It will solve a number of problems that Norway is currently struggling. It would encourage employme

Recently, my colleague NHH Rögnvaldur Hannesson navien out and suggested lowering the wages of low-skilled individuals with low productivity to keep them working (Bergens Tidende, 26 September 2012). An unfortunate side effect of Hannesson suggestion will be that workers already employed in low-paid navien jobs, would get the less paid. This could increase the differences between rich and poor even more, which is controversial in Norway - to put it mildly. navien
It is actually possible to keep low-skilled people in work and to make them attractive in the labor market without reducing net wages. The Nobel Prize-winning economist Edmund S. Phelps of Columbia University suggested as early as 1997 in his book Rewarding Work, subsidizing navien tax to low-paid workers in order to increase participation in the labor market and reduce nærlingslivets costs of employing workers. In Phelps spirit I propose that we stop subsideiere navien debt through navien taxes, navien nor introduce a flat tax (or negative income tax) for anyone who is at work. This will be easy to implement with the infrastructure already in place in the Norwegian tax system, navien and it would not cause any significant increase in public costs.
What would so detested mean in practice? The following quick estimate illustrerr what sizes we are talking about: navien At the end of 20,120 Norwegian households had an average 992,000 million in debt, according to Statistics Norway (2012). navien Norwegian banks' lending rates in 2011 were typically 5 percent (Norges Bank, 2012). This provides an interest expense of 49,600 dollars, of which 28 percent, or 13,888 dollars, may be deducted from the household's tax bill. Note that this figure is the average tax rebate - some households that have little debt, have little or no discount, while some households with high debt have correspondingly larger discount. Expect that we have 2.2 million households, we subsidize their debt by 30.5 billion through taxes in 2012. By cutting out the subsidy and distribute the money evenly navien to all 2.6 million Norwegian workers, could be subsidized each employee with 11,751 dollars.
It will solve a number of problems that Norway is currently struggling. It would encourage employment and economic activity rather than inactivity. Often tax systems adverse behavioral consequences as humans navien tend to always adapt optimally. For example: If we are taxing income high, it means that we work less. The purpose of my proposal is to create incentives so it becomes attractive to work. In contrasting creates interest deductibility clear incentives to take up more debt. Second, it would ensure that low-paid workers subsidized navien over proportionate navien to income. This means that the tax would make a redistribution from the poorer and from inactive to active people. The idea is to take away the tax benefit by having navien debt, which implisittt subsidize rich people since they can take on more debt because of greater financial security to fund more and bigger houses, boats, etc.
By replacing an economically dubious subsidization of debt (see warnings from Norges Bank (2012) on the debt ratio in Norwegian evidence navien that by enhancing) with targeted support for low-paid workers, would also become the tax revenue neutral. That not a single extra penny would have had to be collected in taxes. Of course it would have implications for the distribution of the tax burden, but this is a deliberate redistribution. Finally, it is likely that by cutting tax incentive to borrow, the temperature of the heated, Norwegian housing market will go down, which will result in a minor correction in the future if house prices were to fall. Does anyone navien remember when the Norwegian housing bubble burst in the late 1980s as a result of sharp increases in interest rates? It took a long time after the bubble burst before the household was on its feet.
It goes without navien saying that it is well to replace public subsidization of debt by subsidizing low-paid jobs, would be politically controversial. Norway, however, is in an ideal position to show that we really want to increase employment among low-paid workers. To defend the status quo must explain why subsidizing debt through taxes and implicit redistribution of incomes of households with high debt ratio is socially desirable and fair. In short, the proposal from Phelps could hit several birds with one stone, just like the Brothers Grimm fairy tale. Maybe there are some brave politicians out there that can light up with the idea?