I’m in Geneva, Switzerland, where I just gave a speech about how international bureaucracies such as the OECD are seeking to undermine tax competition in hopes that the welfare state can be propped up for a few more years with ever-higher taxes.
But regular readers already know my views on these issues, so instead I want to focus today on a referendum that just took place a couple of days ago in this Alpine nation.
That referendum has convinced me that I was wrong when I wrote a few years ago that there were five reasons (government-constraining federalism, pro-gun culture, etc) to put Switzerland above the United States.
I’m not convinced there’s a 6th reason. Simply stated, the Swiss have to be the most sensible people in the world.
Here are some excerpts from an English-language report published by Swiss Info.
An attempt to federalise Switzerland’s inheritance tax system and redistribute wealth by taxing legacies worth more than CHF2 million ($2.15 million) has been rejected by Swiss voters… On Sunday, 71% of voters and all 26 Swiss cantons rejected the proposal. …Two-thirds of the revenue from this new tax, projected at CHF3 billion a year, would have been credited to the nation’s old age pension fund.
Yes, you read correctly. The Swiss left thought they could lure voters into supporting a tax hike based on a discriminatory tax on a tiny segment of the population.
But an overwhelming share of Swiss voters rejected this class-warfare scheme. Here’s a map of the results. But instead of liberal blue states and conservative red states that are found in the United States, Switzerland has nothing but conservative brown cantons.
The German-speaking cantons voted no. The French-speaking cantons voted no. And the Italian-speaking canton voted no.
It’s almost enough to make one feel sorry for Swiss statists.
…the political left has continued its losing streak at the ballot box. In the past two years voters have rejected pay caps within companies, the introduction of a nationwide minimum wage and a plan to scrap lump sum taxation for rich foreigners. …Supporters of the plan countered that the overall tax burden in Switzerland is still one of the lowest in Europe.
Though I have to wonder if Swiss leftists are extraordinarily stupid.
Did they really think that complaining about low taxes was the way to win an election?!?
I can just imagine what went through the minds of ordinary Swiss voters: “hmm…we’re richer than our high-tax neighbors and we’re growing faster than our high-tax neighbors…should we copy them or maintain the policies that have worked?”
Opponents had a more compelling argument.
Several politicians and media described the tax as a “KMU Killer”, referring to the German abbreviation for small and medium-sized businesses, which employ more than three-quarters of the Swiss workforce. Businesses said it would have been an effective double tax on income since firms already pay tax on earnings. …Switzerland’s cabinet, both houses of parliament and all 26 cantons had recommended voters reject the proposal, as did the main business lobbies.
Needless to say, I appreciate the argument about double taxation. That’s the obvious economic argument against the death tax.
But what makes Switzerland remarkable is the last part of the excerpt. It appears that the entire Swiss political establishment, as well as the entire business community, understand that it would be crazy to kill the low-tax goose that lays the golden economic eggs.
But ultimately, you have to give credit to the Swiss people. As mentioned in the article, they keep rejected statist proposals.
Here are a few I’ve written about.
- In 2010, nearly 60 percent of the electorate rejected a class-warfare income tax proposal.
- Last year, Swiss voters overwhelmingly killed a minimum-wage mandate.
- Later in the year, the voters of Switzerland rejected single-payer healthcare by a landslide margin.
Needless to say, my favorite Swiss referendum took place back in 2001, when 85 percent of voters imposed a spending cap on the central government. As explained in this video, this system has been remarkably effective at limiting the growth of government.
P.S. Oregon voters and California voters, by contrast, are far less discerning than their Swiss counterparts.
