Does the wealth tax discourage individual savings? Evidences from Norway

2021

Wealth taxation is a widely debated topic, especially in the context of rising inequality.

Empirical research covering the behavioural effects of this tax is relatively new, and the

results in a Norwegian context are mixed. This thesis provides an empirical assessment

of the effects that wealth taxation has on the Norwegian saving patterns. It estimates

the effect of taxation on individual savings using panel data gathered from Norwegian

tax returns from 2009 to 20016. A fixed-effects study is used to estimate the effect that

paying an amount of tax has on the yearly accumulation of wealth. The analysis results

suggest that for every 10 000 NOK paid on the wealth tax, an individual reduces savings

by 0.225 to 0.2909 log points. Event studies also suggest that the discouragement effect of

the wealth tax may linger for up to 3 years. The results suggest that the substitution

effect is stronger than the income effect regarding the wealth tax in Norway.