In view of the upcoming election campaign for the National Council elections, the industry-related economic research institute Eco Austria warns about the negative effects of a wealth tax on economic growth. According to calculations by the institute, of the total of five billion euros that would flow into the state treasury annually through a wealth tax, only two billion euros would remain net in the long term due to the negative consequences for the economy.
In the research funded by the ÖVP-affiliated Julius Raab Foundation and Raiffeisen NÖ-Wien, Eco Austria is based on the Chamber of Labor’s wealth tax model. This largely corresponds to the ‘millionaire tax’ demanded by the SPÖ. Due to the planned high allowances of one million euros and an exception for home ownership, business investments in particular would contribute to the assessment basis, according to Eco Austria. Investment activity would therefore be significantly dampened by the introduction of such a wealth tax.
Consequences also for the labor market
In concrete terms, the institute calculates a decrease in investments of five percent compared to the situation without wealth tax, with consequences for employment and value creation. There would be an additional 10,000 unemployed by 2030, and 20,000 in the long term; Incomes would develop 1.4 percent weaker in 2030 and by 2.5 percent in the long term. Weaker employment and wage developments would in turn lead to lower government revenues from income taxes, payroll taxes and social security contributions.
Of the five billion euros that a wealth tax might generate in the first year, only two billion euros would remain within six years, says the head of the economic research institute Eco Austria, Monika Köppl-Turyna, in an interview with the APA. “And that doesn’t even take into account the administrative costs,” which are considerably higher for a wealth tax than for other taxes.
Compensatory effects are not taken into account
The study did not take into account possible compensating effects through the use of wealth tax revenues for other measures, such as a reduction in payroll taxes or investments in the welfare state, as requested by the SPÖ. Instead, it was assumed that the additional revenue would be used to reduce the national 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 taxes. According to Köppl-Turyna, a property tax would have significantly less negative effects on the economy in Austria than a pure wealth tax. Moreover, a property tax would be easier to administer and would also contribute to soil protection, according to the economic researcher.
Inheritance tax “completely irrelevant”
Köppl-Turyna, on the other hand, has little interest in reintroducing an inheritance tax, which is not only in favor of the SPÖ, but also the Greens and various economists. Although the administrative burdens are lower than with a wealth tax, the other problems are the same as with the classic wealth tax. Moreover, inheritance and gift taxes are “completely irrelevant from an economic point of view” due to low income, says Köppl-Turyna.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
