The deductions for health insurance premiums in the tax return are particularly low in the canton of Zurich. An SVP initiative wants to change that, a counter-proposal strikes a more moderate note.
Insured persons pay high premiums for top Swiss medicine.
On paper, the canton of Zurich is extremely generous: taxpayers are allowed to deduct their expenses for health insurance, life and accident insurance and even the interest on the savings account from their taxable income. There is a separate line in the tax return for each of these items.
In practice, however, most households can save themselves this detailed list. Because the deductible total is set so low that not even the health insurance premiums can be fully offset, not to mention other insurance policies and savings interest.
A married couple with two children, for example, may deduct a maximum of 7,800 francs. The family only pays around 11,000 francs for the health insurance in the current year (average premium according to Federal Office of Public Health). Next year, their health insurance premiums will even rise to almost 11,800 francs, which is around 4,000 francs more than what can be deducted in the tax return.
With a yes, taxpayers save 200 to 400 francs
This discrepancy between high premiums and low deductions could soon be reduced: On November 27, the canton of Zurich will vote on the so-called justice initiative of the SVP and on a counter-proposal.
Both aim to increase the maximum deductible. The initiative provides for the deduction for adults to be increased from 2,600 to 3,600 francs and for children from 1,300 to 1,500 francs. A couple with two children could deduct 10,200 francs in the future, 2,400 francs more than today.
The counter-proposal does not go as far: only the amount for adults should be increased, by just 300 francs. A married couple with two children should now have a maximum of 8,400 francs credited, 600 francs more than before.
Depending on salary and model, taxpayers would save a few tens to a few hundred bills. With a taxable income of 80,000 to 120,000 francs, the counter-proposal would reduce the tax bill by around 60 to 120 francs, according to calculations by the canton, and if the initiative were approved, it would even be between 200 and a good 400 francs.
The initiative and the counter-proposal differ in another central point: the initiative requires that the maximum deduction be linked to the development of health insurance premiums. The counter-proposal, on the other hand, only provides for the deductions to be adjusted every two years to reflect general inflation, as is already the case today.
The difference is subtle, but crucial, especially in the long term: Between 1999 and 2021, consumer prices in Switzerland rose by just under 10 percent. However, the premiums for health insurance have increased doubled in the same period.
Zurich is comparatively stingy when it comes to tax rebates
Compared to its neighboring cantons, Zurich is not particularly generous when it comes to deducting insurance premiums. The limit values in Zurich are lowest for single people and married couples, and for a family with two children, Zurich is still just ahead of the cantons of Aargau and Schwyz.
The counter-proposal would not change anything in the ranking, but if the initiative were accepted, Zurich would outperform all neighboring cantons and would now allow the highest deductions.
Schaffhausen showed the way
The canton of Thurgau had already increased its rates in 2020, this year Aargau and Schaffhausen raised the limits. The people of Schaffhausen have made a particularly big leap: in February, voters in the northern Swiss canton decided to more than double the deductions in some cases. This means that Schaffhausen has overtaken all other cantons in the region. The deductions are also to be significantly increased at the federal level.
The Zurich cantonal government and a majority of the cantonal parliament support the basic approach and the counter-proposal, but reject the initiative as too extreme. This also applies to finance director Ernst Stocker, although he is in the SVP himself.
One of the main arguments is tax shortfalls: the initiative would cost CHF 150 million each for the canton and the municipalities per year. The automatic adjustment of the deductible amount to the increase in premiums is also rejected. This is confusing and makes budget planning more difficult, says the government.
Even the FDP spoke out in parliament against the initiative and thus against a tax cut to the desired extent: the effect for the individual is small, but the tax shortfalls for the state are large. However, the liberals support the counter-proposal – this would cost the canton and the municipalities around 45 million francs each.
Centre-left argues that rising health care costs are the real problem, not deductions that are too low. In addition, high earners would benefit disproportionately from higher deductions. The money should be better invested in reducing premiums.
SVP: “The money is not just gone”
Patrick Walder is SVP cantonal councilor from Dübendorf and member of the initiative committee. He doesn’t want to let it stand that the canton and the municipalities would get into financial difficulties if their proposal were accepted: “The money isn’t just gone,” he says. “The tax cut means that SMEs in particular have more to spend on consumption, and this benefits the local economy and ultimately the state.”
In addition, says Walder, the canton will significantly increase the premium reduction next year, “and nobody is asking whether we can afford it”. For 2023, the amount is a good one billion francs, about half of which will be covered by the federal government.
Although the SVP hopes that its initiative will get through at the ballot box, it is not closed to the counter-proposal. “Our slogan is a double yes and for the key question template A, so our initiative,” says Walder.
The counter-proposal does not go far enough for them on important points, “but our goal is that the citizens do not end up empty-handed,” says Walder. The counter-proposal makes it clear that the government and parliament have fundamentally recognized the problem. “Unfortunately, they lack the courage to admit that the better solution is that of the SVP.”
With a view to earlier votes in other cantons, the SVP has good reason to be optimistic: In Aargau, the increase in tax deductions for health insurance premiums was accepted with 57 percent yes votes. In the canton of Schaffhausen there were almost three quarters of the voters in favour.