Richard Reisch on Building-Tax Reform

Published in 1904, Richard Reisch’s interventions in the fourteenth session of the building-tax reform inquiry, held on 9 December 1903, examine the economic assumptions behind proposals to reduce the tax on rental income from buildings (Hauszinssteuer). The document records successive questions and objections, including an extended response to Professor Schwarz. Its central concern is causal consistency: tax relief cannot simply be assumed to lower rents, increase property values, stimulate construction, and restore public revenue simultaneously. Reisch asks who would capture the benefit and whether one predicted effect would undermine another.

The opening interventions question the distinction between reducing existing rents and preventing future increases. Reisch understands the expert to expect no immediate rent reduction but some restraint on subsequent rises. He doubts that tax relief unable to produce the first effect could necessarily produce the second, especially where other causes drive rents upward. He also challenges the premise that further increases are inevitable:

Ich weiß auch nicht, welche Ursachen der Herr Experte im Auge gehabt hat, als er von einem unausweichlichen weiteren Steigen der Mietzinse gesprochen hat.

English translation: Nor do I know what causes the expert had in mind when he spoke of an inevitable further rise in rents.

This is a demand for a specified mechanism, not an independent forecast of rental movements. Reisch’s qualifications—repeatedly allowing that he may have misunderstood—preserve the interrogative character of the hearing while exposing unsupported connections between tax policy and market outcomes.

His next intervention distinguishes property income from the valuation against which profitability is measured. Schwarz’s claim that buildings have become less profitable seems especially questionable in rapidly expanding Mährisch-Ostrau. Reisch considers it implausible that owners have received no benefit from that expansion and suggests that buildings have appreciated substantially. A lower reported return might therefore reflect higher valuations rather than deteriorating receipts:

Und dann entsteht eben wieder die Frage, was wohl das Richtigere ist, die erhöhten Wertschätzungen der Gebäude oder der angeblich verminderte Ertrag derselben?

English translation: And then the question arises again: which is really the more accurate—the increased valuations of the buildings or their allegedly diminished yield?

The conceptual move is to make the basis of comparison itself contestable. Claims of distress among property owners require scrutiny of asset values as well as income; a falling rate of return does not by itself establish worsening economic circumstances.

Reisch then brings valuation into the debate over construction incentives. Schwarz reportedly expects tax relief to raise building-site values without raising existing building values, while increased construction would compensate the state for lost revenue. Reisch challenges both propositions. Other experts, particularly representatives of property ownership, had expected relief initially to be capitalized into building prices, with later rent reductions potentially moderating that appreciation. More decisively, rising land prices could absorb the very benefit intended to encourage construction:

Wenn aber der Herr Experte wieder andererseits gesagt hat, daß unzweifelhaft eine Erhöhung des Wertes der Baustellen eintreten würde, dann weiß ich nicht, worauf er eigentlich die Vermutung gründet, daß eine Erhöhung der Bautätigkeit eintreten werde, denn wenn der Nutzen aus der Steuerherabsetzung sich bereits in den Grund und Boden verschlossen hat, also vom Erwerber bezahlt werden muß, dann bleibt kein Anreiz für die Ausführung oder doch nur ein sehr mäßiger, so daß also unter dieser Voraussetzung eine beträchtliche Steigerung der Bautätigkeit nicht zu gewärtigen sein dürfte.

English translation: But if, on the other hand, the expert has said that building-site values would undoubtedly rise, then I do not know on what he actually bases the supposition that construction activity would increase; for if the benefit of the tax reduction has already become locked into the land, and must therefore be paid for by the purchaser, then no incentive for construction remains, or at most only a very modest one, so that, on this assumption, a considerable increase in construction activity would hardly be expected.

The final intervention applies a similar consistency test to municipal finance. Schwarz hopes to remedy property owners’ difficulties by fixing high local surcharges. Yet, using the expert’s own figures, Reisch notes that surcharges in Mährisch-Ostrau amount to 134 percent of the state tax. Even transferring the entire state tax yield to municipalities would not cover that amount. Nor would reassignment remove the expenditure pressures responsible for annual increases: municipalities would still require new levies.

The document’s significance lies in these linked distinctions between rental effects, asset appreciation, construction incentives, and fiscal capacity. Reisch supplies no comprehensive alternative reform programme here. His contribution is to show why redistribution of tax receipts or reductions in statutory burdens cannot establish the promised economic benefits without an account of capitalization and continuing public expenditure.