Switzerland is known for beautiful mountains, watches, and chocolates. The country is also known as a haven for the affluent.
This past week, the wealthy European country took a vote to its citizens, who made a decision that makes quite a bit of sense: The country decided not to add an inheritance tax and thus chase wealthy citizens away to other countries.
While some countries look to make wealthy individuals “pay their fair share” to foot the bill on expansive government programs, Switzerland realized that incorporating the proposed wealth tax would have the opposite effect, as the individuals they are targeting are typically highly mobile and can easily vote with their feet and find a more welcoming jurisdiction if punitive taxes are put in place. Keeping them in the country means they will continue to purchase goods and services that help the economy and generate more tax revenue.
CNBC reports that the idea of chasing wealthy people out of the country came from the “youth wing” of the Social Democrats. The report shares that any additional funds raised under the proposed tax rule would go to “combat climate change” – a concept that is losing momentum in many countries but remains popular in Europe. The Social Democrats view the “unequal distribution of wealth as the biggest driver of the crises of our time,” and “effective tax policy would be the most important tool for combating rising inequality and curbing anti-democratic tendencies.” Of course, socialism tends to lead towards authoritarianism. Just ask Venezuela.
The vote was on a proposal to tax inheritances, and 78% of the population voted against the obtuse strategy. Common sense won this time.
WSJ.com declared that Switzerland does not hate the rich (like some other countries) while noting that Singapore and other wealth-friendly jurisdictions could have been beneficiaries of the errant policy.
The Swiss Finance Minister Karin Keller-Sutter was quoted as explaining:
“Such a tax would have thrown our tax system out of balance and would have damaged Switzerland’s attractiveness.”
What people continue to misunderstand is that most of the wealthy earned their money by creating value with a service or product that the population wanted (unless it was a socialist country). And that money is not hidden under the mattress; it is invested, mostly in other businesses, thus creating jobs and driving wealth for others.