Richard Reisch: Interventions on Building-Tax Reform

Richard Reisch’s interventions in the twelfth session of the building-tax reform inquiry, held on 7 December 1903 and published in 1904, examine how testimony about distressed property markets should inform fiscal reform. The supplied document records one substantial intervention, a further challenge to the proposed assessment and tax-reduction scheme, and a brief numerical correction. Addressing expert testimony about Olmütz, Reisch distinguishes the effects of tax legislation from those of enforcement, provincial and municipal levies, speculative borrowing, and foreclosure procedures. His central concern is causal attribution: hardship experienced by property owners does not by itself establish that the state building tax caused it.

Reisch begins by accepting the value of exceptional local cases, provided their distinctive circumstances are established before general conclusions are drawn. He then questions whether the taxes discussed by the expert had previously been assessed correctly:

Wenn wir den Einfluß der bisherigen Steuer betrachten wollen, so glaube ich doch, daß es unbedingt notwendig ist, von der Voraussetzung auszugehen, daß die Steuer bisher auch wirklich richtig bemessen worden ist.

English translation: If we wish to examine the influence of the existing tax, I nevertheless believe that it is absolutely necessary to proceed from the assumption that the tax has in fact previously been correctly assessed.

This requirement changes the interpretation of an apparent tax increase. For rented dwellings, Reisch argues, assessment follows the rents declared by owners; a change of inspector should therefore not independently alter liability if those declarations were accurate. He acknowledges a different situation where owner-occupied premises require an assessment by comparison. In the Olmütz case, however, he interprets the reported connection between a new inspector and higher rents as evidence of earlier underdeclaration. The sharp rise recorded between 1896 and 1897 coincided with personal-income-tax legislation that made inaccurate declarations harder. On this account, the relevant administrative failing was delayed enforcement, not an injustice created by enforcing the law.

His second distinction separates state taxation from charges imposed by autonomous authorities. Against Brandhuber’s interruption that Olmütz levied no surcharges, Reisch points to provincial surcharges rising from 33 to 57 percent between 1890 and 1900 and to the municipality’s introduction of a levy of ten hellers per crown of rent. The absence of a formally designated municipal surcharge does not establish the absence of an equivalent burden:

Mietzinsheller und Zuschläge zur Hauszinssteuer sind aber in ihrem Effekte identisch. Formell zahlt sie der Hausherr, getragen werden sie aber in der Regel vom Mieter.

English translation: Rent-heller levies and surcharges on the rental tax are, however, identical in their effect. Formally, the landlord pays them, but as a rule they are borne by the tenant.

Reisch thus distinguishes legal form from economic incidence. Expressed as a surcharge on the rental tax, the municipal levy amounts to more than 44 percent, or more than 50 percent when the tax reduction he mentions is included. His closing correction clarifies that the approximately 70 percent figure combines the municipal equivalent of 44.11 percent with the provincial increase of over 24 percent. The point is not merely computational: burdens generated by autonomous authorities should not be attributed indiscriminately to the state treasury.

Reisch next challenges foreclosure records as evidence of a general collapse in building values. Official valuation rules need not reproduce market conditions, while forced-sale prices reflect unusually indebted properties and creditors’ bidding strategies. A mortgage creditor may bid only enough to secure the property and protect a claim; the recorded sale price therefore cannot simply stand for the building’s underlying value. Reisch accepts that Olmütz faced serious difficulties but locates much of their explanation in construction undertaken almost entirely through mortgage credit.

His account of this vulnerability turns on a mismatch between returns and financing costs. Buildings yield the relatively low return associated with immovable property, whereas mortgage interest follows the return available to mobile capital. Heavy borrowing magnifies the resulting discrepancy. What appears as damage inflicted by taxation may consequently arise from the financial structure of ownership. Reisch’s argument does not deny distress; it disputes the inference from distress to a particular fiscal cause.

The final substantive discussion examines the proposed use of personal-income-tax declarations for assessing property yield. Reisch questions their advantage over dedicated rental-tax returns: many owners submit no personal-income-tax declaration, and individualized returns record actual maintenance expenditure rather than standardized allowances.

Es ist erstens außerordentlich mühsam und wie gesagt, sehr häufig sind die pauschalierten Erhaltungskosten für die Hausbesitzer günstiger, als wenn die effektiven zur Anrechnung kommen.

English translation: First, it is extraordinarily laborious and, as already stated, standardized maintenance allowances are very often more favorable to homeowners than allowing the actual expenses.

Individualization therefore promises neither administrative simplicity nor necessarily better treatment for owners. In his subsequent intervention, Reisch adds that debt interest and accommodation provided without payment to relatives introduce differences between personal-income taxation and property-yield taxation. Actual expenses also fluctuate, making annual individualized assessment less stable than a fixed percentage allowance.

Finally, he tests the proposed gradual tax reduction against the expert’s own account of rent formation. If only substantial reductions affect rents, small annual reductions financed through the proposed quota scheme cannot plausibly promise benefits to tenants:

Eine derartige sukzessive und allmähliche Steuerherabsetzung wird ganz gewiß den Mietern nicht zugute kommen.

English translation: Such a successive and gradual tax reduction will certainly not benefit tenants.

The interventions’ significance lies in this disciplined separation of assessment, incidence, valuation, and credit conditions. Reisch subjects reform proposals to questions about their evidence and intended beneficiaries, demanding that claims of relief for owners or tenants be demonstrated rather than assumed.