Tax reform: ‘It’s time to turn the tables’ 

It is the first vote campaign for Jansen who became president of the Young Socialists in 2019. Keystone/Alessandro Della Valle

In an interview with SWI, Ronja Jansen, president of the Young Socialists, explains the aims of the “99% initiative”. The left-wing group says the current tax system is not fair and encourages disparities in the distribution of wealth and income.

This content was published on September 5, 2021 - 09:00

On September 26, the “99% Initiative” will come to a nationwide vote. It was launched by the Young Socialists, who propose a tax increase on any capital revenue of more than CHF100,000 ($110,000) by a factor of 1.5 compared with regular income tax.

Jansen is a leading member of the initiative committeeExternal link and represents her group in the leadership committee of the left-wing Social Democratic Party.

SWI Why is an additional tax at a national level necessary when gains on assets are already levied at cantonal and municipal levels?

Ronja Jansen: Our initiative wants income on capital to be taxed 150% [compared with the regular rate]. This should be applicable for the national, cantonal and municipal authorities to ensure that the state has more money at its disposal at all three levels.

The cantons have a particular responsibility to provide public services. This is the reason why we want them and the working population to benefit from the revenue.

SWI: What’s the reason for the Young Socialists to set the rate at 150% instead of taxing capital gains like income from work?

R.J.: Gains on income on capital – that is, dividends and shares – are not generated through work. We believe therefore that this justifies a slightly higher tax. It is a very small minority of taxpayers – the richest 1% - who profit from such an income. They can cope with taxes that are slightly higher than those on earned income.

SWI: There is even opposition to your proposal within the Social Democrats, the parent party of the Young Socialists. Critics argue that applying different rates on income creates additional inequalities. What’s your response?

R.J.: This criticism has almost completely disappeared. Not a single opponent raised objections when the Social Democratic Party delegates decided on the vote recommendation. In other words, the party is unanimously in favour of our proposal. Even representatives of the reform platform [the liberal wing of the party] voted in favour of the initiative when it was discussed in parliament.

When it comes to the unequal taxation between the different forms of income, the Young Socialists are trying to introduce something new. Differences between tax rates already exist. Major shareholders for instance are privileged because they only pay a tax on dividends which is only between 50% and 70% [compared with normal shareholders].

We want to turn the tables: earned income must not be taxed higher than income on capital.

SWI: Your group set a threshold for the annual gains of CHF100,000 when the tax is due, but the text of your initiative remains vague. What is the reasoning behind the figure?

R.J.: An [annual] income of CHF100,00 on assets is only achieved by the top 1% of the population. Calculating a profit margin of 3.3%, a rather conservative estimate, you will see that only those who have invested more than CHF3 million in shares are affected by the initiative.

We’re targeting those who have so many assets and don’t have to work to make a living. The initiative doesn’t want to target small savers. Therefore we set a threshold of CHF100,000.

SWI: People who don’t depend on income from work are particularly mobile. Isn’t there a risk that this group, which already pays taxes on dividends, might leave Switzerland?

R.J.: The political right tells this horror story whenever the left launches a [tax] initiative. But studies and reality have repeatedly debunked this myth. Switzerland has more to offer than an attractive tax model. Other factors are the political stability, the infrastructure and the high levels of education.

The reasoning [of the political right] is also worrying for democracy. It’s not acceptable that a small minority can blackmail the majority in order to keep its privileges at the expense of the community.

SWI: The government has come out against the initiative, saying the text lacks clarity, notably the terms assets and capital. Where would the new tax be applied?

R.J.: The aim of the initiative is clearly stated, and the title spells it out. We want to reduce the burden for 99% of the population.

It’s perfectly normal that the implementation of a people’s initiative is defined by parliament setting the legal details. But opponents have often tried to discredit an initiative for being too detailed or too vague. Whether we like it or not, this tactic has become widely used and doesn’t come as a surprise.

We’ve decided on a version of a proposal that doesn’t include too many details. Because this is the aim of an initiative text: for it to become part of the constitution. And it makes no sense to set tax rates or other financial limits.

SWI: Back in 1977 Swiss voters threw out a similar initiativeExternal link with 55% saying no. Since then most other proposals aimed at redistributing wealth have also flopped at the ballot box. Why should your initiative do better?

R.J.: Companies and rich individuals have benefited from a massive reduction of taxes over the past decades. The federal, cantonal and municipal authorities lost at least CHF5 billion from tax breaks and inequalities have increased as a result. It’s high time we take action.

Many people are directly affected by this development. Poverty is on the increase in Switzerland and people with average incomes have come under great pressure. Health insurance coverage and rents have gone up while salary levels have not changed. We are convinced that something must be done to tackle the problem.

SWI: The OECD, an international organisation which stimulates economic progress and trade, is pushing for the introduction of a global corporate tax system. Tax justice is an issued discussed in many countries. Are the years of deregulation over and is the strong and demanding state making a comeback?

R.J.: I don’t want to go back anywhere – I’m looking ahead to a progressive future. It’s true that we’re living in a time when the economic and political consensus has begun to erode. Even institutions such as the International Monetary Fund or the OECD now admit that their policy of granting favourable tax conditions to the rich has gone too far. They are considering higher taxes for the wealthy.

I’d argue that our initiative is perfectly in line with this policy change. Of course I hope that this trend isn’t limited to Switzerland and continues globally.

We want to help relieve the financial burden for the working population. Those who are already rich and become even richer should be held accountable. The demands of the initiative are therefore modest and justified.

SWI: Opponents warn that the initiative risks draining the financial basis of small and medium-sized companies as it would lead to a lack of investment, R&D and ultimately a loss of jobs. They say that the Young Socialists are targeting the super rich but it’s the middle class and the backbone of the business community that will feel the pain.

R.J.: This is such a far-fetched argument. It’s the standard response by the political right to any demands from the left for more equality and fairness.

We’ve always said who would be affected by the initiative and who wouldn’t. The new tax would be imposed on individuals with an income on capital of more than CHF100,000 annually. Companies, however, would be exempted. To achieve such gains, it takes an investment of at least CHF3 million in shares. Which means that it applies only to the richest 1% of the population.

As for businesses, most of the small and medium-sized firms are far from reaching a profit margin that would allow them to pay out so much capital. It is not in our interest to impose higher taxes on owners of such companies, so these concerns are unfounded.

And by the way, we have received numerous complaints from owners of small and medium-sized businesses. They say they are in favour of our initiative and criticise the arguments put forward allegedly on their behalf. I think this says it all.

Read why Andri Silberschmidt is campaigning against the “99% initiative”.

(Adapted from German by Urs Geiser)

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