As Norwegian leaders prepare to pull billions out of their country’s huge Oil Fund, to cover the extraordinary costs of the Corona virus crisis, several economists think they have a better idea. They’re promoting a new “Corona tax” instead, as part of a collective solution to a common problem.
“I think that would be a legitimate means of sharing the costs,” Bertil Tungodden, an economics professor at the Norwegian business school NHH (Norges Handelshøyskole) in Bergen, told newspaper Dagsavisen on Wednesday.
The professor noted how restaurants and hair salons, for example, have closed all over the country “for the common good.” That’s why he believes a new national tax to cover the costs of such closures would also be in everyone’s best interests.
Tungodden suggests a progressive tax based on income levels. “The point is that we have a tax system already set up for the common good,” he said, “and then we must also use that system in crisis times.”
Another economics professor, Jo Thori Lind at the University of Oslo, also thinks Corona costs should be covered by a new Corona tax. He’s critical towards current plans to rely mostly on the Oil Fund, one of the biggest sovereign wealth funds in the world, to provide the money needed to bail out businesses, their laid-off workers, students and many others hit hard by the government’s measures to limit the spread of the Corona virus.
Raiding the piggy bank
After limiting withdrawals from the Oil Fund for years to no more than its average returns (currently 3 percent of total assets), the government and opposition politicians in Parliament are now all but raiding Norway’s ultimate piggy bank. They’ve already approved spending more than NOK 300 million through economic crisis packages with more to come, all in an effort to offset the ill effects of the virus on the economy.
Lind points out, however, that the Oil Fund (set up to fund pensions) “is what we’re supposed to live off of when we’re old, and to secure the future of coming generations.” He told Dagsavisen that he doesn’t think “we have a right” to raid it now, and that Corona costs “should be covered by taxes, so we pay back the money in a way.”
He realizes that may be hard to sell politically. Another idea, he said, would be for those with secure state jobs to take 20 percent pay cuts, thereby cutting state budget costs. Debate has swirled recently over the relatively high salaries paid to top state bureaucrats who also received pay raises last year of an average 3.6 percent. That’s much higher than most other salaried workers received, and the government recently moved to tie state pay hikes to what industrial workers receive.
Karin Helene Ulltveit-Moe, also an economics professor at the University of Oslo, doesn’t think a Corona tax is realistic at present. Revenues to the state will pick up when the economy opens up again, she told Dagsavisen, but then new economic stimulus programs could be a better option than a Corona tax.
Preparing to be poorer
Torfinn Harding, an assistant professor at NHH, thinks most everyone “will be a bit poorer than before” when the Corona crisis eases. Many goods and services aren’t available now and can’t be replaced: “There won’t be twice as many people at hotels in the mountains at Easter next year, or twice as many at festvals next summer,” Harding told Dagsavisen. The wealth that would have been created during the current shutdown and cancellations has been lost.
Money from the Oil Fund is meant to replace it, until business picks up again. “The people who’ll really pay for it are the future generations,” Harding told Dagsavisen. He also cautioned that with lower oil prices, the Oil Fund itself won’t grow nearly as fast in the years to come as it has since its creation in 1996.
“I’m afraid we may not be as well-equipped (for the future) as we perhaps think,” Harding said. Lind at the University of Oslo thinks Norway is still in a better position than most other countries, but agrees Corona will have a negative effect for years to come.
“The standard of living can decline a bit, unemployment can go up and we may end up with a poorer Norway at the other end,” Lind said.