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Comment by chaosprint | Hacker News Reader

Norway also has crazy exit tax and wealth tax. I heard lots of complaints that this system makes it almost impossible to build a decent vc-driven tech startup.

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Norway has a high wealth tax (it’s gonna be 1.1% of total wealth per year in normal cases), high capital gains tax, and an exit tax treating moving abroad as a capital gains event.

This means, if you start a not-yet-publicly-listed company, get investment at a high valuation (on paper), you must pay wealth tax as if you had that money liquid in your own name. But you don’t have it liquid, it’s yet just a valuation of a VC, so you are screwed.

This means any Norwegian trying to start eg a fast growing software biz must relocate to Sweden if they want to be close to home, or Switzerland more realistically, as swedens top income tax bracket is >50%.

Scandinavia is attractive as a destination if you are poor and especially from the 3rd world and could benefit from free government services and welfare, but for anyone entrepreneurial or already wealthy, there are many better alternatives.

> This means any Norwegian trying to start eg a fast growing software biz must relocate to Sweden if they want to be close to home, or Switzerland more realistically, as swedens top income tax bracket is >50%.

There's nothing stopping them from doing that in Norway, they just have to pay their dues. Which are nowhere near the rate of those in a real communist system that people are so quick to label it as.

I find it very selfish to think that we should optimize everything to squeeze out the remaining 1.1% of the wealth, given that Scandinavia wouldn't have such a high living standard had it not been for the welfare system.

> I find it very selfish to think that we should optimize everything to squeeze out the remaining 1.1% of the wealth, given that Scandinavia wouldn't have such a high living standard had it not been for the welfare system.

1.1% is deceiving. 1.1% is actually over 20% tax on savings (assuming a common drawdown of wealth at 4% per year). Plus savings are usually money that has already been taxed. If you can invest at a higher return then the numbers improve but the risk increases (and governments don't share the risk or otherwise ameliorate it) and the taxes remain if you win.

1.1% sounds small. Any analytical person analysing the rewards versus the risks of founding a company will decide that it isn't worth it. Even if you win, you lose.

Here in New Zealand no founder can plan for a decade timeframe because there's a high chance a new government will screw you if you make any winnings. Currently our taxation system encourages entrepreneurship a little (no CGT).

A taxation system needs to be designed to incentivise individuals to create businesses. The government wins through income taxes and sales taxes - it doesn't need to kill the golden goose by overtaxation.

Most people have a selection bias: they see the winners and think those "greedy bastards" should pay more. Few people weigh up the invisible costs of the people that tried and failed. Very few people consider the benefits accrued to society from businesses (consumer surplus, tax income through other taxes, etcetera).

What is stopping it is the fact that the "wealth" they are being taxed on doesn't actually exist, so by starting a company and getting investment you create tax liability that is impossible to pay.

Early stage companies have a high valuation on paper as an artifact of selling small amounts of equity for relatively large sums of money. This leaves you with purely theoretical wealth in the form of equity which you have not yet sold, and potentially can't sell.

As a concrete example, let's say your tax rate is 15%. If you start a business, and give an investor a 10% stake in that business in exchange for $1M, your remaining 90% stake in the company is now worth $9M. Congratulations, you're wealthy! Now you need to "pay your dues" of 15% of that $9M... good luck with that. You are now bankrupt and deeply in dept to the government.

It's also an attractive destination for people wanting to live in a society that's not completely broken by inequality and are willing to pay their membership dues for living in such a society.

Not everyone's top priority is building a big ol' dragon pile of gold.

In what way does inequality break society?

I’ve frequently heard this article of faith bandied about.

But if the rich get 10X richer, and the poor get 2X richer, then everybody is better off.

The stagnant, ultraconservative, ultracentralized economic systems tankies like to propose always end up leaving everyone 100X poorer. But at least they’re equal, right!?

Seems like cutting off your nose to spite your face.

Wealth inequality is a good thing, but the cause of it matters. Was wealth inequality caused by theft and corruption, or by merit-based capitalism? If wealth is created and concentrated by capitalism, it doesn't cause social unrest.

