r/NoStupidQuestions • u/Discontitulated • 1d ago

Governments say they can't tax the super wealthy more because they'll just leave the country but has any first world country tried it in the last 50 years?

It would be interesting to see how raising taxes on the super wealthy actually affected a first world country's tax revenue and economy.

Are our first world economies really so fragile the rely on the super wealthy and their meager tax revenue?

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u/ILikeToDisagreeDude 1d ago

The richest people in Norway have fled, not only startups.

Do not copy our model. It sucks. And this is coming from someone who isn’t rich even…

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u/Chijima 1d ago

It's not as easy as "do not copy". Every country should copy it at once, but doing it alone is heavily punished.

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u/keithps 1d ago

There will always be some country willing to settle for scraps. Look at Ireland and corporate taxes, for example.

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u/Chijima 1d ago

There used to be armies for that exact purpose.

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u/OneHellOfAVibrato 1d ago

I have a lot of issues with using the military to enforce economically detrimental policies on independent nations.

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u/cagefgt 1d ago

Typical commie behavior. Let's kill innocent people because their governments wants to promote innovation and investment.

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u/ZamiiraDrakasha 1d ago

Not kill them, but force them to pay their due.

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u/fob4fobulous 1d ago

Or what? First on the wall?

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u/Ready_Direction_6790 20h ago

Yeah that's a great idea.

Lets just carpet bomb any nation that won't adapt economic policies dictated by the US.

Don't see any problems with that

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u/ElectronicCut4919 1d ago

You think what Ireland did is settling for scraps? They understood what they're supposed to do perfectly. Create something from nothing. Just having the right regulations will attract hundreds of billions. Let the others fall for populism.

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u/AntiqueCheesecake503 1d ago

Every country should copy it at once, but doing it alone is heavily punished.

Are you willing to have your country threaten war over it? Because that's how you get every State to adopt a policy when those States don't want that policy. Or you recreate North Korea and Cuba through purposeful exclusion (which still hasn't actually succeeded).

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u/cagefgt 1d ago

He is, apparently.

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u/[deleted] 1d ago

[deleted]

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u/AntiqueCheesecake503 1d ago

The assumption is that rich States want it, and poor States would see it as an opportunity to attract foreign capital, producing capital flight from rich States. Rich States then have two options to use on poor States to get them to want to do it.

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u/GeoLaser 1d ago

I did not see that at all I think you are wrong about that but I appreciate the context and idea.

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u/ILikeToDisagreeDude 1d ago

Wrong. It literally sucks and hurts small businesses too, not only the rich owners. A business can literally lose money and the owners can have zero money in their bank accounts and then get slammed with a huge tax bill because of the company’s “worth”. And remember a company can be worth a lot just because it has potential - not because it has a ton of money.

And the worst part, foreigners with companies in Norway don’t have to pay..

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u/Durtonious 1d ago

It sounds like it needs to be more carefully thought out. Obviously what you describe is not ideal, but it ought to be the foreign companies paying more and the smaller ones getting the breaks. It's not fair when a small business has to compete with the "potential" a large (and especially foreign) business would have in its place.

The problem with these sweeping changes is that even with the best ideas, you have to make concessions to the "other side" to pass it, and those small concessions often (intentionally) break the whole system. Then the other side can point to the failure and say "look it doesn't work! Vote for us instead!"

Repeat that ad nauseum and you have the last ~50 years of liberal democracy.

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u/ILikeToDisagreeDude 1d ago

Yes. Exactly. I’m all for taxing the rich, but let’s do it properly and in a fair way for everyone. The Norwegian model ain’t it.

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u/Soft_Walrus_3605 1d ago

then get slammed with a huge tax bill because of the company’s “worth”. And remember a company can be worth a lot just because it has potential

You're going to have to explain how/who values such a company, because this makes no sense

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u/presentation-chaude 1d ago

Companies are valued based on future profits, not past or current ones.

Companies that have a small client base (hence low revenues) but fixed costs (e.g. tech companies) and have potential to reach many more clients are generally valued at a metric ton of dollars. But might be burning cash now.

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u/ILikeToDisagreeDude 22h ago

Snapchat was a great example of this. Worth billions but made zero, but it could earn a lot one day. Which it now does when it utilised its potential!

Snapchat would probably have failed if it was started in Norway because investors would have fled years ago before they reached their potential to generate income.

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u/racalavaca 19h ago

Well I'd argue what's wrong in that scenario is the speculative nature of modern capitalism... Obviously if you try and act like an American tech startup grossly overvaluing and leveraging stocks and shit to raise "capital" then you are going to be punished for it, as in my opinion everyone should be.

The system is just bullshit and you all just decided to do something about it first.

