Santa Claus arrived in Vienna early this year. The government, in fact, has announced “the largest tax relief since 1945”, as Finance Minister Gernot Blümel and Deputy Chancellor Kogler (Verdi) said. The neutral President of the Republic Van der Bellen (Verdi) hinted at his satisfaction with this pioneering reform. In fact, it is about initiating what many economists and ecologists have been advocating unsuccessfully for fifty years: an eco-social reform (RFE).

Its logic is simple, but its application is delicate. It is a question of a gradual increase in the load of goods “to” maximum “, that is to make the use of labor and goods with a lower environmental impact more fiscal, and to make the use of energy and raw materials more expensive, the emission of harmful substances, the use of water and soil. This operation should not be done with the lawnmower because we are not all the same in front of the price of one kilowatt. We need to take into account the poor and the rich. Compensation is needed for the lower income classes, more threatened by price increases. To take social differences into account, it is necessary to classify a series of categories and classes, as well as a good calibration of the compensations. An almost impossible mission. Austria is the first to try.

Shrewdly, the government has placed much more public emphasis on the social and economic aspect of the reform than on the ecological one. Indeed, this reform will change many social conditions no less than ecological ones. If successful on both fronts, this will demonstrate that there can be synergy between a socio-economic policy that is beneficial to the environment and an ecological policy that is beneficial to society and the economy.

The Austrian population (eight million inhabitants) will receive 18 billion euros in three years (in Italy it would be 120 billion). “We are cutting taxes for all those who work hard,” says the finance minister. “We have four milestones. First, workers will have more assets to live on. Second, we give incentives for environmentally friendly behavior. Third, we encourage growth. Fourthly, we will reduce the debt / GDP ratio ”.

For the middle class and for families

“The labor factor will be relieved of 4.7 billion euros per year. Income tax rates will drop from 35% to 30% and from 42% to 40% (a benefit for 3.8 million taxpayers). For people with lower incomes and retirees we will reduce the cost of health contributions (for 2.3 million workers and 1.6 million retirees). Family allowances will rise from 1500 to 2000 euros per year for each child. There will be a tax-free profit sharing scheme of up to € 3,000 per capita per year ”.

Benefits for businesses

“The corporate profit tax will drop from 25% to 23%. 350 million will go to investments to avoid relocations. We will give aid to companies that have high non-reducible energy consumption. Self-produced clean electricity will be tax free. The business profit exemption threshold will go from 13% to 15%. Agriculture and forestry will benefit from preferential tariffs for diesel. Energy independent farms will be favored by the state ”.

CO2 price

Finance Minister Blümel reveals the mystery of this pre-Christmas surprise: “We believe that CO2 emissions can have a price. However, incentives, not penalties. In charging CO2, we will help the inhabitants of rural areas forced to use the car more, as well as those who cannot afford new heating ”. The 18 billion relief in three years will be taken from the population and returned to the population. This will result in higher net costs for those who produce a lot of CO2 and lower or zero or net eco-reimbursements for those who produce less or nothing.

The tax levy for CO2 emissions will not occur individually but with the increase in the price of fossil fuels, ie gas, oil products and coal. Let me give an example with fictitious figures: a person who uses a lot of fuel for a heavy car, a large house and a swimming pool will automatically be burdened, by 500 euros a year, and receive from the state, say, 200 euros, with a net deficit of 300 euros. Instead, a person who uses few or no fossil fuels will be indirectly burdened by, say, 50 euros per year, and will come from the state, for example, 200 euros in eco-reimbursement, with a net income of 150 euros. It is said that the reform would be “fiscally neutral” because 18 billion are withdrawn from the population and 18 billion are returned to the population. However, if we consider individual people, with different individual wealth and emissions, the reform is in fact redistributive.

The eco-social tax reform aims to achieve emissions, not wealth. However, we know that, on average, CO2 emissions are quite proportional to wealth. However, if a well-off lived with ‘nearly zero emissions’, for example in a villa heated with a heat pump or the sun, traveled with an electric vehicle of weight and speed, produced their own electricity with photovoltaic panels, they would almost completely avoid the tax. on CO2 and eco-reimbursement would bring him a net income. Those with a higher income, in fact, also have more money to pay for modern eco-technologies that avoid CO2 emissions. The reform wants to encourage this.

The mechanisms of the reformation of a multiplicity of reliefs for different categories, which will satisfy everyone. Above all, however, the tax breaks in taxes, subsidies and exemptions that already exist will not allow citizens to clearly eco-refund. Other refund mechanisms could instead provide for an “energy check” identified for all citizens or inversely to income (partly similar, for example, to “what energies” in France) and received by paper mail. This check would magnify the positive perception and consent of citizens (“The state is sending me money!”).

If an eco-social tax reform (RFE) were well calibrated, it would obtain both a progressive ecological effect and a redistributive economic effect, as well as a broad consensus. It would also be a strong incentive to direct research, development and production to create products with an ever lower environmental impact. The Austrian eco-social tax reform is not a simple “CO2 tax”, but it is a real fiscal, economic and social reform. President Mario Draghi would do well to follow the Austrian example, which is putting a hand to the environment and money at the same time. In fact, it was Draghi who said in Parliament that he wanted to leave “a good planet, not just a good currency”.