Does a Wealth Tax Discourage Individual Risk Taking? Evidence from Norway

Abstract

The interest in capital taxation has been revived by increasing inequality over the past decades. Norway is one of the few countries persisting with a wealth tax policy, making it an interesting research setting. The wealth tax is assumed to have some distortionary effects on individual behaviour, leading to efficiency losses. Our thesis seeks to further enhance the understanding of the behavioural effects associated with a personal wealth tax. Using administrative data on individual wealth holdings from 2009 to 2016, we therefore address the impact on individual risk taking. The method applied is a regression discontinuity design, exploiting the threshold for wealth taxation. We find no evidence of consistent significant results for individuals in proximity of the threshold, suggesting that the progressive nature of the wealth tax makes the reduction in initial wealth trivial.