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u/ILikeToDisagreeDude 18h ago

Agree that the system is bullshit and needs rework… problem is that the people who can actually do the rework benefits from how the system works now, so it will never happen.

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u/racalavaca 18h ago

Well I get how you feel, I really do, but believing that it will never happen and thus never doing anything about it is exactly what they want and how they want you to feel... yet places like your country are proving that is not true.

Change is possible, it just happens in small ripples.

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u/JSchade 1d ago

Didn’t you read what they just said? Th-

ILikeToDisagreeDude

Actually, you are completely right. We should tax the poor and give to the rich actually, and the government should bend over and let the ultra wealthy screw them as much as they want until we have a anarchocapitalist uptopia

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u/ILikeToDisagreeDude 1d ago

You clearly don’t understand… I’m not saying don’t tax the rich! I’m saying don’t copy our model! Because it hurts everyone besides the rich, since they have the resources to apply workarounds, while we normal people don’t. And, it’s poorly thought through and is quite frankly stupidly implemented.

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u/JSchade 1d ago

Oh wait you were being serious? I saw your username and was just trying to be funny.

Anyway not that its feasible, but every nation adopting the policy at the same time probably would work which is what the original guy was saying

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u/ILikeToDisagreeDude 1d ago

No, it won’t. The model is horrible and doesn’t work. It affects the non-rich more than the rich. A whole new model needs to be invented.

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u/RectangularCake 1d ago

Please do not copy, the tax regulations are structured in such a way that if you don't manage to leave before your start-up is valued at whatever to get the necessary funding to grow, you'll be trapped in the country as the taxes may reach 115% of realized gains down the road if you decide to leave. Adding to the topic, foreign investors does not have to pay the tax at all; thus, companies are sold bit by bit to foreign investors to pay taxes of evaluations based on future potential. In the end, there will be no domestic ownership at all.

This system is killing innovation and start-ups.

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u/ReptAIien 1d ago

Every country should copy an unrealized gains tax? On who? Imagine if your retirement account earnings were taxed before you even withdrew anything? What a fucking stupid idea.

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u/Serial_Psychosis 1d ago

The average person wouldn't have to worry about unrealized gains tax if it started at say a billion dollars. Its what Bernie sanders has been arguing for for years now

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u/ReptAIien 1d ago

Yeah, until billionaires start offloading their stock portfolios into other assets, tanking the market for those of us that want to retire someday.

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u/Trevor775 1d ago

Please see prisoners dilemma

Prisoner's dilemma - Wikipedia

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u/Chijima 1d ago

Yeah, but that only works in a peaceful, equilateral environment. Which for the last 80 years,we have pretended the (western) international political stage was, but that may change again. Being a tax haven is currently pretty much free for the countries doing it, but that could change.

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u/Trevor775 1d ago

There are over 150 countries, there will always be 1

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u/Stargate525 1d ago

"Ah yes, this thing that's only ever hurt the people who tried it will magically work great if ALL of us do it!"

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u/N7day 1d ago

How?

Quixotic fantasy.

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u/Konvic21 1d ago

But how is the quality of life for the average person? I imagine Norway is still doing pretty good, average person happier than those in the US no?

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u/fdf_akd 1d ago

Norway isn't a good comparison anyway because they are literally sitting on top of oil. If anything, it's a proof that a government can successfully manage natural resources

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u/SagittaryX 1d ago

Well no, the oil is underneath ocean, very few Norwegians are sitting on that.

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u/Smeetilus 1d ago

Cousin Sven was buried at sea

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u/Ereaser 19h ago

Yet living in Norway is really expensive

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u/Dick_Wienerpenis 1d ago

Are you unaware that America has quite a lot of natural resources?

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u/cjsv7657 1d ago

And the government sold the rights to them for fractions of pennies on the dollar. I guess the government didn't say "no taksiebacksies" though.

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u/Dick_Wienerpenis 1d ago

I mean, the rights are leased so they actually have "TaKsIeBaCkSiEs" built in.

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u/cjsv7657 1d ago

I googled it- the payments are a joke but it does expire after 10 years but the BLM can extend it. Something tells me higher up that make the decision are well compensated by the oil industry.

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u/fdf_akd 1d ago

Are those resources nationalized?

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u/Dick_Wienerpenis 1d ago edited 1d ago

We're talking about doing something in the US could be similar to Norway. It doesn't matter how something is now when we're talking about changing things to be similar.

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u/Minimus-Maximus-69 21h ago

And our government has managed them comparatively poorly.

