Austria’s tax burden on income over time

On behalf of the Vienna Chamber of Commerce, EcoAustria has examined the development of wage-related taxes in Austria since 1976. The calculations show that the taxes payable have increased significantly for all income levels considered. Social security contributions (employees and employers) in particular were responsible for this increase, as was income tax to a lesser extent.

The calculations can be illustrated in absolute terms: if the contributions to be paid (as a percentage of gross income) were currently at the level of 1975, they would be around EUR 15,000 per year (more than EUR 1,000 per month) lower than they actually are for a person at the maximum contribution base, for example.

Monika Köppl-Turyna, Director of EcoAustria, comments on the development of taxes on labor income: "The tax burden on labor income in Austria is among the highest in Europe. Although the planned tax reform does not represent a fundamental trend reversal in the development of work-related taxes, it is an important step in the right direction to reduce the burden on labor. With our calculations from this week, we are creating an information basis for further necessary reform steps."

Taxes play a fundamental role in everyday life. On the one hand, they finance public services; on the other, they reduce the disposable income of private households and the investment opportunities of companies. The level of taxes influences economic development and international competitiveness. In Austria, income-related taxes are of central importance.

In economic terms, both total taxes and wage-related taxes increased significantly in the period from 1976 to 2018. This is mainly due to a sharp increase until around the turn of the millennium, after which there was a broadly sideways movement.

However, the increase in macroeconomic (wage-related) taxes does not yet provide any direct information on how this is distributed across different income groups. Accordingly, this study shows the progression of taxes to be paid between 1975 and 2022 for selected levels of earned income. This also allows the effects of the Economic Stimulus Act 2020 and the planned further steps of the tax reform to be taken into account.

Seven exemplary income levels are examined, covering a broad spectrum. The analysis includes employee contributions to social insurance, income tax, employer contributions and payroll taxes. This is based on the assumption of a single person without family benefits who is employed.

There was a clear increase from 1975 to 1988, which was curbed by the 1988 income tax reform. After 1989, there was again a continuous increase until around the beginning of the 2000s. This was followed by a sideways movement at a high level. The measures in force or planned from 2020 onwards will dampen the tax burden somewhat.

The increase in contributions to be paid is greater for high incomes than for low incomes. While it amounted to around 10 percentage points of gross annual income for the two lowest income levels examined between 1975 and 2019, it was noticeably higher for the other incomes, with the highest increase of just under 22 percentage points for incomes at the maximum contribution base.

It is also clear that even comparatively low incomes currently bear a tax burden of around 45% of gross annual income, which is similar to the level that applied to high incomes in 1975.