Norway has been brought up quite a bit in the American media as of late.
Why is this small (population of less than 5 million people) Scandinavian country such a popular topic of conversation?
First off, Norway is being used by many advocates of health care reform in the United States as an example of how health care should be delivered in a country. Everyone is covered by universal health care in Norway.
Second, many people point to Norway as a shining example of how a government should manage its finances. Norway is in phenomenal shape in terms of its finances, with the country being able to boast of an extremely low unemployment rate (3.0%) and approximately $400 billion dollars USD in its government pension fund.
Michael Moore included a 10 minute segment on Norway as an extra on his "Sicko" DVD. Moore extols the virtues of the Norwegian system, giving a long laundry list of all of the perks that Norwegian citizens are entitled to. I have included the clip below:
All of this talk about Norway piqued my interest. The country is one of the wealthiest in the world per capita, and they also have one of the highest standards of living of any country in the world. How is this possible, and how is the government able to provide so many perks to its citizens?
In researching Norway, I quickly learned that the country has significant resources (they are one of the world's largest exporters of oil, natural gas and seafood). I also learned that the government has majority or full ownership of the largest operators in the Norwegian oil fields, and that any "surplus wealth" from Norwegian petroleum income is invested straight into the government pension fund.
I also learned that the Norwegian government has large ownership stakes in many important companies that operate in the country - as a matter of fact, the government has majority stakes in nearly 1/3rd of all publicly-listed companies in the country.
The thing that I was most curious about is Norway's tax system. I've heard from friends that used to live in the country that their taxes were really high, but I wanted to find out for myself.
Here are some of the major components of the Norwegian tax system. Most of this information is from a publication from KPMG called "Tax Facts Norway 2009: A survey of the Norwegian Tax System", which I have linked to below.
1. Income Tax.
Income tax is charged at a flat rate of 28% on net income.
A 9% surtax is charged on gross income if you earn between the equivalent of $73,641 - $119,662 USD, while a 12% surtax (on gross income) is charged if you earn anything over that.
In addition, taxpayers must make social security contributions based on whatever they make over $6,612 USD. 7.8% of any salary made over this amount goes towards social security contributions. Pension income is charged at a lower 3.0% rate.
2. Value Added Tax.
A Value Added Tax (or VAT) is charged on the sale of most goods and services in the country.
The general rate is 25%. A reduced rate of 14% applies to the sale of food and drink, while an even lower rate applies to hotel lodging, cinema shows, public transportation services and broadcasting charges.
The 14% rate does not apply to eating out at a restaurant. So, if you decide to take the family out for a dinner that ends up costing the equivalent of $100 USD, be prepared to pay an extra $25 in taxes (before the tip, of course).
3. Wealth Tax / Net Asset Tax.
Norwegians must pay an annual "wealth tax" on their net "worldwide assets".
There is an exemption (up to the equivalent of $78,483 USD), with any amount over that being subjected to a 1.1% "wealth tax".
In order to figure out how much you would pay, take the total worth of your assets (house, cash in the bank, etc) and subtract any liabilities (mortgage, etc).
As mentioned, there is an exemption up to 470,000 NOK (which works out to $78,483 USD) - any amount over that, and you are paying a 1.1% wealth tax.
As far as I am aware, this includes houses, cash in the bank, etc.
4. Property taxes.
Norwegian municipalities can choose to impose a property tax of between 0.2-0.7% on the total "fiscal value of the property". Not all Norwegian municipalities choose to levy this tax.
5. Death / Inheritance Tax.
Children, foster children and parents of the deceased pay a progressive rate for an inheritance or death tax. Here are the USD equivalents:
First $78,483 - Nothing
Next $55,105 - 6%
Anything Over $133,589 - 10%
"All other beneficiaries" pay this rate:
First $78,483 - Nothing
Next $55,105 - 8%
Anything Over $133,589 - 15%
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These are five major taxes that apply to the average citizen of Norway.
There are obviously also corporate taxes (which is a flat rate of 28% of taxable profits), but we won't get into that here.
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According to Forbes magazine, Oslo, Norway is the 14th most expensive city in the world to live in, just behind Paris and Milan.
As a whole, Norway is one of the most expensive countries in the world to live in, according to various cost of living indexes.
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Now, I'm not advocating one system over another.
However, I've heard many people over the last few weeks say "Why can't we have what the people of Norway have?", and I wanted to find out more.
Comment by Monique on September 08, 2009 @ 2:47 am
It's easy to think that the Norwegians are lucky with all the "perks" they get from their government. But it's also easy to forget that they pay for these "perks" at tax time.
