There's an obvious solution to wealth inequality

You already know

In my ‘the left needs better tax policy’ series (1, 2, 3, 4, 5), I write about the importance of a tax code’s interaction(s) with investment. A tax code, to the greatest possible extent, shouldn’t tax investment. Taxing investment causes reductions of investment and/or misallocations, which leads to worse outcomes for society.

Entrepreneurs and investors allocate capital in a competitive process that results in innovations, profitable ventures, and expanded productive capacity. These things help everyday people by giving society access to more sophisticated technologies and innovations, driving down prices, and raising workers’ wages.

This is why I say (1) investment should be tax-deductible. (2) We should only tax the supernormal returns of corporations, and (3) we should tax all rents. These things are pro-growth tax policies, enabling optimal levels of investment.

However, this leaves a big question—what about wealth? The land value tax is a wealth tax, but land accounts for a minority of wealth-derived inequality. Other than the land value tax, I write about taxing flows. While taxing flows of income and consumption reduces wealth inequality somewhat, there’s reason to think that by exempting all investment from taxation, significant wealth inequality would persist.

So, as a spiritual sixth part of my tax policy series, let’s talk about what to do about wealth inequality. The left often advocates for a direct tax on wealth accumulation. I’m not antagonistic to this policy, but it has its downsides. It reduces investment and creates allocative inefficiencies by forcing the sale of assets.

Total investment and allocative efficiency are not my highest values, but they’re important for creating the most prosperous society. The alternative I’ll describe radically reduces wealth inequality without as much concern about reducing investment or misallocating capital.

Luckily, this solution has hundreds of thousands of examples of implementation across time and societies—public ownership.

Wealth Inequality: The Problem(s)

I often see people say, 'Why care about inequality at all?’ Given this, and since I’ve written about this before, I'll provide a summary of the problems with wealth inequality.

1. Wealth inequality is prima facie bad.

2. Wealth inequality leads to imbalances in social power.

3. In the face of optimal policy, a large portion of wealth inequality isn’t instrumentally necessary.

Morally

There’s no reason to believe inequality is desirable in and of itself. In Why Not Socialism, G.A. Cohen writes about a camping trip where people work cooperatively and share resources and responsibilities in order to illustrate people's general egalitarian intuition. It would be odd if, during the course of a camping trip with friends, one friend began excluding others from his resources and/or refused to cooperate with his friends without payment.

Amartya Sen points out in his lecture about inequality, even libertarian philosophers demand an equality of libertarian rights. From the earliest liberal thinkers to modern egalitarian socialists, a human's fundamental entitlement to some type or kind of equality persists.

In terms of wealth, anti-egalitarians face a similar, difficult challenge. Outside of appeals to its instrumental value, wealth inequality isn’t intuitive. Why should someone have more wealth than anyone else, barring inequality’s value in incentivizing production and innovation? Wealth inequality is not like inequality of ability, for example. Some people suffer from incurable ailments, preventing them from having equality of ability.

Conversely, it’s society’s rules that dictate an individual’s ability to accumulate wealth, and these rules dictate the end distribution of wealth. A society could decide everyone should be equal in terms of wealth. Most societies choose not to enforce strict wealth equality, appealing to alternative procedural theories of justice or competing values. This is why I say wealth inequality is prima facie bad. Wealth inequality (and all inequality) requires a reason, from superseding values to practicality to instrumentality.

Wealth & Power

Then there was power. In our capitalist society, in a number of ways, wealth equates to an individual’s power. To the greatest possible degree, society should work to disconnect this relationship. There are two main domains of power in which the wealthy have outsized influence: (1) political and (2) economic.

On politics—the wealthy have outsized influence and access to politics both directly and indirectly. Directly, the wealthy can fund political campaigns and media propaganda to their own ends, often in opposition to the general population’s views. Their wealth also means the wealthy have disproportionate face time with politicians compared to everyday people.

Indirectly, the wealthy have outsized access to free time. Wealthy people can often make their own schedules, and this means more time for political activities like attending local organizing meetings or public events.

On economics—the wealthy’s wealth comes from somewhere and means something. The wealthy have voting power in the various equities they own, allowing them disproportionate power relative to those who do not own. The entrepreneurial wealthy also often make decisions that directly affect the lives of the people who work for them, with their best interests in mind or not. After all, it’s their ownership. Lay off thousands of employees in the name of maximizing profits? Go for it!

