Does the Wealth Tax Kill Jobs?

35 Pages Posted: 13 Oct 2020

See all articles by Marie Bjørneby

Marie Bjørneby

affiliation not provided to SSRN

Simen Markussen

University of Oslo - Ragnar Frisch Centre for Economic Research

Knut Røed

University of Oslo - Ragnar Frisch Centre for Economic Research

Abstract

Fueled by increasing inequality and rising fiscal deficits, the interest in wealth taxation has increased over the last years, both in the public debate and in academia. Yet, knowledge about the behavioral effects of a wealth tax is limited. We utilize rich Norwegian register data and a series of tax reforms implemented between 2007 and 2017 to study how a net wealth tax imposed on owners of small and medium sized businesses affects their firms' investment and employment decisions. Identification of causal effects is based on a generalized difference-in-differences strategy.We find no empirical support for the claim that a moderate wealth tax adversely affects investments and employment in firms controlled by the taxpayers. To the contrary, our results indicate a positive causal relationship between the level of a household's wealth tax and subsequent employment growth in the firm it controls. The rationale behind this result appears to be that the tax value of a given wealth can be reduced by being invested in a non-traded firm, and that this incentive becomes stronger the higher is the wealth tax.

Keywords: wealth tax, capital taxation, labor demand, investment

JEL Classification: H21, J23, G11

Suggested Citation

Bjørneby, Marie and Markussen, Simen and Røed, Knut, Does the Wealth Tax Kill Jobs?. Available at SSRN: https://ssrn.com/abstract=3708628 or http://dx.doi.org/10.2139/ssrn.3708628

Marie Bjørneby (Contact Author)

affiliation not provided to SSRN

No Address Available

Simen Markussen

University of Oslo - Ragnar Frisch Centre for Economic Research

Gaustadalleen 21
N-0317 Oslo
Norway

Knut Røed

University of Oslo - Ragnar Frisch Centre for Economic Research

Gaustadalleen 21
N-0317 Oslo
Norway

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