So much bad economic policy comes out of Europe that it’s notable when a good decision gets made somewhere on the continent. That’s what Swiss voters did Sunday when they robustly rejected a proposed inheritance tax.
More than 80 percent of Swiss voters rebuffed a referendum that would impose a 50 percent inheritance and gift tax on assets above 50 million Swiss francs, or about $62 million. The Young Socialists party that proposed the new law says the money would be used to fight climate change. Yet it was so resoundingly rejected that it may deter others on the continent from following suit.
Switzerland is a wealthy country, but most people do not have a fortune so large that would be directly affected by this referendum. Instead, the electorate made a rational decision to keep what helps make the country so wealthy: a stable and predictable business climate with relatively low taxes. The Swiss understood that taking that away would hurt even those without huge inheritances.
Switzerland has a wealth tax administered locally, but its rates are minuscule and apply to almost everyone. In 2023, the country’s tax-to-GDP ratio ranked 31st out of the 38 countries in the Organization for Economic Cooperation and Development. Even a sniff of a massive inheritance or wealth tax had the country’s richest residents looking for other options to take their capital, such as Dubai, Abu Dhabi and Singapore.
The top 10 percent of asset holders generate 86 percent of wealth tax revenue. The top 10 percent of salary earners contribute 53 percent of that revenue. Not all these people would leave, of course, but only a portion of them departing would devastate the country’s finances. This is why the federal government opposed the initiative.
An inheritance tax is also complicated and inefficient. How does one value exotic assets like fine art? And if someone privately owns a large company, succession planning becomes a nightmare when the government is taking a share of the firm upon death. Some taxation is necessary, but levies on property and other forms of consumption are far fairer. Taxing work is not ideal, but an income tax is easier for a government to maintain than claiming unrealized gains that are part of someone’s estate.
America’s federal inheritance tax kicks in this year at $13.99 million for individuals, and some states add a levy on top of that. This will increase to $15 million in 2026 under the One Big Beautiful Bill Act and will be adjusted annually for inflation starting in 2027. Something all 2028 presidential candidates, Democratic and Republican, should be willing to answer: Do they think this tax should go up, down or stay the same? Do they, like the Swiss, want to prioritize healthy public finances, or do they want to make a political point of taxing the ultra-rich? It will be a telling indicator of which direction both parties are headed.
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