Redistribution by the State in Austria

The distribution of market incomes in Austria is changed considerably by government policies. The secondary distribution of incomes is the distribution of incomes once all taxes and social security contributions as well as public benefits and services have been taken into account. This distribution is significantly more equal than the distribution of primary or market incomes. Taxation and social security contributions have a proportional effect and weigh equally on all the income segments relative to their market income. Public expenditure is strongly progressive in contrast: they benefit people in need more than the well-off and their economic significance is much bigger for the lower incomes. Although universal welfare-state benefits and principles of horizontal distribution dominate, their effect is a marked vertical redistribution: aggregated public expenditure flowing to private households has an unequivocally progressive effect on the distribution of incomes. The progressivity of monetary and real public transfers has increased in the past 15 years. Taking into account incomes as well as household size, in 2005 the lower third of households which had no self-employed members received 43 percent of all public transfers. The medium third got 31 percent, while transfers to the upper third amounted to 25 percent. In the lower third of households, public transfers amounted to 84 percent of the gross market incomes, to 29 percent in the medium third and to 12 percent in the upper third. On average, public expenditure analysed in this study amounted to 27 percent of gross market income in the year 2005.