Norway Isn’t Bowing to Threats of Capital Flight

So you think the rich have life easy, do you? Just try telling that to the deep pockets who’ve spent tens of millions buying condos at 432 Park Avenue, the 11-year-old Manhattan luxury tower that once rated as our hemisphere’s tallest residence. Condo owners in the tower have had to put up with “faulty elevators, leaky plumbing, and noise issues.” They’re now suing the building’s operator.

Or consider the plight of those fabulously wealthy souls who’ve had to pay millions to move their mansions off the sandy coast of Nantucket, the one-time hippie refuge that’s become a summer “holiday hot spot for billionaires.” The problem? With climate change raising water levels, seaside homes on this Massachusetts island now have a nasty habit of “falling into the ocean.”

Or contemplate what life would be like if you were a person of means who fell in love with a mega-yacht the length of a football field and just had to be able to call that yacht your own. The purchase sets you back well over $100 million. But now you’ve just realized you’ll be annually paying at least 10% of that purchase price to dock and staff and fuel and insure your oh-so-cute new plaything.

The one saving grace amid challenges like these: Things could be a lot worse. You could be a rich Norwegian.

On this list of the world’s 500 richest, only one Norwegian today appears—in 374th place.

Norway’s wealthiest have faced a wealth tax ever since 1892, and, over the generations since then, no nation in the world has taken taxing wealth as seriously. But that tradition came under a direct challenge just over a decade ago, in 2013, when a new conservative government came into power. Over the next eight years, that government set about cutting Norway’s richest some slack at tax time.

This conservative government, under prime minister Erna Solberg, trimmed down Norway’s wealth tax, eliminated the nation’s levy on inheritances, and slashed the tax rate on incomes. The predictable result: Norwegians with the greatest wealth, a Statistics Norway analysis found, saw the greatest gains.

“The richest have been given 100 times more in tax cuts than the lowest-paid under Erna Solberg,” the Norwegian Labour Party’s Hadia Talik would charge. “If you want less inequality, tax policies have to be distributive. That’s the fairest way and gives a better basis for the country to create value.”

In the 2021 elections, voters would agree. The center-left government they voted into power that year moved quickly to reverse the Conservative Party’s rich-people-friendly tax cuts. By 2023, the top wealth tax rate on Norway’s largest fortunes had risen from 0.85 to 1.1%, just one of a number of moves that distinctly displeased many of Norway’s richest, among them the industrialist Kjell Inge Røkke. Midway through 2022, Røkke announced he was moving to Switzerland.

Other rich Norwegians would follow Røkke out. By 2022’s close, over 30 of Norway’s richest had departed, more wealthy emigres than Norway had seen over the previous 13 years combined. But that exodus would only strengthen the resolve of tax-the-rich progressive lawmakers.

“The wealthiest should contribute more to society,” noted Bjørnar Moxnes, the Red Party leader, “and it’s important that Norway doesn’t let itself be held hostage by billionaires who threaten capital flight.”

Norway’s richest, the finance ministry state secretary Erlend Trygve Grimstad would add, have always had to pay more in taxes to help keep the nation’s world-class public services—including free healthcare—strong and vital.

“Those who enjoy success with this social model,” Grimstad posited, “must contribute more than others.”

Other Norwegians—like the Financial Times economics commentator Martin Sandbu—would directly challenge the case against raising taxes that Norway’s tax exiles were trying to make.

These exiles, Sandbu observed, tend never to say “that they just want to pay less” at tax time. They instead pose as the “geese that lay golden eggs.” They’re only moving, these rich insist, “because the wealth tax forces them to take capital out of their companies to pay it, and that, in turn, is bad for growth, business development, and employment where their companies are based.”

But Norwegian companies, Sandbu countered, show no signs of suffering from a lack of access to capital. The capital these companies need can “come from other sources than the original owners, and it may be precisely this dilution that rankles, especially for self-made entrepreneurs or family businesses.”

Those Norwegian wealthy who feel most rankled, Norway’s current legislative majority believes, do have every right to exit the nation. But they have no right to leave with all the wealth that Norway’s commitment to economic security—for everyone—has helped those rich amass.

How to keep wealthy exiles from jetting off with wealth they should be sharing? Norway’s progressive lawmakers have put together a new “exit tax” that will have wealthy exiles paying a loophole-free exit levy on unrealized capital gains. Exiles will have the option of paying their exit tax in interest-free installments over 12 years or paying the total due, with interest, after 12 years.

These exiles will, of course, have the option of returning home to Norway anytime they’d like. And if they do return, they’ll be reentering what may be the world’s most equal nation. One telling indicator of that equality: the Bloomberg Billionaires Index. On this list of the world’s 500 richest, only one Norwegian today appears—in 374th place.

In a few years, who knows, you might not find any Norwegian on that list at all.