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New research on inequality in Norway shows that inequality is much higher than expected. But the calculation answers difficult questions.
It is not common for Statistics Norway figures to generate much debate. But the new Statistics Norway analysis “Inequality – significantly higher than statistics show” by researchers Rolf Aaberge, Jørgen Heibø Modalsli and Ola Lotherington Vestad has sparked reactions.
The report has already sparked a strong political debate:
– Inequality in Norway today is back to the same level as at the end of the 19th century, says Kari Elisabeth Kaski from SV to Dagbladet.
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Profit = income?
Statistics Norway has long calculated inequality in Norway by analyzing the personal tax returns of everyone in the country. The main impression has been that Norway has low income inequality, but high wealth inequality.
But what researchers have done now is bring profits to companies and set them up as income for the owners of the companies.
Thus, the report shows that the richest one percent in Norway receives 19 percent of all income, compared to what was previously thought to be 9 percent. Furthermore, the report shows that the wealthiest pay a lower tax rate than expected.
But there are several who think the calculations are very unclear. Marius Doksheim has a master’s degree in political economy and is director of the liberal think tank Civita. He believes there are many questions that researchers should answer.
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– I think this deserves much more discussion than the researchers in the article. The owners do not have direct access to benefits. Much of it returns to the company in the form of new investments or is invested in other companies, Doksheim explains to Nettavisen.
A key part of the report is on the dividend tax, which was introduced in 2006. The purpose was to counteract the fact that owners earned a lot of dividends for private consumption, rather than investing them in companies. Several evaluations have shown that it has worked as intended.
But in the report, the researchers say that this change in behavior is due to “tax-motivated adjustments,” meaning that owners are trying to avoid taxes.
– Statistics Norway researchers present it as if changes in dividend behavior were almost suspicious, as a result of “tax-motivated adjustments.” But the changes are as desired: A larger share of company profits stay with companies, while a smaller share goes to owners personally, Doksheim writes in a recent Civita note on the research report.
He explains to Nettavisen that it will be of little value to see these figures in isolation, because no other country uses this calculation. Therefore, we do not know whether Norway ranks high or low on such a scale.
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– Very unclear
Doksheim is supported by social economist Steinar Juel in Civita, who believes the report raises more questions than it answers.
He believes that it is a fundamental mistake to equate the earnings retained in companies with the income that the individual receives paid.
– First, dividend tax must be paid if retained earnings can be used privately. In the researchers’ preferred calculation, tax on potential dividends is not deducted when retained earnings are included as private income, Juel writes in a column in DN.
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The socio-economist also believes that it is problematic to equate profits with income when most companies need reserves and capital to adapt and be able to use new technologies.
The researchers behind the controversial report believe the criticisms are wrong.
– Why does it have value to include the profit of the companies, when after all it does not correspond to the money directly to the owners?
– This is money that the owners have decided to keep in the companies. No one else has decided. As we have shown in the article, the owners keep a large part of this year’s profits with corporate tax and a small part this year without corporate tax. In other words, the behavior is motivated by taxes, responds Rolf Aaberge in an email to Nettavisen.
– What is the motivation behind this calculation method?
– The motivation for our article is discussed in the introduction (and in the concluding section). I quote: “Income is the money that a person or company receives in exchange for selling an item, performing a service or as a return on invested capital. In addition, the state contributes with transfers. But not all the income a person has is counted as personal income in official income statistics, writes Aaberge.
It stresses that the aim is to complement the current landscape with more information on inequality in Norway.
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