Tax break seeks to ease pressure on families
A proposal granting tax breaks to compensate for education expenses for children is coming to a nationwide vote on March 8. It is the latest in a series of initiatives by different political groups to reduce the fiscal burden on families.
The centrist Christian Democratic Party has traditionally put family policy high on its agenda. Unfazed by unsuccessful attempts in parliament over the past two decades to boost the financial standing of families, it collected the necessary signatures to force a nationwide vote.
While the initiative was pending in parliament, voters rejected two separate constitutional amendments in nationwide ballots in 2013 (see box).
The latest initiative seeks to deduct child allowances and education costs from taxable income and was initially promoted by Lucrezia Meier-Schatz eight years ago.
However, the Christian Democratic parliamentarian, who also has been leading the Pro Familia pressure group, saw her plans given short shrift by parliament. Still, the Christian Democratic Party pursued its political drive. But most other major parties and the government have come out against the initiative.
“Our main aim is to boost the purchasing power of the middle class,” says Meier-Schatz. “But the current system of allowances and taxes simply makes no sense.”
Employers pay about CHF5 billion ($5.8 billion) annually to partially make up for the educational costs of families with children, according to Meier-Schatz. But at the same time, the state taxes the allowances with a total of up to CH1 billion every year – CHF200 million for the federal coffers and CHF760 million in taxes for the cantons and communes.
Meier-Schatz argues that in many cases families in the lower and middle tax brackets have to make do without subsidies for health insurance premiums, reduced tariffs for crèches or student grants because the educational child benefits are added to the taxable income.
Unfair
Most other parties represented in parliament as well as the government take a different view. They argue that the child benefits increase the purchasing power of a family. Given that citizens are taxed according to their wealth and income, the present tax policy is perfectly in line with the constitution.
“The initiative is unfair. Rich families stand to benefit much more than poor ones because of the system of progressive tax rates,” says Ada Marra, parliamentarian of the leftwing Social Democratic Party.
She says lower income households are better off under the present system as only one out of two reaches the minimum tax threshold, at least as far as federal taxes are concerned. Therefore they would not gain even if the method is changed.
On the contrary, say opponents of the initiative: it is only the more affluent families who would benefit.
The higher income classes would also be the real winners when considering the money owed to a taxpayer’s canton and commune of residence.
Family policy
It is the third time in two years that voters will decide on a proposal to alleviate the tax burden for families.
In March 2013 a constitutional amendment proposed by parliament to improve conditions for parents wishing to combine work and family was thrown out at the ballot box. It aimed at giving both the federal and cantonal authorities powers to boost childcare options.
A separate initiative by the conservative right Swiss People’s Party to grant tax breaks for families who look after their children at home was also rejected by voters in November 2013.
Middle-class benefits
But Meier-Schatz dismisses the criticism. “There are only a very small number of children – around 6% – of richer families,” she says.
“But it is the middle-class families, 59% of the total, who can’t qualify for subsidies aimed at helping the less well-off [to pay towards childcare or to qualify for grants].”
“Therefore financial pressure on a majority of families would ease if the child education benefits became tax-exempted,” Meier-Schatz concludes.
Despite opposition from all the other parties she is confident of winning. “Our initiative is simple and would have an immediate impact. I’m sure that parents can put two and two together. Adding up the figures, they will understand that the proposed tax breaks will boost their purchasing power.”
Meier-Schatz also appeals to common interest between different generations. “The grandparents will become aware of the benefits for their children and grandchildren.”
More to come
It is unlikely that this is the final word Swiss voters will have on a proposed constitutional amendment to boost family budgets.
Another initiative by the Christian Democrats aims at putting tax rates and pensions of married couples on par with registered partnerships.
Parliament is still to finish discussions on the proposal before a date for the vote is set.
For its part, the Social Democratic Party was planning its own initiative proposing an amended system of child benefits unrelated to income. But the launch, initially set for February, has been postponed.
Party politics
The rightwing Swiss People’s Party and the centrist Protestant Party both made a U-turn over the latest initiative.
Last September their representatives in parliament overwhelmingly voted against the family tax breaks, but the decision was later overturned by party grassroots.
They now recommend voters approve the initiative by the Christian Democrats on March 8.
(Adapted from Italian by Urs Geiser)
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