Behavioral Responses to the Norwegian Wealth Tax

Abstract

In this thesis I use a bunching design and regression discontinuity to examine how the Norwegian wealth tax affect taxpayers’ portfolio composition. The hypothesis is that taxpayers change the composition of their investment portfolios to minimize or avoid wealth taxation. Using Norwegian tax data from 2009 to 2016 I estimate bunching around the wealth tax threshold and investigate discontinuities in ownership of different asset classes among taxpayers above and below the threshold. I expect to see some degree of bunching below the tax threshold, and to see a discontinuity in ownership of assets with high valuation discounts in the wealth tax system. The results show no evidence for bunching, and no significant discontinuities in ownership of any asset classes. These results implies that taxpayers do not take measures to avoid wealth taxation, which has implications for optimal capital taxation.