Publication

An Imperfect Wealth Tax and Employment in Closely Held Firm

Forfattere: Bjørneby, Marie, Simen Markussen, Knut Røed

Publisert: 2023

Sammendrag: Fuelled by increasing inequality and rising fiscal deficits, the interest in wealth taxation has grown over recent 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 behavioural 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, for example, in the form of (untaxed) human 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.

DOI: 10.1111/ecca.12456

Referanse: Bjørneby, Marie, Simen Markussen, Knut Røed, 2023, «An Imperfect Wealth Tax and Employment in Closely Held Firm», Economica, Vol 90(358), 557-583

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