Norway's national budget 2005
 Today the Norwegian center-right government announced its proposed national budget for 2005, a widely scrutinised and debated document. In a country where the public sector is more bloated than compared to the US (~30 % of all employees are in the public sector), and where the health sector is overwhelmingly public, how the state manages its finances is of vital importance. And, like everywhere else, taxes follow you from birth to grave.
Norway has one of the highest sales taxes in the world, and it is now being increased from 24% to 25% on most goods and services, except food where it is increased to 13%.
This compensates for a relief in direct taxation. Housing tax - taxing ownership of your private home - is finally abolished. There is some reduction in asset tax (in Norway, even stock ownership is part of the basis for the ~1% asset tax, which can be rather crippling for business owners who had no plan to take out dividend).
The government has proposed a net tax and duty relief of NOK 1.65 billion (USD 245 million).
The net relief is rather limited.
Norway's parliament, which has the final say on the budget, has been quite disciplined when it comes to spending the country's vast oil revenue. With current oil prices being record high, Norway's unique "oil fund", a pension fund, is reportedly going to pass NOK 1,000,000,000,000 (~$150bn) this year. There has been a broad agreement to not overuse the extra income for all "good purposes", and finance minister Per-Kristian Foss (picture) has mostly stuck to this principle.
There is a near-total unanimous position in the Norwegian society that the welfare state works, and should remain largly intact. The country's oil revenues mean we will not have to make the same painful choices faced by Germany and France. Thus, there is really not much leeway for serious tax reductions, as pensions and health expenses need to be paid.
The newly formed close alliance between Labour and the Socialist Left builds its criticism of the proposed budget on good old fashioned envy. Since poverty is not really an increasing problem, the oft-repeated slogan by socialist politicians and their media allies is "the inequalities are increasing." This means, of course, that some people are getting better off. The government's plan to ease the tax burden on the rich (as well as the poor) will be met with stiff opposition from the left. Our economy is hurt by the reluctance of ordinary Norwegians to start small businesses. If you own a mildly successful small business you are "rich" by socialist standards, and thus you must be taxed to death. That your business also employs people and benefits the society around you are left out of the equation.
I am all for everybody sharing a fair burden of taxes, and I also agree that the rich should pay more than the poor. However, if the tax burden deters the "rich" from creating the wealth the country needs in the first place, it is counter-productive.
The only realistic way to decrease inequality is to make everybody more miserable. Poverty, even in Norway, is a problem that needs to be addressed. Helping lift people out of poverty is a very worthwhile goal, and the way to do it is to create more employment possibilities. When the socialists attack it from an "inequality" angle, they get the wrong answers and find the wrong remedies.
The government does not have a majority in parliament, and needs support from either the left or (populist) right to pass the budget. Quite a few things will undoubtedly change in the coming negotiations.
9:14:08 PM 
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