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Taxing unrealized gains has caused an entrepreneurial exodus in Norway

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Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#141

Post by bryanlarsen »

ivanche wrote: post #23
bryanlarsen wrote: post #3

> This creates a perverse scenario where business owners must extract dividends or sell shares every year just to cover their tax bill. With dividend and capital gains taxes at around 38%, you need to withdraw approximately 1.6 million NOK to pay a 1 million NOK wealth tax bill. Why wouldn't you just take a loan against the assets? A few percent of interest is a lot cheaper than 38%. In Canada you used to have to pay…

And how would they pay back a loan?

Standard practice in America is to not pay them back, to hold the loan until death. The estate pays off the loan.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#142

Post by tim333 »

mediaman wrote: post #26

Norway doesn't care. It is a country with a reputation for good governance and northern-European economic strength. But economically, it is a country that is largely a gas station: like a democratic Russia with more competent governance. Over half its economy is based on oil and mining. It has failed to develop meaningful economic diversification, and, because it has wisely banked so much of the proceeds of its oil (…

I bet they do care. "Reputation for good governance" is usually a cultural thing. I doubt they want to turn into Venezuela.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#143

Post by freefaler »

vidarh wrote: post #113
freefaler wrote: post #98

Earlier quoted context omitted.

Taxes are levied on economic activity. In capitalist systems the main economic activity is created by companies by direct tax on profits or direct tax on labor they buy (wages for the workers). Count the number of companies created and grown in the last 20 years and see the trend. If it's going down your tax revenues will decrease. So indeed number of companies created is a very good proxy for future tax revenues.

Taxes are levied on all kinds of things that are not economic activity. Including, in Norway, on ownership. > Count the number of companies created and grown in the last 20 years and see the trend. If it's going down your tax revenues will decrease. So indeed number of companies created is a very good proxy for future tax revenues. Even if it was that simple, that does not provide even a correlation - much less causa…

Yes, I agree with you that taxes can be levied on property too, but to pay for those taxes economic activity is needed. I don't see how it's different though.

Companies and people need to generate money to pay for these. Profits are created by economic activity. When you increase the risk for companies to die by creating a cost that is not easily planned you decrease your future revenues. just basic math...

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#144

Post by tharmas »

vlovich123 wrote: post #103
thrw42A8N wrote: post #62

Earlier quoted context omitted.

Norway is uniquely located among those, though.

It’s uniqueness is more how they manage their petrol dollars through a government investment fund rather than subsidizing government services directly or giving back the money to buy popular support like you see in Alaska.

Yes, well managed indeed! Far superior to what the Canadians did with their oil wealth. The Norwegians negotiated a good price for their oil. The Canadians practically gave it away. https://thetyee.ca/Series/2012/08/01/Norway-Petro-Wealth-Ser...

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#145

Post by devchix »

freefaler wrote: post #25

This is a bad solution to taxation. It brakes the long-established tax practice of "realization principle". Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price. You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to…

> Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price.

This is exactly how state property tax is assessed in the US. You're not taxed on just the difference but the entire assessed value of the house. There have been cases of seniors who have bought and lived in their homes for 30, 40 years having to sell because they could not afford the tax after the value of their home went into the stratosphere. Similarly for poorer neighborhoods experiencing gentrification when property value shot up beyond what the original buyer paid, and they are forced out. When objections are raised on how a wealth tax would be infeasible to administer, my rejoinder is local governments levy it all the time, on the middle class, they just call it a property tax.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#146

Post by exe34 »

Aloisius wrote: post #32
exe34 wrote: post #2

easy, impose an exit tax. capital doesn't need to be free when it's trying to evade justice. you pay tax on unrealised gains the same way the rest of us do when facing an unexpected bill that we can't afford - you sell your stuff.

Norway already has an exit tax which levies a 37.84% tax on unrealized gains. The "easy fix" isn't working for some reason. Perhaps a one-time tax is still preferable to an ongoing one.

you can also do what America does, if you're a citizen, you get taxed on your gains worldwide.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#147

Post by slowmovintarget »

mikrl wrote: post #61
dzhiurgis wrote: post #46

Earlier quoted context omitted.

How do you pay taxes for something that doesn't exist with money you do not have?

