Does the wealth tax discourage individual savings? Evidences from Norway

Abstract

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.