Wealth tax does not kill jobs – strengthens economic incentives
Marie Bjørneby et al. 20 -- Marie Bjørneby: PhD student, Norwegian University of Life Sciences; Simen Markussen: research fellow, Norwegian labor economist; Knut Røed: Senior Research Fellow at the Ragnar Frisch Centre for Economic Research (“Does the Wealth Tax Kill Jobs?”, Institute of Labor Economics, 10-2020, https://docs.iza.org/dp13766.pdf, Date Accessed 7-4-2023) //TCM
Our results do not indicate that the wealth tax kills jobs in companies owned by the taxpayers. To the contrary, we identify a positive relationship between the wealth tax level and employment growth in small and medium sized family-run businesses. The positive employment effect of higher wealth taxes can be rationalized by a positive income effect on household savings, as well as by the fact that the wealth tax strengthens economic incentives to invest in assets that reduce taxable wealth. Familyowned businesses appear to be useful for tax avoidance purposes. Given the difficulty of assessing the true value of non-traded economic activities, the existence of a wealth tax provides an incentive to allocate wealth into such activities rather than into other (and more easy-to-assess) assets. Since the human capital embedded in employees does not enter into a firm’s balance sheet, raising employment in a family-owned business appears to be a particularly convenient strategy for wealth tax reduction. However, our finding of a positive employment effect on average does not mean that liquidity problems created by the wealth tax are irrelevant. For a small subset of liquidity-constrained business owners, we indeed identify negative employment effects.