Let’s Say a Resounding YES to a Tax on the Rich, If…

The United States now wants to take more federal tax from the high-end earners. This idea is worth discussing, if a few assumptions are correct (and conditions are met).

Werner Faymann probably feels vindicated: On the other side of the Atlantic, Barack Obama has obviously heard the cries of the people demanding increased taxes on the rich and has decided to adopt the idea. Hurrah! After the anti-nuclear initiative in Austria, the world is adopting our initiative for tax on the rich.

Austria would have to lower its minimum tax rate in order to reach the percentage of the American “tax on the rich.” The tax will hit taxpayers with a stiff 29 percent (for an income of $8 million). In Austria the income tax rate starts at 36 percent, 1 percent above the maximum tax rate of the United States.

If billionaire Warren Buffett lived in Austria, there is no doubt that Obama would not have delivered the pretext of a supplementary tax, because in this country, he would have had to give to the government $23 million of the $46 million that he earned in 2010.

It is a bit presumptuous to rejoice in Austria that the U.S. has discovered the tax on the rich, but this is the correct way to go. After all, France and Spain have also introduced supplementary taxes on individuals with high incomes.

One has to look at the U.S. move in context: The tax hike (if the Republicans accept it, which is questionable) is part of a massive austerity program which would forecast cuts to the extent of $3 trillion in the next 10 years. However, within the next three months, the United States needs to save more money than the entire Austrian government spends in an entire year.

In such a context, one can indeed speak about a contribution of the higher earners. Rich people are not antisocial human beings, and quite a few — for example, developer Hans Peter Haselsteiner — are quite willing to pay higher taxes under the condition, a very essential condition, that the government handles the money responsibly. Unfortunately, this is not something we can expect at the present time.

Higher taxes, which Chancellor Werner Faymann is pushing for, would ridicule all working people if, for example, these taxes are used to finance a “heavy worker” regulation. First, one should explain why perfectly healthy people, who have only seen pictures of a blast furnace, are allowed to retire after 40 years. If Austrians would retire only one year later, it would yield a billion euros per year, more than all income tax.

A temporary surcharge on the top tax rate, a temporary wealth/property tax, a solidarity surcharge or whatever you want to call it can be supported if it is focused on a national budget consolidation effort, accompanied by massive savings from an immediate abolition of the “heavy worker” regulation, an extensive administrative reform and a reduction of subsidies. The fiscal consolidation requires a large effort, which everyone should contribute to, not just the rich.

The U.S. under Barack Obama is trying to do so, by means of reductions while defending the “holy cow.” The Swedes demonstrated in the 1990s that this could be done with their “holy cow”: social benefits. The finance minister at the time, Göran Persson, had an 11 percent spending cut across all departments at his disposal. He drove back public investments, reduced social transfer payments and raised taxes, all with the promise to reverse these measures after a successful rehabilitation of the budget was accomplished. This was duly done.

Is it naïve to expect similar measures from our government? That this is not just a debate motivated by political parties but a serious discussion on how to reconstruct the country.

Is it naïve to expect a vision from our government that would extend past the next election period?

It would be nice to be able to answer “no” to these questions.