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Comment by John on September 08, 2009 @ 4:33 pm
I know someone who is from Norway… I have been told that their health care system isn't very good and the bedside manner stinks. I understand this is one person's view.
Someday, our taxes will have to be that high to fund our future national healthcare system and our debt. The only difference will be is that in Norway everyone has some skin in the taxpaying game whereas in the US, it is only the high income groups that pay substantial taxes. The US lower income tax brackets of negative taxes (the earned income tax credit groups), and the ones below Norway’s 28% taxes can hardly be considered “skin in the game” worthy. Things need to be equaled a little better. EVERYONE needs to pay taxes in order for these systems to work without major backlash.
What is the average tax rate paid in the US?
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Comment by Marc Jordan on September 09, 2009 @ 12:30 pm
Whoa, it seems that the Norwegian system may actually be better than the US. Here's why:
1. The base tax rate of 28% is pretty much in line with the US.
2. Workers have 7.8% taken out of their paycheck for Social Security, versus our 7.65% (ha, we are lower).
3. In the US, many states levy state and local income taxes. In California I think it's around 10%.
4. Their property taxes are outrageously low. The article quotes a high of .07%. Here in the US we pay
anywhere from 2-3%.
5. A 25% VAT does sound excessive compared to out state income taxes. But some states such as New York and California are approaching 10% sales tax.
6. The author asks how we would like to have $25 added to a $100 restaurant bill. My experience in Norway was that the VAT is always included in the menu price. At the bottom of the menu is usually a line stating "Prices inclusive of VAT".
7. One thing the author didn't mention is that in Norway college tuition is free to students and paid through the tax system.
So as you can see, things aren't always what they appear.
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Comment by Dave on September 09, 2009 @ 4:02 pm
Hi Marc
Thanks for your comments.
Just a few things:
1. I'm not arguing for or against either system.
2. The property tax quoted was a high of 0.7%, not 0.07%.
3. Norway has a phenomenal number of perks that are provided to its citizens - this was implied in the article. I am sure that there are many more that could be mentioned.
4. Interesting about the VAT - it's still an added cost though, and it's still 25% on most items.
5. I find the wealth tax to be the most interesting of the five listed here.
So, you squirrel away your money every year (after paying taxes on it) in your savings account, but still have to pay a "wealth tax" if you have over 80k in net assets?
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Comment by John on September 15, 2009 @ 9:41 am
My daughter just returned from a 6 month study abroad program in Oslo, and we have family living there as well. One of the main differences in the taxation of citizens in Norway is that almost everyone pays fairly high taxes where statistics here show that more than 50% of Americans pay no income tax at all and that a large number actually receive more back in a tax refund than they ever paid in. It would be political suicide for either party to increase taxes to the point they are at in Norway or other countries that offer socialized health care and there aren't enough wealthy taxpayers to cover the burden so we end up with a huge deficit if we want to enact the same type of public services.
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Comment by gg on September 26, 2009 @ 1:14 pm
I lived in Norway and I loved the healthcare I got, personally. I walked into a clinic with no appointment and was treated 40 minutes later, certainly no longer than I would have to wait here in the states. The doctor was nice and it cost me $20 because I was not a citizen.
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Comment by emma on October 04, 2009 @ 9:35 pm
I'm doing a report on Norway, and this site was really helpful. thanks! could you maybe put more on the differences between their taxes and our taxes? like more compare/contrast.
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Comment by Adam on October 15, 2009 @ 2:20 am
Norway has extremely low unemployment but they put people that are out of work are put on "sick" leave. This does not get counted as "unemployed." It is very easy to say you have back pain or mental problems to get on this "sick" leave. I have heard that 13% of the working population is on "sick" leave but very hard to find the facts.
New (cheap) car costs over $50,000, gas costs $8/gallon, and healthcare is ok but not as good as USA (if you have insurance.)
Norway will have a problem in the future with too many living on the almighty gov't. Besides the "sick" leave people getting $ from the gov't, they also get in immigrants in from Africa, middle east, that get a house, car, living expenses when they get here. Give it 20 years and I think policies will change.
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Comment by Bobby Casey on January 26, 2010 @ 6:00 pm
I just returned from a trip to Norway and I was certainly surprised. $11 beer and $50 pizza! $5 one-way subway ride and $250,000 Porsche 911. And everyone I spoke to was disgusted with the very long wait times for healthcare. If you have a broken leg they will see you immediately, but need and MRI? See you in 6 months. If you are a high earner, your effective tax rate is about 50% and you will pay about $2500 per month for a 700 square foot apartment.
