Preserving the wealth tax is good conservative policy

The wealth tax plays an important but little-understood role in the Norwegian tax system. It's the insurance we have against loopholes and shifting political winds, which could give the nation's wealthiest a much bigger gift package than zero wealth tax.

It is striking that Civitas Eirik Løkke, in a Chronicle in the Althing, does not mention this feature in a word.

According to Loop and other wealth tax opponents, the argument for removing the wealth tax is simple: The tax is not only negative for value creation. It is also superfluous and unreasonable.

All wealth must be created and taxed from value creation to consumption. 22 per cent in corporation tax and another 38 per cent in dividend tax yields 51.5 per cent in taxes.

If the state has already taken half, it is not obviously reasonable to impose a further tax on wealth -- especially if it additionally prevents value creation.

The tax fixes a vulnerability in the system

One reason to keep the wealth tax is to avoid requiring the country's wealthiest to be zero-tax payers in individual years. But the taxes in individual years are obviously irrelevant to the fairness of the tax system. What matters is whether people, over time, pay a fair share to the community.

A better argument for the wealth tax is that people should pay according to ability. If an ordinary family can pay forty percent in taxes, people with large fortunes can pay more than fifty.

But even if you think the rich can pay more, that's not necessarily an argument for keeping the wealth tax. One might as well raise the tax rates on corporate and dividend taxes or consider a progressive consumption tax.

The best argument for the wealth tax, as I see it, is one that is almost never discussed. The tax addresses a vulnerability in the tax system, created by the fact that rich people can wait to realise value until the day they find or are given a loophole to release tax.

Kjell Inge Røkke, Bjørn Dæhlie and others got such an opportunity in 2022. By moving to Switzerland for at least five years, they could not pay dividends tax on assets earned in Norway over a number of years. For Røkke and Dæhlie, the tax will be 22 per cent, not 51.5 per cent.

Exactly that tax hole was plugged with the exit tax, but a future government can always remove it. Or they could create a temporary tax haven in Norway by reducing or removing the dividend tax, if only for a limited period.

Insurance for the community

It is, of course, an ordinary part of democracy that tax rates go up and down. However, due to the exemption method does this have a bigger bearing on the taxes the richest pay.

Ordinary people have to pay taxes every year. More in some years and less in others. People with large fortunes, on the other hand, can live well for many decades without having to realize values and thus trigger taxes. They have plenty of time and can wait for times to change and taxes to go down.

Some do not calm down med to wait. If billionaires succeed in influencing elections, the gains can be much greater than an ordinary investment. If the dividend tax were removed, the country's richest would dropping 1,500 billion in taxes. It provides a significant incentive to influence elections in the rich's favor.

When we realize that the fifty percent tax can be reduced down to twenty, we are better able to understand the central function of the wealth tax. It is society's insurance against the rich sitting patiently waiting for the opportunity to drop taxes, or use their considerable resources to get their way.

The wealth tax must be paid every year and is calculated on the basis of both realized and unrealized values (albeit imprecisely). You can't get away from it.

Given the risk that a policy shift or the exploitation of unforeseen tax loopholes will drastically reduce the tax burden for the nation's wealthiest, that insurance is very much worthwhile.

It's not an insurance policy we should be paying for regardless of price. If the wealth tax has major negative consequences for value creation, we should rather find other moves to ensure that the rich pay a fair share of tax.

However, there is little evidence that the wealth tax has major negative consequences for Norwegian business, and its harmful effects can be minimised by making changes to it. It is striking that Løkke, like many other opponents of the wealth tax, does not refer to research or good individual examples to strengthen his case.

Good conservative politics

It is difficult to raise enough risk-friendly capital in Norway for companies with a low chance of success. But the wealth tax favors risky investments. An investor who has the choice of investing in a start-up company or in the stock market will get a lower wealth tax in a start-up company than in the stock market. That is because there is a discount for values in unlisted companies.

Perhaps we should go even further in this direction, i.e. keep the wealth tax, but provide rebates for investments in small, new, unlisted companies. It will provide a strong incentive to move the money from foreign exchanges to start-up companies in need of capital.

Unfortunately, such opportunities are left unexplored when people fight against the wealth tax rather than consider how we can solve the specific problems it creates.

Preserving the wealth tax is, in my eyes, good conservative policy. Conservatism at its best is cautious about changing complicated systems, like the tax system. It can be difficult to understand how the different parts are connected, and the rich have strong incentives to create a narrative that works in their favor.