Wealth Taxation and Household Saving: Evidence from Assessment Discontinuities in Norway

84 Pages Posted: 3 Dec 2020 Last revised: 9 Nov 2021

See all articles by Marius Alexander Kalleberg Ring

Marius Alexander Kalleberg Ring

University of Texas at Austin - Department of Finance; Statistics Norway - Research Department

Date Written: October 21, 2020

Abstract

I use a quasi-experiment in Norway to examine how households respond to capital taxation. The introduction of a new wealth assessment methodology in 2010 led to geographic discontinuities in household exposure to wealth taxes, along both the extensive and intensive margins. I exploit this novel variation using a boundary discontinuity approach together with third-party reported data on saving behavior. I find that wealth taxation causes households to save more, and that this increase in saving is primarily financed by increased labor earnings. These responses are the combination of small negative effects of increasing the marginal tax rates on wealth and relatively larger positive effects of increasing average tax rates. These results imply that income effects may dominate substitution effects in household responses to rate of return shocks, which has important implications for both optimal capital taxation and macroeconomic modeling.

Keywords: Wealth Taxes, Savings, Capital Taxation, Intertemporal Substitution, Household Finance

JEL Classification: G51, D14, D15, H20, H31, E21, J22

Suggested Citation

Ring, Marius Alexander Kalleberg, Wealth Taxation and Household Saving: Evidence from Assessment Discontinuities in Norway (October 21, 2020). Available at SSRN: https://ssrn.com/abstract=3716257 or http://dx.doi.org/10.2139/ssrn.3716257

Marius Alexander Kalleberg Ring (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Statistics Norway - Research Department ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway

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