Sammendrag
Fueled by increasing inequality and rising fiscal deficits, the interest in wealth taxation has grown over the last years, both in the public debate and in academia. A key concern is that the wealth tax may reduce the amount of capital available to closely held firms and drag down their employment. Yet knowledge about the behavioral effects of a wealth tax is limited. A wealth tax is almost by construction imperfect, as the value of some assets is unobserved. In particular, intangible assets held by non-traded firms are in practice tax-exempt, giving firm owners an incentive to allocate wealth into their businesses, e.g., in the form of (untaxed) hu-man capital investments. 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’ employment. Identification of causal effects is based on a saturated control function approach, fully isolating the influence of tax reforms. Our results indicate a positive causal relationship between the level of a household’s wealth tax and subsequent employment growth in the taxpayers’ closely held firms.
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