> But if the rich get 10X richer, and the poor get 2X richer, then everybody is better off.

If the rich get 10x richer, prices will rise by more than 2x, leaving everybody but the rich worse off.

These numbers are always given on a "real" basis, accounting for inflation.

Inflation is hard to measure because products get better and houses get bigger over time. But by every measure I've ever seen, purchasing power per hour worked has been going up exponentially or at least geometrically for 200 years now.

If you don't believe this, the World Bank, the IMF, and the US Federal Reserve publish reams of statistics about it.

People get turned around the axle of income disparity, because what actually has happened since WWII is that society has gone from being huddled pretty tightly around an average income ( a bell curve where almost every household made $65k) to a society where this has spread out further to the right ( a similar curve from $0 to $65k but now with a smushed peak a long drawn out tail going up into the 100's of thousands).

There are more wealthy families right now in the US than there has ever been. More people are earning more than ever before. But it creates a lot of societal fracture and strong negative perceptions. When the whole gang is broke, well we're in to together. When the gang ranges from broke, to comfortable, to some splurging, to wealthy, to flat out rich, the cohesion really takes a beating.

Well while celebrating, let's remember that the dream leans massively on the US. 74% of Europe's publicly listed companies depend on US-based technology services like Google and Microsoft for their core operations. And can Europe defend itself? No is the response most analysts give. It's massively under-resourced & dependent on the US. However, if Russia invades (as predicted by some), it invades Europe. So in negotiations such as they are, where are the Europeans leaders dominating (or even putting an appearance at) the discussion to try to call a cease fire to the appalling tragedy of Russia's invasion of the country adjacent to European territory? Isn't it kind of embarrassing?

Overstaying a visa is an offence and if you've gone through the efforts of getting one in the first place, you should read the regulations. Most of us do and act accordingly as I know from own situation this summer.

Kinda makes it harder to attract foreign talent to Norwegian startups as it could affect their decision moving to Norway. While I think the number of people affected is exaggerated, the most well-known case would be the Dune Analytics founder who had to pay more in tax than his salary and was forced to either take a loan to pay taxes (no guarantee the company would succeed) or move out of the country.

This, and barnevernet has reputation similar to gestapo in East Europe.

You might've mixed up your analogy there, Gestapo was a German 3rd Reich thing… NKVD would be the Soviet one.

Germans (including gestapo) gassed a few million people here. Soviets (including NKVD) liberated survivors.

But maybe I read wrong history books.

That wasn't what I meant, I'm confused why you're associating the Gestapo with Eastern Europe. They were active in all of German controlled Europe with a pretty bad reputation almost everywhere. The nazi mass murders also have more of an association with the SS rather than the Gestapo, especially when it got worse in the later years.

(FYI, the NKVD killed more than 100'000 Poles in a just a few months in 1941. I haven't found a total. But they were also active in all of the CCCP. Not sure what would be an Eastern Europe specific reference here…)

Or the Stasi (Staatssicherheit) for the DDR.

However it also prevents hoarding wealth, which in turn prevents special interest groups and some forms of election manipulation.

Balancing taxes for fairness and innovation is quite tricky...

Most of Scandinavia is rife with old money. It's just that new entrants aren't allowed to build wealth.

https://www.euronews.com/business/2024/04/01/wealth-inequali...

This article seems to argue that the cause of the inequality is the lack of taxes

An exit tax in itself does nothing to prevent hoarding of wealth. It might enable you to deploy other taxes that would make rational people leave the country, but it's a bit of a "lock the doors and rob people" strategy.

If you have good advisors as a wealthy person you know this and leave as soon as an exit tax is on the table. If you start new businesses you start them outside of the country

If you're a regular non-wealthy person who happens to become successful you're stuck paying high taxes of course, but you'll probably learn and structure your next venture better.

Most businesses are not as portable as a tech startup.

Ownership is though.

>However it also prevents hoarding wealth

Hoarding wealth isn't a problem if no wealth creation happens in the first place.

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