It’s the Friday after a holiday week, and I thought you might like to take a break from your usual finances to talk about someone else’s. Why not Norway? Last month, Norwegians reinforced their reputation as economic innovators with a voluntary income tax – you pay based on what you think you should pay.
The “voluntary tax” came from a good bit of healthy squabbling between the current “center-right” government (which looks almost nothing like our center-right) and the “left-wing” parties about the future of Norway’s economy. With its rich North Sea petroleum resources and modest population, Norway has been riding high on oil money since the 1970’s. This changed, though, in late 2013, when oil prices plunged globally. While petroleum continues to be a valuable resource, no one another great era for oil. So Norway has been planning and looking for its next economic engine for years now.
Fortunately, the Norwegians are a famously well-educated bunch. Having created a massive national wealth fund during boom times, the country has plenty of resources to invest in the new future. And its government has been busy doing just that. The most recent reports indicate that oil now accounts for only 12% of Norway’s economy. But all is not clear sailing. Norwegians are still feeling the loss of tens of thousands of oil jobs, compounded by a recent downturn in the housing market.
The current government has responded to the strain on Norwegian households by cutting income tax rates, which of course, means less money to shore up all of the spending the government is doing now. When the tax cut created a rancorous political debate, the government added a new provision: if you feel your taxes are too low, feel free to pay more. According to an article in yesterday’s Bloomberg Politics, the voluntary tax has brought in a total of $1,325 in its first month. This might not be Norway’s most successful innovation. But who knows? Maybe wealthy Norwegians will be feeling more civic-minded in July?