Comment by charlesdm | Hacker News Reader

Comment by charlesdm | Hacker News Reader

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I think basic welfare and good free healthcare are basic human rights. But tax-wise, Norway is about as bad as it gets. And I am obviously aware those services need to be paid for, but a lot of it has to do with policy as well.

It's probably a decent tradeoff for the average Norwegian, but not for anyone who wishes to (eventually) live off of investment and/or (semi) passive income.

A lot of these taxes don't serve any purpose (and generate very little revenue) and merely exist to stop or limit certain behaviors. Why are luxury cars taxed a lot? They don't want people to drive a Porsche or an Aston Martin, because some people would feel bad they can't afford those cars. Why is alcohol taxed excessively? They don't want people to drink (too much). Why is there a wealth tax? They don't want people to focus on getting rich. Etc

One simple example is a wealth tax: hard to verify whether people are reporting their true net worth, hard to enforce (takes a lot of manpower to check everything), and it brings in very little. In France, the wealth tax barely covers the cost of enforcing it. That's a policy decision, i.e. we want wealthy people to pay X% of extra tax. But it's not a sane decision.

As a Norwegian that aspires to eventually live off investments and passive income, you do have some salient points. We could probably have a significantly cheaper public sector; hiring for the public sector during the last decade has been ridiculous. Counter-cyclical spending during times of economic crisis should not be performed by hiring people for permanent positions with some of the strongest labor protections in the world; you'll never get rid of the expense when the cycle turns back.

And don't get me started on the wealth tax; it's a good and probably necessary idea in the long-term, but here it's both (1) too high; at 1% p.a. it's in effect an extra 25% capital gains tax on top of the 29% which is taxed directly, and (2) assets that "everyone" own (real estate) are only taxed at 25% of their market value. And debt is deducted at its full value! Buy a million dollar home borrowing $250k, and you pay no wealth tax at all! So you are allowed to be a real estate millionaire (and receive tax-free income on rent from your primary residence), but not a stock fund millionaire.

To everyone's big surprise, real estate has appreciated much faster than other assets (20% in Oslo last year), mostly evening out the post-tax advantage over other assets.

The tax on investment income was recently reduced by three percentage points to make the system more similar to other parts of the EEC, but a multiplicative factor was introduced when calculating the "taxable value" for stocks and funds, in effect increasing the tax by two percentage points. I never quite understood this move.

I am proud of our universal healthcare system and our welfare system -- in effect it's a means-tested basic income system; no one starves or freezes -- but some tax policies feel really oppressive if you are trying to do something ambitious.

Very nice example, and you can clearly see how market distorting the wealth tax is. In a post below you wrote it triggers from $175k, but the value of a property is only counted at 25%.

Purchasing property is essentially a tax avoidance mechanism to avoid the wealth tax on cash, and in turn leads to a massive property bubble (probably because the wealth tax cap is relatively low, and it hits a lot of people / families).

Even if you don't really want to invest in property, it makes sense to do so, because otherwise you'd just be paying wealth tax. Add to that that you can probably lever it up easily (e.g. buy something with 20% down) and.. you get a recipe for disaster at some point.

Yup, this sums it up nicely.

I wouldn't drive a Porsche or Aston Martin in Norway during winter. I'd drive it in Monte Carlo.

Alcohol is probably taxed because during a six month winter with 16 hours of darkness just about anyone and their mothers would develop chronic alcoholism.

Of course a wealth tax brings very little because anyone wealthy enough would move their assets to other countries with lower wealth taxes. Tax the rich is just an excuse to tax everyone else.

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