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Comment by Norwegian on October 04, 2010 @ 4:19 am
A bit of a late comment here, but...You are not considering that Norway is what they call a high-tax, high deductions system. There are a large number of deductions available. Intrest on your morgage, having kids, kindergarden, etc, etc.
Numbers from the Norwegian IRS show that the actual tax paid by Norwegians are 9% -32 % total, after all the deductions. With a 25 % average.
Of course, the important thing about taxes is not how much you pay, but if you feel you are getting your moneys worth.
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Comment by Tawm on November 06, 2010 @ 8:12 pm
In the US we have deduction systems too, it's called a tax write off. Being a fiscal conservative, the thing I like about Norway is that its income tax is a flat rate. However, what keeps it from truly being an awesome flat rate tax is all the VAT's and the sub-income taxes that go around. We need a flat tax in America, we could learn a lot from our Russian neighbors who saw a huge economic boom when Putin imposed a flat tax. Americans are strong and do not need their government micromanaging their lives, that's why we are more than welcome to leave America and live in places that'll wipe your ass for you like Norway. Norway, without a doubt, has too much taxes to really grow.
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Comment by joe on December 21, 2010 @ 11:00 am
Norway sounds awful! That is a pretty ridiculous tax system. And, you cannot compare a country with 3 million people to the US with 330 million people and an immigration policy that is very, very relaxed (give us your tired, poor, huddled masses) whereas Norway's immigration policy seems to state "If you're tired, poor, or a huddled mass then stay the f--k out!"
The US isn't perfect, but i"ll take it.
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Comment by Terry Helton on January 21, 2011 @ 7:27 pm
I for one don't mind paying tax as long as EVERYBODY ELSE PAYS AS WELL!!! Which in the US they don't don't. The rich don't pay much if anything and they still bitch while the middle class and working poor pay,pay, pay. It's fucked up. And what about a VAT? Do you actually thinik that if it is imposed that EVERYBODY will pay or just certain people?
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Comment by Eric on April 17, 2011 @ 8:16 pm
Do I think what these countries have works for them? Yes. Do I think it would work in America? Probably not, not because of some of the reasons stated in others comments (Scandanavian countries have some of the easiest asslyum processes on the planet) However, our society is just alot more unequal that Scandanavia and we are much more tolerant of it. The upper middle class and upper classes in this country have a huge subisidy of low prices due to all of the people who work but making under a living wage (a.k.a. people recieving the Earned Income Tax Credit), which helps keep costs for consumer products down (although so does low business taxes, good infrastructure and the size of our market). Is a doctor or lawyer making $200,000 going to decide to become a bum just becuase his tax rate increased by 10%? No. Would he vote for a system that not only increased his taxes by 10% but also increased the wages of the working poor to levels similar to Norway and therefore contributing to higher prices for everything? Probably not, at least not if only voting for his self interest.
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Comment by Alan on May 24, 2011 @ 12:27 pm
Norway is a massively oil rich nation - massive oil exporter - with a tiny population. You cannot use it as an example of how America might be - anymore than you could Suadi Arabia or Kuwait etc. Silly people.
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Comment by Walter Ndjibu on June 26, 2011 @ 8:23 am
The only and most important thing people in any country want is a certain level of improvement in their daily lives. Norway it is true has if I am not mistaken the highest tax cost in the world. But if this system as managed by the government has led to the kind of high standard of living we know in Norway and the remarkable per capita income and purchasing power parity then it is good. The purpose of any economy is to reduce scarcity by identifying effective ways of generating more income and allocate it in a way that it improves human lives. Norway is an example to follow. What is the point of sparing citizens with more taxes while their lives continue to deteriorate?
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Comment by Walter Ndjibu on December 19, 2011 @ 10:20 am
the great take away of what you have exposed abovei is that the capitalist philosophy according to which government must be out of the market operation to promote growth and prosperity is inaccurate. Nowergian gov. is almost as you said in major business activites in the country. As Norwegian premier said last time he was on Pierce Morgan show, rich in norway pay almost 5o% of their share to the nation. The result is highly positive. The huge amount of revenues acquired by the Norwegian gov. through taxes enable it to build a glorious enviable life for its citizens. Healthcare is universal, school is free, the country is among the richest in the world and always among the top five on the UNDP indexes. Lower tax or higher tax does not mean economic growth or prosperity. It depends on the characteristics of the country socially and economically. Lower tax means low revenue for the gov. and therefore limited resources to fund public or social programs. In a country like US where the cost of health care is astronomical, those who want lower taxes are self-inflicting a terrible blow. We are wrong and should get rid of our Omniscience syndrom in order to learn from others
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Norway has been brought up quite a bit in the American media as of late. 