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u/ILikeToDisagreeDude 1d ago

It doesn’t matter, the point is that this tax is making it worse and the income it generates is like 5 days of revenue from our oil fund. So it’s just a drop in the water - but causes great damage to Norwegian owned businesses as they have to take out extra dividends every year so the owners can pay their wealth tax. And where do you think that dividends is taken from? From potential growth for the business or benefits for their employees…

And, if you’re foreign and own a business in Norway you don’t have to pay this tax! Which is unfair.

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u/RequiemAA 1d ago

The obvious solution would be to offer a personal wealth tax break tied to your direct contributions to employee welfare/social programs.

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u/ILikeToDisagreeDude 1d ago

Not sure if that will pan out properly in Norway since we’re covered in most ways already. The ideal solution would look more at property tax (where they put most of their wealth) for the owners and employee taxes rather than company value for the companies. This way foreign or not will be taxed the same and the rich pays taxes based on their property values rather than “Wall Street says my company is worth billions even though we make zero dollars and have debt flowing out our ears” values that tend to hurt startups and smaller businesses the most.

Edit: employee taxes are what the company pays per employee, not something the employees have to pay. It’s already there and could be increased 0.4% or something that could cover for the owners wealth tax.

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u/Dx2TT 1d ago

Norway is the number for happiness or the second, so their wealth tax is obvious terrible... for the super rich.

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u/hauntedSquirrel99 15h ago

It's not actually that bad for the super rich, they can keep their money in a fund with a decent return.

It's startups that suffer from it.

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u/nobono 23h ago

Do not copy our model.

I wouldn't say that. The wealth tax "discussion" in Norway is skewed by interest parties and media, hyping the "tragedy" that isn't quite true. Dagens Nærlingsliv had an interesting article (paywall) earlier this month where this was pointed out.

I translated the most relevant bits:

Looking at the total wealth tax for 2022, which is the latest year with complete figures, 22 out of 37 countries tax wealth more heavily than Norway. Israel is the country with the highest wealth tax. It is followed by the United Kingdom. The overall level of wealth tax in the UK is 3.5 times higher than it is for us Norwegians. Wealth is also taxed far more heavily in the United States than in Norway. Measured as a percentage of value creation, the total wealth tax in the U.S. is 2.6 times higher than in Norway.

Even in Switzerland, where many wealthy Norwegians have relocated, the total tax on wealth is almost twice as high as in Norway. It is natural to question why Norwegians who believe the wealth tax is too high move to a country where the total wealth tax is even higher.

The answer is that OECD statistics only show what an average citizen of a country pays in taxes. Many countries, including Switzerland, offer special arrangements for wealthy foreigners. Foreigners moving to Switzerland can negotiate their own private tax agreements, which are confidential and therefore cannot be compared with official statistics.

Looking at official statistics, the annual tax on net wealth for businesses and individuals is significantly higher in both Luxembourg and Switzerland than in Norway. In Luxembourg, this tax is over four times higher than in Norway, while in Switzerland it is more than twice as high.

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u/ILikeToDisagreeDude 22h ago

Yes, the discussion is very skewed and I have no doubt that those who fled to Switzerland got a better deal than in Norway for sure . But it’s still not a good law by design and most rich people I’ve listened to have no problem paying taxes, but how it’s calculated and paid is what they don’t agree with. Many say they are happy to pay more taxes if they are taxed differently. So it’s about the details that they claim is unfair and bad and they claim to have a better model, but the government isn’t interested in learning and adapting. So it’s probably quite frustrating.

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u/Shiny-Pumpkin 1d ago

So what is the downside of getting rid of the super wealthy? What exactly sucks?

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u/ILikeToDisagreeDude 22h ago

Well, I would be even poorer if they didn’t give me a job, a job that generates income for my municipality, that put asphalt on my roads and runs schools for my kids etc. Rich people have at some point taken a risk to create something for themselves that helps the community also that most people haven’t. (Not including generational wealth)

We’ve had rich people basically funding entire municipalities here and when they fled the country, schools and health care offerings are directly impacted.

Innovation should be celebrated, not taxed out of existence!

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u/hauntedSquirrel99 15h ago

The part where small and medium sized businesses get relocated out of the country.

Employment is generally helpful for quality of life.

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u/lIllIlIIIlIIIIlIlIll 23h ago

The money. Super wealthy people having super mansions have to hire a super staff (jobs). They buy goods to fill their super mansions (local economy). And although it's marginal, they still do pay some tax. If they leave, then everything just goes down to 0.

IIRC the issue was Norway pulled their unrealized gains tax without first ensuring rich people won't just flee. Now Norway amended their exit tax so the rich can't just dodge everything.

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u/kkjdroid 1d ago

And yet your people are literally the happiest of any country.

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u/PinkCadillacDoughnut 1d ago

Different cultures have different perspectives of happiness. It’s not a good measure.

