I’ve written several times about the “Austrian School” of economics, but I’ve never written about the economics of Austria.
Since I just spoke in Vienna on the topic of that nation’s fiscal policy, this is a good opportunity to make up for the lack of attention.
Though it will be a depressing topic. As illustrated by this chart based on IMF data, the burden of government spending has expanded significantly over the past six years.
In other words, Austria’s economy was burdened by excessive government before the pandemic and now has an even bigger burden of spending today.
This is a recipe for economic stagnation (and you can see from the chart that nominal GDP growth is roughly even with inflation, so the past six years have not been very successful).
To make matters worse, Austria has an aging population that will lead to an even-greater fiscal burden (unlike many other European nations, it has not created private retirement accounts).
As is so often the case, bad spending policy is correlated with bad tax policy.
Here’s a chart from the OECD’s 2025 version of Taxing Wages.
As you can see, the tax burden on average workers in Austria is the third-highest among all member nations.
For purposes of comparison, I also circled the United States to show that Americans are very fortunate not to have an Austrian-sized welfare state.
This is because no country has ever figured out how to finance a big welfare state just by taxing the rich. Simply stated, there are not enough of them. As such, a big welfare state inevitably and always means a stifling tax burden on lower-income and middle-class taxpayers.
I also highlighted Switzerland because I asked the audience whether they think they get more and better services from government than their Swiss neighbors (where government spending consumes 32 percent of GDP rather than 56 percent of GDP and the tax burden is far lower).
Needless to say, none of the Austrians thought they had a better government that was more efficient at providing roads, schools, and healthcare (I got the same response back in 2013 when posing the same question to a French audience).
So I concluded by telling them they needed to copy Switzerland’s spending cap. And I also gave a plug for Swiss federalism.
P.S. American politicians who opposed entitlement reform implicitly favor Austrian-style taxes for America.
P.P.S. While today is the first time I’ve written about overall Austrian economic policy, I have a addressed a couple of quirky policy issues in that nation. In 2015, I wrote about a strange case of tax-free prostitution. And in 2013, I wrote about an even-stranger case of government mooching.
