Why is Switzerland voting again on the ‘marriage tax penalty’?

The initiative calls for the joint taxation of married couples to be retained, but only for direct federal tax. Keystone / Christian Beutler

On November 29, the Swiss will vote for the second time this year on how to end the tax disadvantage faced by married couples. After saying yes to individual taxation in March, voters must now decide on the Fair Taxation Initiative submitted by the Centre Party, which wants to keep joint taxation.

It is not the first time that the Swiss have voted more than once on the same issue. The Covid-19 Act was put to the electorate three times in as many years. This time, the Swiss will vote on November 29 on an alternative way of ending the marriage tax penalty – although they accepted the principle of individual taxation just a few months ago.

Why hold another vote on the taxation of married couples?

At present, married couples are taxed jointly. Their incomes are added together to calculate their tax due. For some spouses, this results in a higher tax bill than if they were unmarried. This is particularly the case when both spouses have a high income. It is known as the “marriage tax penalty”.

To put an end to this disparity, on March 8 Swiss voters approved the Individual Taxation Act. This was an indirect counter-proposal by the government to a popular initiative launched by the women’s wing of the centre-right Radical-Liberal Party. The reform is supposed to take effect in 2032. From then on, each taxpayer will be taxed based on their own tax return, at federal, cantonal and municipal levels alike.

The Centre Party, however, is not in favour of this principle. It decided to press ahead with its own popular initiativeExternal link, which proposes a different way of ending the tax discrimination faced by some married couples. The text, entitled “Yes to fair federal taxes for married couples – to finally put an end to marriage-based discrimination!”, was submitted to the Federal Chancellery on March 27, 2024, accompanied by 102,051 valid signatures. 

What does the Centre Party’s initiative entail?

The initiative calls for the joint taxation of married couples to be maintained, but only for direct federal tax. This means that the spouses’ incomes would be added together and the couple would file a joint tax return. The text also stipulates that married couples should not pay more tax than unmarried people in a comparable financial situation. This principle would be enshrined in the Constitution.

The initiative does not set out the exact calculation method, but tasks the legislature with finding a solution. It does, however, provide for a fallback mechanism if no implementing legislation comes into force within three years of its adoption. In that case, the tax authorities would have to carry out two calculations: one based on joint taxation and the other using the tax scales and deductions applicable to unmarried individuals. The lower of the two amounts would then be taken into account.

Who is for and who against?

A cross-party committee supports the initiative. It comprises the Centre Party, the right-wing Swiss People’s Party, the Evangelical Party, the ultra-conservative Federal Democratic Union, as well as the Swiss Farmers’ Union and the “Famille 3plus” interest group. The federal government and parliament recommend rejecting the proposal. The left-wing Social Democratic Party, the Green Party, the Radical-Liberals and the Liberal Greens are also against.

What are the arguments in favour of the initiative?

The proponents regard it as the fairest solution to end the tax penalty on marriage. They argue that individual taxation disadvantages families in which one parent provides the bulk of the income, while the other earns little or nothing at all. Their model, they say, allows couples to decide for themselves how to divide paid work and family responsibilities, without being penalised fiscally for this choice.

They also stress that the initiative does not require a complete overhaul of the tax system, as it builds on the existing joint taxation model. This, they argue, would preclude the additional administrative burden linked to individual taxation, which would generate some 1.7 million extra tax returns, according to government estimates.

Lastly, the initiative’s proponents highlight the situation of retired couples who have organised their lives for decades on the basis of joint taxation. A change in system could put them at a disadvantage, as they can no longer adapt the division of labour and income that prevailed during their working lives.

And the arguments against?

The opponents argue that the goal of ending the tax penalty on marriage was already achieved with the approval of individual taxation last March. They therefore call for this democratic decision to be respected.

The critics also point out that, in certain situations, the initiative could create a new form of inequality, this time to the detriment of unmarried people. They could end up paying more tax than married couples in a comparable financial situation.

Furthermore, the adoption of the proposal would create a situation at odds with the principle of taxing each taxpayer individually. As the Centre’s initiative concerns only direct federal tax, it could give rise to a dual system: married couples would be taxed jointly at federal level, but individually at cantonal and municipal levels.

Lastly, according to the opponents, joint taxation provides less of an incentive to engage in gainful employment than individual taxation, particularly for the person bringing in the household’s second income. They therefore believe that the initiative does less to promote equality between women and men.

What about the fiscal cost of this reform?

The financial implications of the initiative would depend on how it is implemented. If the proposed alternative method of calculation were applied, it would result in an estimated reduction in direct federal tax revenue of between CHF700 million ($842 million) and CHF1.4 billion per year, according to the federal government’s dispatch to parliamentExternal link. By way of comparison, the individual taxation system approved in March is expected to result in a shortfall of around CHF630 million per year in direct federal tax revenue.

Will individual taxation be scrapped if the initiative is accepted?

Not necessarily. Even if the Centre’s initiative is accepted on November 29, the law on individual taxation, approved by the electorate in March, will remain in force. The federal government has set its implementation for 2032.

However, acceptance of the initiative would give rise to a contradictory situation. The Constitution would enshrine the joint taxation of married couples for direct federal tax, whereas the law would require a shift to individual taxation. It would then be up to parliament to resolve this contradiction.

>>Read our article on the taxation of couples in the countries of residence of Swiss citizens living abroad:

Edited by Pauline Turuban. Adapted from French by Julia Bassam/amva