. That's if we're sticking to the customary definition of "profit". So that you know, the practice in question is to open a line of credit on the value of your stock. This enables you to put large amounts of money in your pocket without "realising" your gains. It's a blatant tax dodge. "going into debt" lol no. Close the loophole.
kingstoned 2y ago
It's amazing to me that on a startup-oriented forum like this one you see these kinds of socialist comments when it comes to something that is harmful to startup founders and the entire ecosystem. Honestly curious to see what people who are hostile to entrepreneurship are even doing here.
- no_wizard 2y ago
  It’s amazing to me that people think this is what socialism is. This isn’t seizing the means of production.
  - sandeepthroat 2y ago
    [flagged]
  - barbazoo 2y ago
    Wouldn't that be more communism than socialism?
    - no_wizard 2y ago
      The unpolluted definition of socialism is about public (e.g. social) ownership of the means of production. Technically, it’s not mutually exclusive of market systems, simply that participants are socially owned in some form. To be more specific about what I said, the roots of socialism called for the “seizing of the means of production” if governments and capital would not voluntarily convert to some form of social ownership Communism differs in that it takes this a step further advocating not only for social ownership but also the dissolution of of all private property ownership and its corresponding economic role, and distribution, and exchange that allocates products to everyone in the society based on need. For the record, I think communism is a dead end as it flys in the face of human nature. Market socialism might have legs though. I was being a bit tongue in cheek but taxes aren’t inherently socialism. Taxation has been levied under multiple periods of economic philosophy like in feudal Europe or during the age of mercantilism for example. Seems to be a hallmark of highly organized civilizations Something like an employee owned co-op is a valid socialist concept, for example. Social doesn’t automatically mean government. Though communists like Marx believed in revolutionary uprising and those tend to be inherently violent. It’s a shame that the only exposure people have to any form of socialist ideas is via Marx.
occz 2y ago
The article mentions the existence of such a tax.
deleted 2y ago
[deleted]
Aloisius 2y ago
Norway already has an exit tax which levies a 37.84% tax on unrealized gains. The "easy fix" isn't working for some reason. Perhaps a one-time tax is still preferable to an ongoing one.
- exe34 2y ago
  you can also do what America does, if you're a citizen, you get taxed on your gains worldwide.
cscurmudgeon 2y ago
Law != justice. Else, you won't have the concept of unjust laws.
- exe34 2y ago
  any law I agree with is justice though, almost by definition.

bryanlarsen 2y ago

> This creates a perverse scenario where business owners must extract dividends or sell shares every year just to cover their tax bill. With dividend and capital gains taxes at around 38%, you need to withdraw approximately 1.6 million NOK to pay a 1 million NOK wealth tax bill. Why wouldn't you just take a loan against the assets? A few percent of interest is a lot cheaper than 38%. In Canada you used to have to pay taxes on unrealized option gains, standard procedure was to take a loan to pay taxes. If the options gains disappeared, you'd use your next years tax refund to pay back the loan.

SiempreViernes 2y ago
If they took a loan then they would have to stay and waste this perfectly good excuse to do what they wanted to do anyway.
ivanche 2y ago
And how would they pay back a loan?
- vidarh 2y ago
  If their business grows at a rate higher than interest, there's no reason why the bank wouldn't be happy to add the interest to the loan. If their business is growing at a rate lower than interest, it's a poor investment and they ought to sell it off and put their money somewhere else. Such as lending it out.
  - ag56 2y ago
    > sell if off To who? How?
    - vidarh 2y ago
      If you can't find a buyer, then close it down and sell the assets. The point being that if your business isn't capable of raising capital equivalent to 1% of its taxable value, then this generally isn't a reasonable business. The valuation for tax purposes of unlisted companies is the taxable valuation of the company assets excluding goodwill [1]. In practice this usually means the taxable value of e.g. a startup tends to be quite low. [1] https://www.skatteetaten.no/rettskilder/type/handboker/skatte-abc/gjeldende/a-4-aksjer--formue/A-4.015/A-4.016/ https://www.skatteetaten.no/rettskilder/type/handboker/skatt...

jplrssn 2y ago

Not surprising that an Atlas Shrugged reading entrepreneur dislikes taxation. But government services cost money, and by other accounts [0] Norway are doing pretty well: Norway performs well in many dimensions of well-being relative to other countries in the Better Life Index. Norway outperforms the average in jobs, work-life balance, education, health, environmental quality, social connections, civic engagement, safety and life satisfaction. [0] https://www.oecdbetterlifeindex.org/countries/norway/ https://www.oecdbetterlifeindex.org/countries/norway/

