Introduction

This research document investigates the economic impact of increasing taxes on business owners, focusing on whether such policies constrain investment or induce “capitalist flight”. To explore this, the author exploits a series of Norwegian tax reforms implemented between 2021 and 2024. These reforms increased dividend tax rates, closed migration-related capital gains tax loopholes, and nearly doubled the effective marginal tax rate on business wealth. The study provides new empirical evidence to a debate often characterised by a lack of supporting data, particularly concerning the causal effects of wealth taxes on the wealthiest entrepreneurs.

Institutional details and data sources

Norway levies an annual progressive tax on net wealth, including financial and real assets net of debt. Following the 2021 election, the left-wing coalition government implemented significant changes. The top statutory wealth tax rate rose from 0.85% to 1.1%, while the assessment discount for stocks was reduced, causing $1 of book equity to increase taxable wealth by $0.80 compared to $0.55 before the reform. This nearly doubled the top marginal tax rate on business wealth from 0.47% to 0.88%. Concurrently, the dividend tax rate increased from 31.7% to 37.84% by 2023. The government also tightened exit taxes, removing a five-year loophole for unrealised gains in 2022 and later introducing a 12-year payment deadline. Data for the study was gathered from the Norwegian shareholder register, public tax lists, journalistic wealth estimates, and financial statements from the Orbis Historical database.

Mobility responses

The reforms sparked intense public debate regarding an “exodus” of Norwegian billionaires. The study confirms a clear effect on migration, particularly amongst the top 0.1% of the wealth distribution. However, this response was mostly confined to 2022 and 2023. Estimates indicate that at most 100 individuals left Norway due to the reforms, representing approximately 1.78% of the top 0.1%. Despite this outmigration, wealth tax revenues are estimated to have increased by 71.5% between 2021 and 2024, net of the revenue lost to migration. The study finds no evidence of significant outmigration amongst startup founders or inventors, using data from LinkedIn profiles and patent records. Furthermore, firms owned by those who did outmigrate remained economically active in Norway and did not reduce their investment levels.

The effect on businesses

The research examines whether the tax reforms influenced firm-level financing and investment behaviour, irrespective of whether the owners migrated. Using a user-cost of capital model, the study finds that higher wealth taxes have an ambiguous theoretical effect on corporate investment. Empirically, the author compares firms owned by Norwegian individuals subject to the wealth tax with a control group of firms owned by tax-exempt entities or foreigners. The analysis finds no evidence that Norwegian-owned firms increased their dividend payouts or reduced their investment rates during the 2022–2024 period. The estimates are precise enough to reject investment rate reductions larger than 1.2 percentage points. Additionally, there is no indication that the reforms induced a higher rate of corporate bankruptcies.

Disruptions to entrepreneurial finance

The study also considers the potential for disruptions in the financing of innovative startups. Analysis of startup investors—defined as minority stakeholders in young firms receiving innovation grants—reveals no evidence of excess outmigration. In fact, outmigration rates amongst this group appeared to drop below pre-reform trends once certain tax loopholes were closed. While there is some evidence of a decline in the ownership share of Norwegian residents in firms receiving R&D tax credits, there is no corresponding decrease when considering unweighted ownership shares. This suggests that while high-capital investments may have been affected, the broader entrepreneurial ecosystem remained stable.

Discussion

The findings indicate that the short-run economic costs of the 2021–2024 Norwegian wealth tax reforms, in terms of both migration and firm investment, are significantly more limited than the public and political debate suggested. The outmigration that did occur was highly concentrated at the very top of the wealth distribution and did not lead to a reduction in the economic activity of the firms involved. The study concludes that while tax-driven migration is a reality for the ultra-wealthy, it does not necessarily translate into broader negative outcomes for national investment or entrepreneurship.