What is a myth about rich people
Above all, do the rich pay? Five myths about Austria as a tax country
Fierce debates regularly break out in Austria about who pays too much or too little taxes and duties in the country, who are the service providers and who is just resting in the hammock. Especially in the election campaign or like now, when a tax reform is pending, the debate boils up. Some misconceptions are particularly persistent. An overview.
Myth 1: The rich pay more taxes
Those who earn a lot also bear a higher tax burden in Austria. This sentence sounds almost so natural that it does not cause any major public discussion. The service providers finance the state. But that's simply not the case.
The most extensive study on the burden on households through taxes and duties comes from the economic research institute Wifo. Wifo analyzes the effects of wage taxes, sales tax and social security contributions. The result: households in Austria in which at least one person is self-employed or employed have an almost equally high tax burden.
It hardly makes any difference how high the income earned in the household is. The poorest ten percent pay roughly the same as the richest ten percent. The tax burden is just over 40 percent. Austria is therefore similar to a flat tax republic.
How come According to Wifo experts Margit Schratzenstaller and Christine Mayrhuber, there are several causes. The largest tax in Austria in terms of revenue is sales tax. The state took in 29.3 billion euros with her last year. That corresponds to around a third of the total tax revenue. Poor households have to put a larger proportion of their income into consumption, i.e. spend it on food and clothing. Sales tax therefore burdens these households more heavily than rich households. In addition, there is the special effect of social security contributions in Austria. They charge roughly the same amount for every euro earned above the de minimis threshold. The only exception to this principle is unemployment insurance, where lower incomes are exempt. However, because there are no additional insurance fees for very high incomes (from 5,220 euros per month), the contribution payments even have a regressive effect. Above the threshold, high earners tend to pay less.
The fact that capital income is not taxed progressively in Austria also makes a contribution. So whether someone collects 100 euros from dividends or a million: 27.5 percent is always taxed.
Myth 2: High earners always do it anyway
The fact that the duty and tax rate is similarly high for all households does not mean that all groups contribute equally to the financing of the state. Whoever earns more pays in absolutely more.
This was impressively shown by a recently published analysis by the National Council's budget service on the redistributive effect of the tax and transfer system. First of all, a comparatively small group bears a very large burden of wage and income tax. The ten percent of top earners in Austria pay 45 percent of the total income tax in the country. This is because the wage tax is very progressive overall. For example, anyone who earns more than a million euros pays 55 percent. For low-wage earners, on the other hand, exemption limits apply. So high earners make a very important contribution to the financing of the state.
The budget service has drawn up another bill that has been discussed a lot on social media. He has studied how the state redistributes. On the one hand, it was calculated how high the state transfer payments are from which households benefit. These benefits include, for example, child benefit or minimum income. This was compared with the burden of wage taxes and social security contributions. The result: only 30 percent of the richest households pay more net to the state than they get out of it.
But the calculation is not complete. The effects of sales tax were not taken into account. The equivalent of benefits in kind that the state makes available to its citizens was also not included. The state finances schools, kindergartens, universities and hospitals. Wealthy households benefit more from some of these benefits, for example because the children attend school longer.
However, there is little to be shaken about the main message of the budget service's analysis, which is also confirmed by Wifo. The Austrian state is redistributing heavily, from top to bottom. He collects about the same amount from everyone, and overall, poorer households in particular benefit from state cash and non-cash benefits. The middle class pays a lot and gets back about the same.
Myth 3: Everyone who works pays
The parties in Austria have different opinions on many economic policy issues. Everyone is largely in agreement on one thing: They are calling for the workforce to be relieved. The government coined the motto: Those who work must not be stupid, so they have to get more out of it than someone who only receives social benefits.
However, according to Statistics Austria, more than a quarter of the self-employed in Austria recently earned so little that they paid no income tax at all. Because the tax is only due from an annual income of 11,000 euros.
Then there is a large group of people who hardly pay anything. Slightly less than 40 percent of the employed people recently earned less than 20,000 euros gross per year. At this limit, an employee pays just 37 euros wage tax per month.
