Expropriation? Why Certainly!

“Wealth tax has nothing to do with justice and is expropriation,” wrote Bernhard Felderer, director of the Institute for Advanced Studies (IHS), in Der Standard on Sept. 14. A Rejoinder.

Opinion | Georg Herrnstadt | October 2011

When economists don’t argue economically, but with a caste mentality, they like to throw big words at you. "Expropriation" is one of those words and so is "double-taxation". Every tax is – prima vista – expropriation! The squandering of public housing is expropriation. The imminent sacking of 20,000 Greek bureaucrats is as well. So are wage and pension cuts, tax rises, and controlled inflation. So are fines and penalties. Everywhere you look: expropriation!

I hear little about the various kinds of appropriation – in inter-play with expropriation – in the political and philosophical debate. The resulting property, its forms, and its transmission are taken for granted. 200 years ago Hegel wrote that the protection of private property was not the state’s responsibility. Iåndeed, the Latin word "privat" – signifying "deprived" – already hints at the origin of certain assets.

Just how dumb the talk of expropriation is when applied to taxes, becomes clear with just a little thought. When the millionaire [Hans Peter] Haselsteiner says that he is prepared to pay "outrageously high taxes for an outrageously high income," and that voluntarily, one could view his tax-contribution as a gift; or a donation to the socially disadvantaged. In this case, one could not speak of an expropriation, but at most of a re-appropriation.

However, Mr. Haselsteiner is obviously not only altruistic, he is also utilitarian. He hopes - as he puts it - to buy social peace in Austria with his tax contributions. […] Now tax money has gone from being a donation to being a purchase value or down payment as part of a "transaction." Equivalents are being traded. In exchange for my taxes, I get health, education and security. And that’s a good thing. […]

When I was recently driving (too fast) through Horn, I became the victim of an expropriation of €60 by the district authorities. Mr. Felderer, what do you say about that?

The next fighting word is double-taxation. […] The mendacity of those who rage against double-taxation is easy to see through their silence about the 20 per cent VAT, in other words of sales tax plus a consumer tax, even though the money being taxed here has, in fact, already been taxed. This clearly unjust, because non-progressive, tax makes up a third of Austria’s tax revenue. And it is paid by everyone, even by those who are exempt from income tax due to their shamefully low wages.

The SPÖ leads the debate on redistribution, if at all, almost exclusively under the aspect of social justice. Sometimes the  argument of democracy being jeopardised in times of economic crisis also comes to the fore: Right wing populists will have an easy time gathering the votes of angry, apathetic, extremely disappointed and humiliated parts of society. […]

Both views have their justification, but the concrete economic causes are not discussed enough, or only in unintelligible bureaucratic jargon. Even the head of the Austrian workers’ union (ÖGB), [Erich] Foglar says, "losses in purchasing power must be compensated." Why doesn’t he finally demand: "Low and middle incomes need a significant and urgent raise"?

A "New Deal" for all!

The current, exorbitant inequality of income and wealth was the main cause for the last big crisis and will lead to further economic catastrophes, because it stalls mass consumption and the very rich have more wealth than they can feasibly consume, while wisely refraining from investing in the shrinking real economy.  We know the consequences: enormous sums of money in the banks and in financial speculation.

By the way, expropriation measures on an unheard of scale was what turned the U.S. into an economic super power during and after the Second World War, as well as into a just society – a respected position which it is now on the verge of losing.

Those expropriation measures entered the history books under the name of the New Deal: The top tax rate rose from 24 to 79 per cent, and after the war Eisenhower raised it to 91 per cent. Business tax, which stood at 14 per cent in 1933, rose to 45 per cent by 1955, and inheritance tax went from 20 to 77 per cent.

These policies of raising state revenue - and precisely not just cutting costs - proved so beneficial to America’s economic and socio-political development that they should be the shining example today. This includes adapting salaries to the economic growth rate. ÷


Georg Hernnstadt was a founding member of the political rock band "Schmetterlinge" ("Butterflies") in 1969. He works as a composer, director, and organisations consultant in Vienna. This is an excerpted translation of a commentary published in Der Standard, Sept. 17, 2011.

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