I think the rationale is that if you have unrealized gains, there is a high likelihood that you are well off, and can therefore be pressured into reifying your economic potential into a resource that the government can appropriate (ie money) It’s not a straightforward tax like income tax, it’s more of a class based tax that has some aspects in common with income / CG taxes. It makes sense when you consider that the c…

It makes zero sense when you consider that the stock market is how most people save for retirement.

What you're saying is people aren't allowed to save for retirement, and you have to tax them every step of the way, destroying that savings because they might be well off due to owning stocks. That's not reasonable.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#148

Post by m463 »

mediaman wrote: post #26

Norway doesn't care. It is a country with a reputation for good governance and northern-European economic strength. But economically, it is a country that is largely a gas station: like a democratic Russia with more competent governance. Over half its economy is based on oil and mining. It has failed to develop meaningful economic diversification, and, because it has wisely banked so much of the proceeds of its oil (…

I thought sweden did the same sort of thing until some famous person had > 100% tax rate and got politicians voted out in outrage.

EDIT: stackoverflow question:

https://skeptics.stackexchange.com/questions/15235/did-swedi...

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#149

Post by mikrl »

slowmovintarget wrote: post #147
mikrl wrote: post #61

Earlier quoted context omitted.

I think the rationale is that if you have unrealized gains, there is a high likelihood that you are well off, and can therefore be pressured into reifying your economic potential into a resource that the government can appropriate (ie money) It’s not a straightforward tax like income tax, it’s more of a class based tax that has some aspects in common with income / CG taxes. It makes sense when you consider that the c…

It makes zero sense when you consider that the stock market is how most people save for retirement. What you're saying is people aren't allowed to save for retirement, and you have to tax them every step of the way, destroying that savings because they might be well off due to owning stocks. That's not reasonable.

In Canada we have two types of nonstandard tax accounts, an RRSP and a TFSA.

The RRSP is what I think is called a 401K in the USA: you put money in pre-tax and pay income tax when you liquidate/withdraw in the future.

The TFSA you put post-tax money into and pay no tax to withdraw, including CGT, though there is a maximum capacity.

I would imagine if this tax came to Canada, RRSPs and TFSAs would be exempt from it.

My brokerage lets me open RRSP, TFSA and a standard cash/chequing to buy securities, but CGT only applies to the cash account which I don’t use as I haven’t maxed out the others. If I was maxing out the others, I’d have enough slack to do the financial dance, at least in the governments eyes…

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#150

Post by slowmovintarget »

mikrl wrote: post #149
slowmovintarget wrote: post #147

Earlier quoted context omitted.

It makes zero sense when you consider that the stock market is how most people save for retirement. What you're saying is people aren't allowed to save for retirement, and you have to tax them every step of the way, destroying that savings because they might be well off due to owning stocks. That's not reasonable.

In Canada we have two types of nonstandard tax accounts, an RRSP and a TFSA. The RRSP is what I think is called a 401K in the USA: you put money in pre-tax and pay income tax when you liquidate/withdraw in the future. The TFSA you put post-tax money into and pay no tax to withdraw, including CGT, though there is a maximum capacity. I would imagine if this tax came to Canada, RRSPs and TFSAs would be exempt from it. M…

In the U.S. those are 401K and a Roth IRA. Both have contribution limits low enough to make them not enough to retire on.

Did the lawmakers in Norway make such exceptions and adjust for this? Or are they just trying to keep people dependent? Why should we trust Canada or the U.S. to be any better if they tried to put this sort of law in place? There would be loopholes for the very rich (which includes the political class), and everyone else that didn't have the "capital" to leave would be screwed.

If you really want to fix things, tax capital gains from financial instruments (stocks, bonds, options, and all the ridiculous leveraged instruments on top) as regular income, and tax loans taken against such securities. At the same time, tax owned but unoccupied buildings and land, and restrict foreign ownership of real estate (you need disincentives for rent-seeking behavior and land as investment).

So you can still invest to your heart's content, but there's not a perverse incentive to hoard or leverage. If you can make more by building something do that.

But, but, but... those rich people! Stop worrying about people being rich, and stop trying to hand the government ways to confiscate, because every new method for confiscation gets enshrined in perpetuity. Having them crossing this line into imagining what you maybe, perhaps, could have gained in some alternate reality where you took some action, and taxing you based on something that didn't happen is bananas.

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