I also became convinced of this truth, which I have observed in the smartest American and the smartest Norwegian entrepreneurs: It's not about the money. Entrepreneurs are not hedge fund managers, and they rarely operate like coldly rational economic entities. This theme runs through books like Bo Burlingham's Small Giants, about company owners who choose not to maximize profits and instead seek to make their companies great; and it can be found in the countless stories, many of them told in this magazine, of founders who leave money on the table in favor of things they judge to be more important.
At one point, I asked Wiggo Dalmo why he was still working so hard to expand his company: Why not just have a nice life—especially given that the authorities would take a hefty chunk of whatever additional money he made? "For me personally, building something to change the world is the kick," he says. "The worst thing to me is people who chose the easiest path. We should use our wonderful years to do something on this earth."
When I got back to the United States, I had a beer with Bjørn Holte, the CEO of bMenu, whom I'd first met in Oslo. It was early November—days after the congressional elections—and Holte had just arrived in New York City, where he is opening a new office. We talked about the commercial real estate market, the amazing cultural diversity in a city that has twice as many people as his entire country, and the current debate in the United States about the role of government. Holte was fascinated by this last topic, particularly the angry opposition to President Obama's health care reform package. "It makes me laugh," he says. "Americans don't understand that you can't have a functioning economy if people aren't healthy."
Holte's American subsidiary pays annual health care premiums that make his head spin—more than $23,000 per employee for a family plan—and that make the cost of employing a software developer in the United States substantially higher than it is in Norway, even after taxes. (For a full breakdown, see "Making Payroll.") Holte is no pinko—he finds many aspects of Norwegian socialism problematic, particularly regulations about hiring and firing—but when he looks at the costs and benefits of taxes in each country, he sees no contest. Norway is worth the cost.
Of course, that's only half the question when it comes to taxes. The other, more divisive question is, What is fair? Is it right to make rich people pay more than poor people? Would paying a greater percentage of our income for more government services make us less free? "I'd rather be in the U.S., where you can enjoy the fruit of your labor, rather than a country like Norway, where your hard work is confiscated by the government," says Curtis Dubay, senior tax policy analyst at the Heritage Foundation, a Washington, D.C., think tank that advocates for lower taxes.
These are important moral issues, but, in America, they are often the only ones we are willing to consider. We have, as Holte suggests, become religious about economic policy. We are unable or unwilling to make the kind of cool-headed calculations about costs and benefits that I saw in Norway. "There's a disconnect in the way people think about paying taxes and funding public services that's worse here than in any other country," says Donald Bruce, a tax economist at the University of Tennessee. "We refuse to believe that taxes can be used for anything productive. But then we say, 'Stay out of my Social Security. And my Medicare. And don't cut defense or national parks.' "
Our collective inability to have a rational conversation about taxes will have consequences. In 2010, the American budget deficit hit $1.3 trillion, or 10 percent of GDP. By 2035, the deficit could be close to 16 percent of GDP, according to the report issued late last year by the National Commission on Fiscal Responsibility and Reform. That report prescribed dramatic spending cuts and tax increases. But just weeks after it was released, President Obama and congressional Republicans unveiled a new package of tax cuts, which will add an extra $800 billion to the deficit over two years.
Obama has said he hopes to allow these cuts to expire in 2012 and for income tax rates to revert to levels of the 1990s, and that is only one of many revenue-generation ideas kicking around in policy circles. There are also proposals for a tax on millionaires, a national sales tax, and even a dreaded, Norwegian-style wealth tax.
When lawmakers inevitably take up these issues, it's a sure thing that those who oppose raising revenue through tax hikes will make the argument that higher taxes will hurt entrepreneurs. They will make it sound as if even a modest tax increase would represent a death knell for American business. But the case of Norway suggests that Americans should view these arguments with skepticism—and that American entrepreneurs could stand to be less dogmatic about the role of government in society.
This isn't to say that entrepreneurs don't have a right to get angry about taxes—or to fight tax increases in the same way they might fight any price increase by a supplier. It is to say only that, despite what you hear from Washington politicians and activist groups, the tax rate is probably far from the most important issue facing your business. Entrepreneurs can thrive under almost any regime, even the scourge of European socialism. "Taxes matter, but their effect is small in magnitude," says Bruce. "In the end, decisions entrepreneurs make are about more important things: Is there a market for what you're making? Are you doing something relevant for the economy? If the answer is no, then taxes don't matter much."
Max Chafkin is Inc.'s senior writer.