Instrumentally

Ok, Mr. Socialism, we get it. You think the wealthy are evil! Have you ever stopped to consider that the wealthy provide a service to society? Without their wealth accumulation and entrepreneurship, you wouldn’t have the abundance around you!

Of course there’s likely an instrumental reason for some level of economic inequality. I imagine if people received the exact same reward despite their amount of work, difficulty of work, and/or their work’s market value, society wouldn’t be quite the same. I have reason to think, under such conditions, society would be quite a bit worse.

People require, at least, some additional incentive to work hard and push the boundaries of what’s possible. However, I’m skeptical that the level of innovation we see in many societies requires their associated levels of inequality, and I have reason to think the level of inequality and destitution in many societies isn’t optimal if we care about innovation and productive capacity.

After all, you aren’t going to be very innovative if you live in a community at the bottom of the hill, ridden with crime and destitution, the schools around you run down, and the social support you receive is minimal to none. Poverty and inequality aren't quite the motivators that the anti-egalitarians of the world think they are. If they were, we might expect Haiti or South Africa to be among the most innovative places on earth. Yet, they aren’t.

Norway: A Case Study

When Rawls developed his ‘veil of ignorance’ thought experiment, he asked individuals to imagine how they would design society if they had no idea what place in society they would be born into.

This thought experiment primes most into thinking that they'd design society with some egalitarian aims in mind. If a person didn’t know what part of the social hierarchy they would be born into, they would likely design society with high levels of social, economic, and political equality.

Under the same frame, if you didn’t know what place in each country’s hierarchy you’d be born into, which country would you choose to be born in? To me, there’s an obvious answer—Norway.

Norway has many egalitarian institutions, from its robust political democracy to its union power to its welfare state, but today, I want to talk about its public ownership. Public ownership is an underrated way in which the democratic state can extend access to wealth, and the associated power thereof, to everyday people in a horizontal manner.

How Norway does it

Norway has two big buckets of public wealth outside of general public ownership, like municipal buildings and direct state services—(1) state-owned enterprises and (2) wealth funds. Let’s talk about each in turn.

As of the start of 2025, the Norwegian state owns 69 companies directly. Norway divides these companies into two categories: category 1 and category 2. Category 1 companies are meant to sustainably maximize returns, and category 2 companies have policy goals, as dictated by the government.

The biggest example of a category 1 company in Norway is Equinor, the state’s oil company. In 2023, the company employed over 23,000 people (86% in Norway) and posted profits of $36 billion USD, remitting $6.935 billion (73 billion NOK * 0.950 USD/NOK) to the state as a dividend. This alone is worth over $1,250 for every single Norwegian ($6.935 billion/5.52 million Norwegians).

Helse Midt-Norge is an example of a category 2 company. This is a state-owned health services company tasked with providing equitable access to specialist healthcare in two Norwegian regions. As of 2023, the company employed over 22,000 people (100% in Norway) and posted an operating loss of $7.4 million (78 million NOK * 0.950 USD/NOK) compared to a profit of $30.1 million (317 million NOK * 0.950 USD/NOK) in 2022.

Across all of these state-owned enterprises, the goals and types of companies are diverse, ranging from oilfield to financial services, from healthcare to the arts. As of mid-2024, these companies are worth $130.6 billion (1,375 billion NOK * 0.950 USD/NOK). This is equal to over $23,000 for every single Norwegian. In total, these companies employ over 336,000 people, and this isn’t just oil.

The non-Equinor portfolio represents a majority of the state ownership value of Norway. Norway, of course, benefits heavily from its oil wealth, but it’s incorrect to say a state couldn’t maintain significant public ownership absent oil wealth.

Now, let’s move on to the big daddy of Norwegian public ownership—its wealth funds. Norway chooses to responsibly manage its wealth through diversified investment. The difference between a state-owned enterprise and a public wealth fund is the same difference between an individual who owns both a small business and has a 401(k). One is a specific business that the individual operates directly, and the other is just a mixed pool of assets, from stocks to bonds to real estate.

Norway has two main wealth funds, a small wealth fund called the ‘Government Pension Fund - Norway' (GPFN) and a very large wealth fund called the ‘Government Pension Fund - Global' (GPFG).

