The lip service to illuminate the work factor is clearly worth little. Because the new coalition takes back the previously celebrated abolition of the cold progression – only partially, but this “trick” in the government program costs taxpayers a total of 360 million euros per year.
The cold progression was criticized for years. Because it meant that with every wage increase as a result of the constant tax levels, the Austrians were more stressed. “Without adjustment, every percentage in inflation eats 400 million euros away,” said Austrian expert Dénes Kucera. In 2022 the National Council finally decided to abolish, but even then there was a catch.
The third third is randomly decided
Because the government has only indexed the tax levels with inflation, but the last third part has to be ordered. At that time, however, it was claimed that payers would benefit from income tax more in low tax levels than in the higher. Now the treasury claps this third completely from 2026 to renovate his budget.
There was already criticism during the reform. Experts believed that the state could have the money from taxpayers. The Neos also saw it, which did not stop them from sodling the measure.
“In total, the employee costs the partial reintroduction of the cold progression 360 million euros in one year,” Dénes Kucera criticizes from the Think Tanka Agenda Austria. The amount is based on the assumption that inflation is 2.7 percent in the period July 2024 to June 2025.
The more someone earns and the more taxes they pay, the stronger the effect. With the median income of around 2560 euros, it would be 47 euros per year. With a gross monthly income of 4000 euros, it is net 80 euros, considerably more for high earners (see the image above).
“The amounts do not sound particularly high in the beginning, but the employee takes this loss year after year. So hundreds of euros come together over the years, “the expert emphasizes.
Full abolition would just be a solution
In general, this leads to an extra burden instead of alleviating the factor. Kucera argues to finally completely abolish the cold progression, in Switzerland this is the case. “Unfortunately, exactly what we feared in the partial abolition has,” said the expert. The budget crisis is clear, but the state should get the money somewhere else – after all, Austria has something different than an income problem.
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.
