Wealth Taxes Result in Rich People Fleeing, Turns Out

By Liz Wolfe

Friday, May 26, 2023

 

If your net wealth is approximately $135,000 or more and you live in Norway, you've long been subject to a 0.85 percent wealth tax. That rate has, as of this year, been hiked to 1.1 percent by the center-left government, and even more gobs of cash will be taken from rich people worth roughly $1.8 million, who will be taxed at a rate of 1.3 percent.

 

Unfortunately for the Norwegian lefties—and their American counterparts who argue for similar taxes to be instituted here—this wealth tax hasn't really generated the revenue they'd expected. It has instead resulted in rich people boarding their superyachts and leaving those fjords behind forevermore.

 

Per the Norwegian newspaper Dagens Næringsliv, 30 of the country's multimillionaires and billionaires left the country last year in advance of the wealth tax hike. "This was more than the total number of super-rich people who left the country during the previous 13 years, it added," noted The Guardian. "Even more super-rich individuals are expected to leave this year because of the increase in wealth tax in November, costing the government tens of millions in lost tax receipts."

 

The research department for Statistics Norway admits the same in a 2021 paper: "The tax revenue from wealth taxation is modest, only approximately 15 billion NOK per year, which corresponds to around 1.1 percent of the total tax revenue and 0.4 percent of GDP." (Other gems: "The richest Scandinavians keep a substantial part of their wealth in offshore tax havens. The wealth of the top 0.01 of Norwegian households increases by about 25 percent if offshore wealth is included.")

 

Many have moved to Switzerland, taking a leaf out of the book of recently deceased music legend Tina Turner, who never officially gave up her U.S. citizenship, probably to avoid having to fork over the hefty exit tax (a 23.8 percent on worldwide assets) our own country imposes. Norway's most-taxed individual, billionaire Kjell Inge Røkke, recently moved to Lugano, costing Norway the equivalent of almost $16 million in lost tax revenue annually. Since 2008, Dagens Næringsliv estimated that Røkke has been forced to cough up the equivalent of $135 million. Another billionaire, Tord Ueland Kolstad, who just moved to Lucerne, mournfully told the Norwegian broadcaster TV 2: "This was not what I wanted, but the toughened and increased tax rules of the current government means that I, as the founder and responsible owner, have no choice."

 

In other words, wealth taxes work exactly as libertarians warned: They generate far less revenue than anticipated and result in the ultra-rich hopping to fairer locales that don't see them as cash cows to milk.

 

As for our own expats, like Turner, if they haven't given up their U.S. citizenship, they're hit with privacy-eroding requirements like the Foreign Account Tax Compliance Act (FATCA), which forces foreign banks to report to the U.S. government assets held by Americans. Expats from this country also get hit twice by the taxman: once by the government of their country of residence, and once by the U.S. government, in a move that is out of step with how most other places treat their deserters. It's no wonder a high-net-worth individual like Turner never formally renounced her U.S. citizenship but took Swiss citizenship with the "intent to lose her U.S. citizenship," seemingly to avoid the exit tax.

 

Whether it's wealth or exit taxes, FATCA or other intrusions, people behave in predictable ways regardless of where they were born: They tend to want to preserve both their money and privacy to the fullest extent possible.

 

Norway's learning that the hard way.