Johann von Komorzynski on Reforming the Building Tax (1904)

Johann von Komorzynski’s testimony to the building-tax inquiry comprises procedural interventions and an expert opinion delivered on 16–17 November 1903, followed by a supplementary response, published in 1904. Its organizing claim is that Austria’s excessive building taxation burdens housing consumption as well as property ownership. Reform must therefore address rents, land values, construction incentives, and administrative practice together. The opening interventions establish this interconnected approach: Komorzynski asks that experts complete their answers before discussion, because isolated responses obscure the principles connecting them.

Introducing his testimony, he combines academic authority with almost thirty years’ experience on the governing board of a Viennese building company. He rejects the familiar opposition between theoretical and practical knowledge:

Eine richtige Theorie darf mit der praktischen Erfahrung nicht in Widerspruch geraten und praktische Erfahrungen andererseits werden gediegene Kenntnisse nur zeitigen können, wenn auch eine gewisse theoretische Richtunggebung vorhanden ist.

English translation: A correct theory must not conflict with practical experience, and practical experiences, in turn, can yield sound knowledge only when some theoretical guidance is also present.

The first day’s substantive answers concern valuation. Komorzynski insists that calculations begin with rents actually obtainable locally, rather than construction expenditure treated as grounds for demanding a particular rent. Market income determines how much capital can economically be invested; costly improvements cannot compel tenants to pay beyond their means or preferences. Land value consequently emerges as a residual: estimate a proposed building’s net rental income, capitalize it, and deduct construction costs. Site configuration, frontage, surroundings, and location make this an individual calculation, not a mechanical application of customary prices.

On the second day he distinguishes capital historically spent acquiring a property from its present capitalized value. A tax increase can reduce the return on the former while lowering the latter until its yield again corresponds to comparable investments:

Es wird das durch ein Haus repräsentierte Kapital weder eine geringere, noch eine höhere, sondern dieselbe Verzinsung bieten, wie überhaupt das Kapital in Anlagen von ähnlicher Sicherheit sich verzinst.

English translation: The capital represented by a house will yield neither a lower nor a higher return, but the same return as capital generally yields in investments of comparable security.

This distinction prepares the testimony’s central argument about tax incidence. Against the either-or position attributed to Inama, Komorzynski argues that higher rents and diminished land values can occur together. At the urban periphery, where land accounts for little of a property’s value, falling land prices cannot absorb a substantial tax increase. Rents must rise to sustain construction, provided tenants can pay; otherwise building activity and settlement contract.

Better locations command a premium for accessibility and other advantages. Their rents combine the peripheral rent for comparable accommodation with this locational premium. A tax-induced rise in peripheral rents therefore spreads inward, but does not necessarily increase the premium itself. Because taxation also falls on that premium, centrally situated properties absorb part of the burden through reduced land values. Incidence varies spatially rather than following one universal rule. Komorzynski presents this as an abstract explanatory pattern, qualified by purchasing power and the uneven adjustment of actual markets.

The argument also challenges claims that the tax has already been “amortized” through past capital losses. Capitalization cannot eliminate the continuing consequences of higher rents for housing consumption. Nor can historical losses dispose of fresh burdens continually imposed through provincial, district, and municipal surcharges. His caution extends to statistical evidence: rents rising without a contemporaneous tax increase do not establish that taxation has no effect.

Man darf nicht vergessen, daß die ökonomischen Ergebnisse zumeist eine Komplexwirkung aus verschiedenen Ursachen sind.

English translation: One must not forget that economic outcomes are usually the combined effect of several causes.

Temporary exemptions require a further distinction between individual advantage and market effects. Comparable dwellings at the same location command the same rent irrespective of their owners’ tax liabilities. Exemption thus creates a capital advantage, divided between landowner and builder according to circumstances. Yet repeated construction under exemption can depress rents generally. Relief for rebuilding has a stronger justification than relief for development on vacant land, since demolition destroys accommodation that might remain serviceable.

Komorzynski accordingly supports broad tax reduction as housing reform. Competition among landlords, vacancy losses, and additional construction should transmit relief to tenants; price inertia can delay, but not permanently prevent, adjustment. Permanent reductions in investment interest rates work through a similar mechanism. Budgetary constraints nevertheless favor gradual implementation: hold total tax receipts at their existing level and use natural revenue growth to lower rates. To counter inertia during existing tenancies, he proposes allowing tenants to deduct legislated reductions unless landlords actively renegotiate.

His administrative proposals complement this economic program. A valuation cadastre would help only if it replaced intrusive annual rental declarations with periodic assessment, rather than reproducing the existing system under another name. The concluding response accepts reduced precision: with substantially lower rates, valuation errors become less consequential, while simpler administration retains considerable value. He also demands limits on autonomous surcharges, lest local increases undo state relief. The testimony’s relevance lies in this integration of spatial tax incidence, housing welfare, and administrative proportionality: nominally direct property taxation can function substantially as a tax on tenants’ need for accommodation.