SiempreViernes 2y ago
Careful, did you pay him the three dollars it costs to quote his text?!
jjtheblunt 2y ago
Does Norway perform well in various well-being metrics essentially because Norway is extremely oil rich? (I don't pretend to know the answer, and ask because I don't see how to figure that out)
- mediaman 2y ago
  Yes, they're just a petrostate. Over half their economy is oil and mining.
  - currymj 2y ago
    they separate out oil activities in their national accounts. “Mainland Norway” GDP is also not bad compared to neighboring countries. although it doesn’t measure indirect effects of oil wealth on other sectors. but still, “petrostate” isn’t really accurate.
- jplrssn 2y ago
  It's a good question. If that were the case, I would have expected to also see other oil rich countries at the top of those rankings.

fragmede 2y ago

The references to Atlas Shrugged and the trains not running on time, and the bit about healthcare costs do not bolster any argument against a tax on unrealized gains, so this comes off more as ideologically motivated bit, rather than than an argument against the specific tax. Taxing unrealized gains is really problematic, as anyone in the startup scene who's been granted stock options in a rising startup in Silicon Valley can attest to. Paying a million dollars to the IRS because of AMT means you got a big payday, except for the fact that if you don't actually have a million dollars, you then have a problem. Most people don't have a million dollars to begin with so you can't pay that bill and you take a loan from sketchy loan shark, whole repeating the mantra, 100% of $0 is $0. 70% of a big number is still a big number. Looking at the US, rasing taxes on the rich and doing more against unrealized gains won't happen for at least four years, so we don't have to worry about that, at least.

no_wizard 2y ago
Taxing unrealized gains in a blanket way is bad but a more targeted threshold, such as taxing them when used in loan arrangements in which someone borrows against their holdings to avoid paying taxes on realizing the gains, seems like it would achieve the spirit of such a tax
- Aloisius 2y ago
  Taxing people for going into debt certainly an... interesting idea.
  - no_wizard 2y ago
    That’s not it. That’s too general. Applying a tax when the financial purpose of the loan is solely to avoid paying any taxes on realizing the gains is what I’m talking about. This is demonstrably a vehicle of tax avoidance used by wealthy individuals to avoid taxes on what they would otherwise have to because they would have to sell the asset otherwise
    - Aloisius 2y ago

sandeepthroat 2y ago

[flagged]

SiempreViernes 2y ago

Holy shit, this blog tries to sell me the the right to highlight text! This gotta be the most extreme instance of NFT brain I've ever encountered...

barbazoo 2y ago
You misunderstand. You pay to "collect this highlight to permanently own it", not just highlight it.
Analemma_ 2y ago
It's hilariously self-defeating how I'm encountering this """"feature"""" for the first time on an article complaining about taxation. Like, you might have done a better job convincing me of the evils of government, if it wasn't directly alongside your vision of an ultra-capitalist nightmare hellscape where I have to pay to highlight text!
zzz999 2y ago
[dead]

DataDaoDe 2y ago

Here's a thought: as long as some countries somewhere have enough freedom to innovate, and entrepreneurs can leave their countries and get to the freer ones, countries like Norway can piggyback off all the innovation from others (or outsource it). I think it would only be a problem if for some reason there was technology that couldn't be copied.

freefaler 2y ago
How will they pay for that technology they need to import when the oil ends? They'd need to barter something for something else.
- asadotzler 2y ago
  How will any oil-dependent finances deal with the end of oil? By saving and diversifying. Norway's got the savings down good, and in a few decades they should start thinking about diversifying. Until then, they're in a great position because they didn't spend all their oil money on weapons and instead put it into savings for their people.

freefaler 2y ago

This is a bad solution to taxation. It brakes the long-established tax practice of "realization principle". Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price. You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay and if you don't you'll be in big trouble, because you owe the money to the government. So independently of your own actions & impossible to predict you will need to plan for this expense. How many homeowners and rentiers would like that? The "realization principle" in tax law specifies that income is not subject to tax until it is "realized" through a taxable event, such as the sale or exchange of an asset. In the US this was established in early 20th-century U.S. Supreme Court cases such as Eisner v. Macomber (1920). In this case it was established that mere appreciation in value does not constitute taxable income until a sale or exchange occurs. Europe is not very business friendly. This regulation will make creating businesses even harder. When governments need more revenue they need to create more opportunities to create that revenue, not squeeze the current business tighter and tighter. Startups are risky, adding additional risk would just kill more of them sooner. BTW, it's easy to fix "loan against my equity" evasion by classifying the "money has been loaned" as a "realization" event.