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u/ILikeToDisagreeDude 1d ago

Money doesn’t buy happiness. We rather put vitamin D in our milk in order to stay happy. We have welfare and that isn’t because we have wealth tax. The income generated by the wealth tax is just a drop in the water for our general income and causes more harm than good.

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u/tml25 1d ago

Not because of the wealth tax or the exit tax. The exit tax is new since this year and targets pretty much everyone that would work in an early stage start up, not simply rich people. Its a bad policy.

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u/kkjdroid 1d ago

I'm not saying that people are specifically super stoked about wealth taxes, but they like the amenities that those taxes are supposed to fund.

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u/tml25 1d ago

In this case it's not like that. The new exit tax is widely unpopular and it's just new this year. Its not like our welfare and amenities were funded by it. Not all tax policies are good or worth it in norway. I'm happy to pay the 30+% income tax and capital gains tax, but not the exit tax or the wealth tax in its current form.

The current government is set to lose next year.

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u/Moth1992 1d ago

can you elaborate on why it sucks?

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u/Historical_Tennis635 1d ago edited 1d ago

I can elaborate to you on why an unrealized gains tax sucks as someone in the startup scene. First, the value of a stock especially for a startup is partly based on the potential of the company in the future. So you can have someone whose company becomes worth $10 million on paper, but hasn’t generated profit, or potentially hasn’t even generated revenue(imagine a biotech startup for instance trying to bring a product to market). So this person could be forced to sell some ownership of their company to pay the tax. So imagine they sell 30% to cover that tax, then imagine the company balloons up to $100 million because their product is looking like it will successfully get through regulatory agencies, but still has another 2 years before they can actually bring it to market so they still have no revenue, and then bam they have to sell another 30% of their ownership in the company. This also significantly reduces the likelihood of people investing in startups at all in the first place, hurting innovation.

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u/Moth1992 1d ago

oh so you pay tax on predicted value not actual revenue. I can see why that would cause issues, thanks for explaining!

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u/ILikeToDisagreeDude 1d ago

I can try, but I’m not a financial guru nor rich. The essential of why it doesn’t work is:

It doesn’t affect foreign people who runs businesses in Norway, making it unfair for locals who wants to build something in and for Norway.

It affects the non-rich also, meaning that people with little to no money have to take up loans in order to pay the tax because on paper, they are rich.

it goes on working capital also. Meaning that if you run a small business, digging with an excavator, fully paid for, you will pay taxes on that excavator- every year because it’s “worth” something.

Owners of companies takes out dividends each year, even in years where they have lost money, in order to pay for their personal wealth taxes. This money could have been spent to save or build more staff, which again leads to more tax income for the government. Even more than the wealth tax provides.

the government basically said “we’re coming to get you, rich people!!!” And started talking about taxes that made no sense, so the rich fled the country scared of what silly things the government would do. Imagine being in their shoes where your own government say they want to peg you dry? This led to financial disruption in many municipalities that relied on their tax income.

The income it generates is pennies in the big scheme of things, but scares away the innovation in our country which means less tax income because of fewer businesses.

So basically the law looks at the splash and not the ripple effect it creates. Or the earthquake and not the tsunami to put it in better words…

I’m not a financial advisor and I might interpret some things wrongly.

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u/Moth1992 1d ago

thankyou for explaining, it makes sense

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u/Fresh-Wealth-8397 1d ago

We figured this out in the usa a long time ago. The only way to get out of paying us taxes is to give up your us citizenship then you can never ever come back even for a visit and your company can no longer do business in the usa.

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u/Ready_Direction_6790 19h ago

Wut, the US just bans Entry for anyone that renounces their citizenship ?

That's crazy, I had no idea they were that draconic. Know a few people that renounces the citizenship of their home country and they all can still visit home without any issues

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u/Fresh-Wealth-8397 13h ago

Blood in blood out. You want the advantages of america then you pay your share

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u/SPorterBridges 1d ago

https://x.com/hagaetc/status/1857676671572435016

The founder of @dune on X:

So I tried to build a tech company from Norway and here’s what happened:

Two years of building without almost any money/funding, better part of a year without salary

Raise VC and become one of Norway’s first unicorns

Face unrealized gains wealth tax bill of many x my annual net salary. ofc the company is loss making and all the investors have preference shares so I can’t take out any money.

Call out publicly that this does not make sense. Independent of level, taxation needs to happen when you actually make money.

I move to Switzerland because no politician cares/listens.

I still don’t get any tangible and sensible answers to my criticism of unrealized gains tax, BUT I do get put up on the “wall of shame” at the socialist parties offices…

I’m Norwegian and I love Norway but the socialist politicians are taking the country down a dark path. It’s a real life Atlas Shrugged.