Not every person who earns so little automatically has to be poor: For example, a woman can earn little and still have an upscale lifestyle because her partner earns very well. In many cases, however, low incomes and low living standards go hand in hand. Either way: The constellation described makes it difficult to relieve low-wage earners by reducing wage tax. Lowering the basic tax rate from 25 percent to 20 percent only helps someone who pays taxes.
One way to remedy this would be to expand the existing negative tax: People who do not pay income tax but pay social security already receive a small tax credit. This could increase.
The government prefers a different model. In January, the ÖVP and FPÖ agreed at their government meeting to reduce insurance premiums by 700 million euros from 2020. It was explicitly stated that health insurance contributions should decrease.
This creates new holes: ÖVP and FPÖ have agreed that there should be no benefit cuts for insured persons. To do this, the government has to give the health insurers back the money it takes away from them on the other hand via tax money. Critics see this as a weakening of the self-administration of the coffers. The Chamber of Labor criticized the fact that in future the health insurance companies will have to haggle with the finance minister year after year about how much money they will get.
Myth 4: We always pay more to the state
The tax quota in Austria has to be "down, down, down": That is one of the central demands of the head of the economic research institute, Christoph Badelt, in the direction of the government. The argument goes something like this: The state burdens its citizens too much and thus prevents the economy from developing fully. This is especially true for the labor factor.
The industrial organization OECD has just calculated that an average employee in Austria has to pay 47.6 percent of taxes and duties. Only in four other of the 36 OECD countries examined is the burden even higher. In view of these values, the impression can quickly arise that we have to pay more and more to the state. But that's not true. The tax rate has remained very stable over the past few years. Although it is high in international comparison, it is not rising any further. In 2000, the average employee mentioned had to give about the same amount, 47.3 percent, to the state.
The same applies to the so-called general government tax quota. Economists calculate how much taxes and insurance contributions are paid in a country compared to total economic output. The tax rate in Austria is currently a little more than 42 percent. In the mid-1990s it was about the same, namely 41.6 percent. According to tax experts, what has shifted is the structure. Taxes on work now contribute somewhat more to the financing of the state. In contrast, the importance of taxes on environmentally harmful behavior has decreased. The environmental taxes in Austria include, for example, the mineral oil tax and various energy taxes. The change is due to the fact that environmental taxes have not been increased, while the state is earning more through the cold progression, i.e. ongoing tax increases on rising incomes. According to economist Margit Schratzenstaller, the importance of property and inheritance taxes has also declined - contrary to the international trend. Inheritance and gift taxes have not been levied since 2008; the only property taxes worth mentioning are real estate tax and property tax.
Myth 5: If the corporations paid, there would be no end of money
The many stories and revelations à la Paradise Papers in recent years have led to more public discussions about the tax morale of large corporations. The focus is primarily on IT giants such as Facebook and Google. These companies do not pay corporate income tax on their profits in Austria and many other countries. In addition, there are various tricks that corporations use to shift their profits away from Europe to tax havens.
If these loopholes were closed, the state would have endless money, so one thesis. According to experts, however, that is probably not the case. In fact, the debates tend to overestimate the additional revenue that could be generated from corporate taxes.
The economist Gabriel Zucman, together with two doctoral students from the University of Copenhagen, examined how much corporate profits actually end up in tax havens. In 2015, to which the study refers, multinationals such as Google, Amazon, Nike and Co parked a total of around 570 billion euros in profits in tax havens. That corresponds to 40 percent of the total profits that multinational companies generated worldwide that year.
The authors also determined from which countries how much money ends up in tax havens like the Netherlands or Ireland. In the case of Austria, it was 3.6 billion euros. According to this, the state loses up to 900 million euros in tax revenue per year if a corporate tax rate of 25 percent is used. 900 million more income per year - that would be a lot of money, a number of schools could be renovated and new kindergartens built.
However, this only corresponds to around one percent of the total state tax revenue. "Anyone who wants to mobilize billions in Austria cannot rush to the topic of multinational corporations alone," says economist Lukas Sustala from the economically liberal think tank Agenda Austria. The total income from corporation tax was most recently 9.6 billion euros. For comparison: the state received 28.3 billion from the wage tax. (András Szigetvari, April 29, 2019)
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