As of mid-2024, the value of these two funds together (around 98% of which is the global oil fund) was around $1.7 trillion (18 trillion NOK * 0.950 USD/NOK). This is worth around $307,000 for every single Norwegian.

In 2025, the government’s proposed withdrawal from the fund amounted to ~2.5% of the fund’s value (below its 3% guidance) or $43.7 billion (460 billion NOK * 0.950 USD/NOK). This is about $7,800 for every single Norwegian ($43.7 billion / 5.6 million Norwegians).

The large oil fund comes from net of oil revenues after all government expenses. For example, let’s say government expenditure in a given year is $10, and, after all non-oil revenues, the government generates $9. Let’s say in the same year oil revenues amount to $2. The government would spend $10, $9 from non-oil revenue, $1 from oil revenue, and it would take the extra $1 from oil revenue and invest it in the GPFG.

This accomplishes two main goals at once. (1) The fund insulates the public from the volatility of oil by diversifying this cash flow into a broad asset base, and (2) the accumulated wealth of the fund lowers wealth inequality.

Public Ownership & Inequality

To understand how much public ownership lowers wealth inequality, let’s look at Norway’s private wealth inequality. In 2023, private household net worth had the following distribution:

Even in Norway, with high rates of unionization and taxation (including a wealth tax), private household wealth remains very unequal. The top 10% have a majority of private household wealth. By contrast, the bottom 50% have a combined 3.6% of household net worth, and the bottom 20% have a negative net worth. As in, their liabilities outweigh their assets.

Let’s bring in Norway’s public wealth. Using the 2023 general government balance sheet (local and national government), we can obtain the net worth of Norwegian governments. I subtracted 16,000 billion NOK to separate (approximately) the wealth fund from other public assets in Norway around the same time. Note, the non-sovereign wealth fund (SWF) bucket includes state-owned enterprises and all general government ownership (like transit systems, public schools, etc.).

Assuming public wealth is horizontally distributed (i.e., in a democratic society, each household has an equal controlling claim to public wealth), this is the distribution of total wealth in Norway compared to its private wealth distribution:

Including public wealth in the total wealth of Norway, wealth distribution becomes radically more egalitarian. The top 10 percent’s wealth share is cut in half. The top 0.1%’s wealth share is cut by two-thirds, and the bottom 50% of people now control over 33% of total wealth, as opposed to 3.6%, a 9x increase.

It’s important to note that Norway did not accomplish this with autocratic and/or uncompensated expropriation. The most sustainable way for countries to accumulate public wealth would be, like Norway, to purchase open-market capital (stocks, bonds, ETFs, etc.), strategic buyouts of existing companies (no different from a traditional acquisition process), and capitalization of public companies using tax revenue or public debt.

The management of these assets is also crucial. It’s important that governments have professional, independent, apolitical management of these assets to ensure optimal allocation of public capital.

State-owned enterprises, as opposed to diversified wealth funds, also come with unique challenges. Like Norway, it’s fine to have state-owned enterprises with policy goals, but a strict segregation of profit-maximizing state-owned enterprises and policy-oriented state-owned enterprises helps avoid mixed objectives for publicly owned enterprises.

It’s reasonable to be skeptical of the state’s ability to invest and manage capital, but this skepticism should exist regardless of the entity in charge. Large corporations don’t always make optimal decisions, but, given their size, they tend to make good decisions most of the time for their business’s goals. Similarly, the way a state manages its public wealth matters, but it’s silly to think a people couldn’t design its institutions to manage public wealth appropriately.

Closing Thoughts

The People’s Policy Project released a similar analysis on Alaska’s public wealth fund, which inspired this piece. If Alaska can do it, I’m not sure why America at large can’t.

There’s good reason to care about wealth inequality, especially in the presence of effective inequality-reducing policies. Norway is a growing, wealthy society. While it’s true Norway owes a lot of its success to its resource wealth, almost every society has resource rents it could collectivize. Every society can collectivize land rents, and all societies, under a transparent, democratic framework, could engage in public wealth accumulation through a wealth fund and state-enterprise portfolio like Norway.

All society needs is the knowledge and will to demand change and produce a more egalitarian, prosperous world.