"Revenues go up in smoke"

Eco Austria: Wealth tax would be unsustainable

The SPÖ wants to tax millionaires. According to Eco Austria, a think tank with close ties to the Federation of Austrian Industries, this would not leave much left over.

(Bild: APA/HANS KLAUS TECHT)

In view of the upcoming election campaign for the National Council elections, the industry-oriented economic research institute Eco Austria warns of the negative effects of a wealth tax on economic growth. According to the institute's calculations, out of a total of five billion euros that would flow into the state coffers each year as a result of a wealth tax, only two billion euros net would remain in the long term due to the negative consequences for the economy.

In the study financed by the ÖVP-affiliated Julius Raab Foundation and Raiffeisen NÖ-Wien, Eco Austria uses the wealth tax model of the Chamber of Labor as a basis. This also largely corresponds to the "millionaires' tax" demanded by the SPÖ. Due to the planned high tax-free amounts of one million euros and an exception for owner-occupied homes, it would be primarily company shareholdings that would contribute to the tax base, according to Eco Austria. The introduction of such a wealth tax would therefore significantly dampen investment activity.

Consequences for the labor market too
Specifically, the institute calculates a five percent decline in investment compared to the situation without wealth tax, with consequences for employment and value creation. This would result in 10,000 additional unemployed people by 2030 and 20,000 in the long term; incomes would fall by 1.4 percent by 2030 and by 2.5 percent in the long term. The weaker employment and wage growth would in turn lead to lower state revenues from income tax, payroll taxes and social security contributions.

Of the five billion euros that a wealth tax would perhaps generate in the first year, only two billion euros would remain within six years, according to Monika Köppl-Turyna, head of the economic research institute Eco Austria, in an interview with APA. "And that doesn't even include the administrative costs", which would be significantly higher with a wealth tax than with other taxes.

Equalization effects not taken into account
The study did not take into account possible offsetting effects from using the revenue from the wealth tax for other measures such as a reduction in wage taxes or investments in the welfare state, as demanded by the SPÖ, for example. Instead, it was assumed that the additional revenue would be used to reduce public debt.

In an OECD comparison, Austria is one of the countries with the lowest wealth-related taxes. However, in other countries these are largely based on property-related taxes. In Köppl-Turyna's opinion, a property tax would also have significantly less negative effects on the economy in Austria than a pure wealth tax. In addition, a property tax would be easier to administer and could also contribute to land protection, according to the economic researcher.

Inheritance tax "completely irrelevant"
Köppl-Turyna, on the other hand, thinks little of the reintroduction of an inheritance tax, which not only the SPÖ, but also the Greens and several economists are in favor of. Although the administrative costs are lower than with a wealth tax, the other problems are the same as with the classic wealth tax. In addition, inheritance and gift taxes are "completely irrelevant from an economic point of view" due to the low revenue, according to Köppl-Turyna.