Norway has a wealth tax. Now, I’m in favour of a greater role for wealth taxes but, whatever your view, there’s at least one benefit we should all appreciate: lots of data on who owns what.
Recent research delves into this Norwegian data mine and helps us investigate the popular view that those with more wealth build it up by saving more. You might call this the “wealth as the reward for doing the right thing” view of the world. But the research finds it’s nonsense – Norwegians save around 7% of their income, however much they may own.
Despite saving the same proportion as those with much less, those with lots accumulate more. Why? Because we can accumulate wealth by the rising value of assets, such as property and shares. The wealthier have more assets and more capital gains. These are banked, not consumed, so the gap grows.
This is a huge deal, explaining 80% of wealth growing faster than income in Norway. The UK has also seen a wealth boom from rising house prices. These unexpected windfalls – rather than active savings like paying off a mortgage – explain 82% of increased property wealth since the early 1990s.
Yet we pretend that wealth comes from savings and we ignore these capital gains when considering who is doing well, and so we make a dog’s dinner out of taxing them. It’s time we woke up to where wealth has actually come from in modern Britain ... and Norway.
