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Does the Wealth Tax Kill Jobs?

Marie Bjørneby, Simen Markussen () and Knut Røed ()
Additional contact information
Marie Bjørneby: The Norwegian University of Life Sciences
Simen Markussen: Ragnar Frisch Centre for Economic Research

No 13766, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: wealth tax; capital taxation; labor demand; investment (search for similar items in EconPapers)
JEL-codes: H21 J23 G11 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-10
New Economics Papers: this item is included in nep-acc, nep-eur, nep-lma, nep-pbe, nep-pub and nep-sbm
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