Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/227293 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13766
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Fueled by increasing inequality and rising fiscal deficits, the interest in wealth taxation has increased over the last years, both in the public debate and in academia. Yet, knowledge about the behavioral effects of a wealth tax is limited. We utilize rich Norwegian register data and a series of tax reforms implemented between 2007 and 2017 to study how a net wealth tax imposed on owners of small and medium sized businesses affects their firms' investment and employment decisions. Identification of causal effects is based on a generalized difference-in-differences strategy. We find no empirical support for the claim that a moderate wealth tax adversely affects investments and employment in firms controlled by the taxpayers. To the contrary, our results indicate a positive causal relationship between the level of a household's wealth tax and subsequent employment growth in the firm it controls. The rationale behind this result appears to be that the tax value of a given wealth can be reduced by being invested in a non-traded firm, and that this incentive becomes stronger the higher is the wealth tax.
Subjects: 
wealth tax
capital taxation
labor demand
investment
JEL: 
H21
J23
G11
Document Type: 
Working Paper

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