The tax cuts will be given to those born between 1990 and 2005 and apply to workers who earn less than 647,500 kroner a year.
The aim of the scheme is to trial whether lower taxes result in higher employment, which groups are incentivised by the tax breaks, and how much extra they work as a result.
“We do it because we need knowledge,” Minister of Finance Jens Stoltenberg said.
“We spend a lot of money on things we are unsure of the effect of. And there is uncertainty and professional disagreement about what works and what doesn't work. Now we can get the knowledge to decide that,” he added.
At most workers will save 27,500 kroner a year on their taxes, this will apply to those who earn between 326,000 kroner and 335,000 kroner a year.
The more those selected to receive the tax cuts earn, the lower the tax break.
The proposal has been sent out for consultation and could be adopted in the autumn if the government decides to carry out the experiment.
Estimates from the finance ministry suggest the scheme will cost 500 million kroner per year.
Successive Norwegian governments have tried to tackle rising social security payments and a shortage of workers in key sectors with various measures.
Stoltenberg pointed to the increase in the number of young people who receive disability benefits today compared to when he was previously finance minister in 1996. He said the scheme meant the government could avoid making cuts to the welfare state by making work more profitable.
Critics have referred to the scheme as a lottery, and leader of the Conservative Party Erna Solberg said that a tax break should apply to all young people to encourage greater participation in working life.
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