HPsquared 2y ago
The other thing is what happens when the notional value goes down a year later? Do they get a tax refund?
- freefaler 2y ago
  At most you'd get a rebate of your future tax payment as is the current practice.
- novok 2y ago
  Usually, you get a credit or deduction that can only apply to future tax liability in the same category. Ex: Capital losses are stuck with capital gains in the USA and can only be applied to $3000 of your income per year otherwise. These rule systems are usually incredibly self-serving.

mediaman 2y ago

Norway doesn't care. It is a country with a reputation for good governance and northern-European economic strength. But economically, it is a country that is largely a gas station: like a democratic Russia with more competent governance. Over half its economy is based on oil and mining. It has failed to develop meaningful economic diversification, and, because it has wisely banked so much of the proceeds of its oil (over US$300k per capita), there's not a lot of pressure to adapt. Norway will not be a center of innovation anytime soon, except in oil-related fields. Eventually, as oil gets replaced as a source of energy, they may feel more pressure to change. But for now, they suffer from a more sophisticated version of the resource curse. Sweden is an interesting counterexample, which has a lower GDP per capita but a much more diversified economy. Sweden abolished a wealth tax they used to have almost 20 years ago.

formerly_proven 2y ago
In a nutshell, Norway can afford to have some mildly self-sabotaging economic policies. The rest of europe absolutely cannot (but that won't stop them, just like with rent control).
wrp 2y ago
Is this tax because the state needs the money or is it social engineering?
- psd1 2y ago
  All tax regimes, including zero tax, are social engineering.
msoad 2y ago
Norway has a good oil refinery industry though. They refine oil from other places because they're so good at it.
vidarh 2y ago
Over half of the value of exports is oil and mining, but oil production, mining and quarrying directly employ only about 23,000 people, compared to 190,000 in manufacturing for example. Because such a large portion of the oil proceeds are banked, it also distorts the rest of the economy far less than it otherwise would. Unless you live in very specific parts of Norway, you can go your entire life with hardly any exposure to the oil industry directly, or secondary interactions with major suppliers to the oil industry.

digibeet 2y ago

Is this satirical? If it is, well done you could've fooled me with the whole Norwegian perspective. If it isn't, damn how much of a caricature can you be.

seryoiupfurds 2y ago

If you ask a socialist to describe their ideal world, it is one in which everyone is equally poor. They see "taxing the rich" first and foremost as punishing an ideological enemy, with little thought given to actually maximizing the tax revenue they can collect from them over time.

asadotzler 2y ago
If you build strawmen it's easy to knock them down. Socialist mostly want a floor so people don't starve to death or lose their roof to medical bills. That floor would be quite easily to establish at a comfortable life for 10 billion people on this planet while still allowing for more than enough many times over millionaires.
- seryoiupfurds 2y ago
  And yet socialist countries starved millions, and their only periods of relative prosperity were when they loosened their ideology and allowed limited market reforms.

j7ake 2y ago

It’s not surprising, but I don’t think people of Norway care about entrepreneurs so it doesn’t matter.

vidarh 2y ago

I've started several companies in Norway. When I moved to the UK, the wealth tax was not even remotely a consideration, even though my shares were at the time valued in the millions - we moved because getting the size investment we needed to grow in Norway was too hard at that time. Yes, it can be a challenge for fast-growing startups where the secondary market is not very liquid, and is something people need to be aware of. It's not generally a major problem, in that if you can't find ways of structuring deals in ways that allow for ensuring the founders can afford the tax bill, the company just isn't doing very well.

karencarits 2y ago
Note that the total tax burden has, at least seemingly, increased significantly under the current government [1]. So the conditions may have changed [1] https://www.nho.no/tema/privat-eierskap/ny-menon-rapport-kraftig-okning-i-norsk-eierbeskatning/ https://www.nho.no/tema/privat-eierskap/ny-menon-rapport-kra...
- vidarh 2y ago
  It's a creative presentation that presents it in terms of percentages of taxation of ownership while assuming most wealth tax would be paid with dividends (which makes sense in a mature company, not in a startup, where you might be more likely to find other approaches). It's not changed enough to make much difference from when I dealt with it.

karencarits 2y ago

Please note that the main criticism in the Norwegian debate is currently how this kind of taxation discriminates Norwegian ownership and gives a disadvantage in terms of competition, in comparison to foreign business owners

greyw 2y ago

The funniest part about Norway rising the wealth tax rate so extremly is that bow revenue from that tax drastically fell. I guess they need to read up on the Laffer curve. The second funniest thing is that a huge chunk of rich norwegiens left for Switzerland a country, one of very few, that also has wealth taxation on all assets. The difference is only that its an order of magnitude lower.

zorobo 2y ago

I’m okay with taxes on unrealized gains if I can get money from unrealized losses (and not just tax credits).