Economist Discusses Wealth Inequality and Inheritance Taxation in Switzerland

An interview with economist Marius Brülhart sheds light on the complexities of wealth inheritance in Switzerland, highlighting the impact of inheritance practices on economic inequality and public finances.

In Switzerland, nearly half of all personal wealth is inherited, yet a third of the population receives nothing upon the passing of relatives. This disparity poses questions about wealth distribution and its implications for society. Brülhart emphasizes the importance of income for equitable living standards, noting that while Switzerland performs well in terms of income distribution, wealth distribution is a different story.

Brülhart points to rising wealth concentration as a growing concern. The wealthiest 1% of Swiss citizens now hold 45% of the taxable wealth, a figure that has steadily increased over the past two decades. He suggests that while inheritance can temporarily alleviate wealth concentration by distributing assets among multiple heirs, this effect is often short-lived. Research indicates that smaller inheritances tend to be spent quickly, on items like new cars, while larger inheritances, particularly those including business assets, are more likely to be retained and accumulated, thereby contributing to a long-term increase in wealth concentration.

The aging population of heirs adds another layer to this issue. The average age of Swiss heirs is now around 60, which raises concerns about the economic implications of wealth transfer at this life stage. Brülhart notes that inheritances often lead to a reduction in labor supply, as many individuals over 50 choose to retire early upon receiving an inheritance. This trend can negatively affect the overall economy, especially since a significant portion of inheritances is directed to older individuals.

While some propose reforms to allow for earlier wealth transfers to younger generations, data shows that younger heirs similarly tend to reduce their work commitments. Thus, the anticipated economic benefits of earlier inheritances--such as entrepreneurship or further education--do not typically materialize.

Brülhart expresses concern over the declining inheritance tax rates in Switzerland, which have fallen significantly since 1990. This reduction is attributed mainly to competitive tax policies among cantons, yet evidence suggests that the mobility of wealthy individuals is often overstated. He believes that a more equitable inheritance tax system should be based on total assets rather than the current structure, which disproportionately affects childless individuals.

He critiques the proposal from the Swiss Socialist Youth, which advocates for a 50% tax on inheritances exceeding 50 million Swiss francs. Brülhart warns that such high rates could prompt wealthy individuals to relocate, ultimately resulting in diminished tax revenues for the state. His calculations indicate that a significant percentage of high-net-worth individuals would likely move to avoid these taxes.

In contrast, he supports the idea of a moderate inheritance tax, which could provide a vital funding source for social programs like the national pension system (AHV). He argues that a balanced approach to inheritance taxation could alleviate some of the financial pressures on the government without penalizing those who contribute significantly to the economy.

Brülhart also discusses the current debt brake policy in Switzerland, which mandates that the federal government maintain a surplus. While he acknowledges the merits of fiscal prudence, he suggests that the debt brake's strict implementation may hinder the government's ability to respond to economic fluctuations. He proposes adjusting how surplus funds are managed to provide the government with additional financial flexibility.

Overall, Brülhart's insights highlight the intricate relationship between inheritance, wealth concentration, and economic policy in Switzerland, urging a reconsideration of current tax structures to foster greater equity and sustainability in public finances.