New research on inequality in Norway shows that inequality is far greater than expected. But the calculation meets tough questions.
It is not commonplace that figures from Statistics Norway create a lot of debate. But the new one The SSB analysis “Inequality – significantly greater than the statistics show”, from researchers Rolf Aaberge, Jørgen Heibø Modalsli and Ola Lotherington Vestad have provoked reactions.
The report has already led to strong political debate:
– The inequality in Norway today is back at the same level as the end of the 19th century, says SV’s Kari Elisabeth Kaski to Dagbladet.
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Profit = income?
For a long time, Statistics Norway has calculated the inequality in Norway by looking at personal tax returns for everyone in the country. The main impression has been that Norway has low income inequality, but high wealth inequality.
But what the researchers have now done is to bring in profits in companies, and set it up as if it is income to 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 thought to be 9 percent. In addition, the report shows that the very richest pay a lower tax rate than expected.
But there are several who think the calculations are highly unclear. Marius Doksheim has a master’s degree in political economy, and is head of the liberal think tank Civita. He believes there are many questions that researchers should answer.
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– I think this deserves far more discussion than the researchers do in the article. A profit is not directly available to the owners. Too much of it either goes back into the company in the form of new investments, or is invested in other companies, Doksheim explains to Nettavisen.
A central part of the report is about the dividend tax, which was introduced in 2006. The purpose was to counteract the fact that owners took out a lot of dividends for private consumption, rather than investing it 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”, ie that the owners try to avoid taxes.
– Statistics Norway researchers present it as if the changes in dividend behavior are almost suspicious, a result of «tax-motivated adjustments». But the changes are as desired: A larger share of the companies’ profits remains in the companies, while a smaller share goes to the owners personally, Doksheim writes in a recent Civita note about the research report.
He elaborates to Nettavisen that it will be of little value to see these figures in isolation, because no other country uses this calculation. Thus, we do not know whether Norway comes high or low on such a scale.
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– Highly unclear
Doksheim is supported by social economist Steinar Juel in Civita, who believes the report raises more questions than it answers.
He believes it is a fundamental mistake to equate retained earnings in companies with income that the individual receives paid out.
– First, dividend tax must be paid if retained earnings can be used privately. In the researchers’ preferred calculation, potential dividend tax is not deducted when retained earnings are included as private income, Juel writes in a column at 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 equity to adapt and be able to use new technology.
The researchers behind the controversial report believe the criticism is flawed.
– Why is it of value to include the profit from companies, when after all it does not correspond to money directly to the owners?
– This is money the owners have chosen to keep in the companies. No one else has decided. As we have shown in the article, the owners keep a large part of the profits this year with corporation tax and a small share this year without corporation tax. In other words, the behavior is tax-motivated, Rolf Aaberge answers in an e-mail 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 money that a person or business 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 income that a person has over is counted as personal income in the official income statistics, writes Aaberge.
He emphasizes that the goal is to supplement the current picture with more information about inequality in Norway.
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