Blaming Welfare Scams

At its party conference in Saalfelden this September the ÖVP made an acrobatic move to bat away both the accusations of graft in its own ranks, and the growing calls for a wealth tax in one go: "Welfare fraud is an abuse of this country’s culture," party head Michael Spindelegger barked.

The idea has the seduction of a logical sequence: We don’t have to raise taxes if we cut the state’s losses. Then a syllogism: The state loses money through political corruption and welfare fraud. So one is as bad as the other. Nothing is more dangerous in politics than the appeal to logical inevitability.

The very attempt to compare white collar crime with, at worst, petty theft by marginalised groups is distasteful. But it is also wrong: They are vastly different in nature and scale.

While self-enrichment by well-paid public officials is an obvious disgrace, the notion of welfare "fraud" is often misplaced: It is an enormous presumption to claim that individuals who feel they need a subsistence grant to make ends meet should not be entitled to it because, say, they have a small undeclared income or a little property. Their choice to preserve their property for better times should be honoured, while they receive the support they need to recover from illness or unemployment.

Regarding scale, consider the losses incurred by the state. In June 2011, there were 119,000 beneficiaries of the annual €9,000 subsistence grant in Austria; if 5 per cent of the claims were "fraudulent" (a high estimate), this would cost the state €53.5M per year. This compares to €40M in annual maintenance charges for the emergency service radios that were dubiously contracted from Telekom Austria –  overpriced, according to Wiener Zeitung (Sept. 12) –  not to mention the €1.8 billion incurred by the (allegedly) corrupt and unnecessary purchase of Eurofighter defence planes.

But a more permanent leak in the state budget are the billions lost in revenue each year through tax evasion – the classic white collar crime. While there are no recent estimates for Austria, the practice costs Germany €30 billion in tax every year, according to Thomas Eigenthaler of Germany’s Federal Tax Police Union.

These figures would suggest that more effective taxation of the wealthy would net the state more than going after welfare "fraud" by the poor. But Finance Minister Maria Fekter (ÖVP) thinks a wealth tax would endanger civil liberties. She cautions against a dystopia in which the state sniffs through the private fortunes of well-heeled ÖVP voters. Welfare "frauds", clearly, don’t have the luxury of such privacy: The ÖVP has demanded an evaluation of subsistence grant abuse by next year.

–  LD