[…] I’m a public finance economist, I think this map from the Tax Foundation helps to explain why Switzerland is a role model. As you can see, the tax burden on workers is dramatically lower than in other European nations. […]
[…] I’m a public finance economist, I think this map from the Tax Foundation helps to explain why Switzerland is a role model. As you can see, the tax burden on workers is dramatically lower than in other European nations. […]
[…] There are many reasons to admire Switzerland. […]
[…] score dropped and Switzerland’s improved. So it will be interesting to see if the “sensible nation” takes the top spot next […]
Some comments:
1. There is a long empirical literature on how direct democracy reduces taxation and spending: see
https://academic.oup.com/ej/article-abstract/121/557/1252/5079369
https://www.cambridge.org/core/journals/political-science-research-and-methods/article/abs/direct-democracy-and-government-size-evidence-from-spain/E3D106AD332D40789DECC98090EFBA90
https://link.springer.com/article/10.1007/s11127-017-0486-0
Recall Swiss voters can use the initiative to cap federal tax rates (cf. with Leichenstein where voters in 1945 capped income tax rates to 1%).
2. California use to be libertarian – after all, it gaves us Proposition 14! But thanks to ignoring ballot propositions – oh, like Proposition 187 and open primaries – the demographics of the state have changed, as have the political incentives of the political class. Thank you supporters of unfettered open borders!
3. Oregon has had a number of libertarian initiatives over time: see, eg:
https://ballotpedia.org/Oregon_Sterilization_of_Criminals,_Measure_3_(1913)
https://ballotpedia.org/Oregon_Repeal_of_the_Sunday_Closing_Law,_Measure_7_(1916)
https://ballotpedia.org/Oregon_Property_Forfeiture_Requirements,_Measure_3_(2000)
Note, however, Washington state has had the opposite problem – voters constantly limit fees, but courts strike them down!
https://en.m.wikipedia.org/wiki/2019_Washington_Initiative_976
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And if the proposal that Sardinia should join Switzerland instead of being part of Italy gets anywhere, it would add a warm Mediterranean climate to Switzerland’s desirability. Then Switzerland/Sardinia would become one of the most attractive places in the world to live…
https://www.theguardian.com/world/2014/mar/23/italy-separatist-sardinian-swiss-canton-marittimo
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Let’s hope the Swiss stay on the virtuous cycle, and don’t become voter-lemmings, because referendum after referendum, some bad choices may pass. And a few bad choices are enough to turn the virtuous cycle of prosperity into the vicious cycle of decline — as we seem to be witnessing in America in this early 21st century where America’s economic freedom ranking is falling precipitously — with American per capita prosperity poised to follow and already sliding down towards the middle income countries at alarming speed (on a historical time scale).
The other major threat to Switzerland is its been surrounded by a fast declining statist continent. The declining Euro-continent is likely to turn increasingly nasty against Swiss success. And unlike past conflicts, European statists today seem unified in their resentment of Switzerland. So the Swiss better keep their guns in good working order, though in my opinion they need nukes (something I’m saying with a very heavy heart, as militarism is inherently one of the most coercively collectivist endeavors).
But let’s enjoy it, because Switzerland is admirable indeed. Unlike the United States which is a young nation born in the English tradition of individual liberty, Switzerland is an old world country whose citizens have had many centuries to screw things up. Yet they have not. Coercive collectivism, that seemingly inexorable entropy of civilization, seems to have little traction in Switzerland. Switzerland inspires the same hope as the Magna Carta. It is a rebuff to Thomas Jefferson’s statement that the normal state of things is for coercive collectivism to advance and individual liberty to yield (I’m paraphrasing him). Switzerland is a reminder that things don’t always get worse, and I’m sure that statists reading this see blood, so I should probably stop elaborating, lest I set Switzerland even more in the crosshairs of our typical voter-lemming neighbors who pray on the altar of coercive collectivism at their Martini gatherings.
It will be interesting to see what relationship does Switzerland develop with the OECD long term. In that relationship, I’m looking for leading clues as to where the world is moving and how to advise my children. Is Switzerland the nascent new branch of success and human prosperity in the Darwinian tree of national cultures?
I’m staying tuned with great interest…
Darwinism cannot be stopped, therefore successful cultures will emerge and break out of statism sooner or later. Cultures that operate at the top of the Rahn Curve. But let’s hope that these cultures are here already, and that Switzerland is one of the first. They’ve worked hard at it and they deserve it. They deserve some praise and support in a sea of resentment and envy.
And why are Swiss voters wiser economically? Or, why are California/Oregon voters less so? It is a puzzlement.
Reblogged this on Scoop Feed.