The finance director of the Zurich Cantonal Council about new compensation for tax progress

The term “cold progress balance” is not self-explanatory. But the principle is important to taxpayers. If their income is adjusted for inflation, they may be at a higher rate of tax progress. As a result, they had to deliver more to the state, even if their purchasing power has not increased.

This cold progress has been compulsorily compensated in the canton of Zurich since 1987 by automatically adjusting income and wealth tax rates as well as tax deductions to the consumer price index. national practice every two years.

The think tank Avenir Suisse and the cantonal councilor Mario Senn (FDP, Adliswil) have now introduced the neologism “warm progress” into the political debate. What is implied is that workers also reach a higher level of progress as a result of nominal wage increases beyond inflation, ie when their purchasing power increases as a result of growth in production and real wages.

Together with the SVP and GLP, Senn asked for a binding motion to compensate for this lukewarm or real progress by changing the tax law. The increase in de facto taxes places particular pressure on lower incomes and the middle class. High earners in particular would almost certainly benefit from this, Senn said on Monday during the debate about the initiative.

For the critics it is “sliding

The government council rejected this order and calculated that the canton would lose around 240 million francs in taxes every year. The municipalities would suffer approximately the same reduction in income. Methodologically, he objected that inflation, as in 2021 and 2022, could be one day higher than the development of nominal wages. In addition, compensation for cold progress is common in the rest of Switzerland.

Mario Senn objected to the advice that the state was not earning less to compensate for the lukewarm progress, that its income was just increasing so quickly. In addition, the government itself points out that Zurich was the first canton to introduce automatic compensation for cold progress in 1987. Now it can move forward again instead of to look at others and the federal government.

The left and the political establishment had little to gain from the idea. SP financial politician Stefan Feldmann (Uster), referring to the proverbial false cities in the Russian Prince Potemkin, spoke of an artistic vision of false and staged truths. The heart of tax law is taxation based on economic performance. Therefore, it is fair and logical that those who receive a higher salary despite inflation pay more.

If the canton of Zurich missed 240 million francs that needed to be saved, that would certainly not help medium-sized businesses, said Green co-president Selma l’Orange Seigo (Zurich). Meanwhile, Thomas Anwander (Mitte, Winterthur) said he doubted whether this was an urgent problem. Donato Scognamiglio (EVP, Freienstein-Teufen) scoffed at the warm welcome. The people do not understand what Senn wants and they cannot get a majority in any way.

Gabriel Mäder (GLP, Adliswil) objected that the change does not benefit individuals and that the growing tax burden due to higher real wages affects broad sectors of the society. The head of the SVP parliamentary group, Tobias Weidmann (Hettlingen) sees a contradiction in the SP, which identifies itself as a defender of purchasing power. It is taxes that reduce disposable income.

Less revenue, more services?

Finance Director Ernst Stocker spoke ironically of a “creative” move. He was surprised how citizens suddenly wanted relief for middle and low income taxpayers. Until now he had always heard from there that the burden on good taxpayers had to be relieved. In addition, based on statistics, he said that medium-sized businesses are in a good position in the canton of Zurich and do not need any relief.

But he was also responsible for the budget, Stocker continued, and he spoke to the conscience of the entire parliament about how he was spending. The debate on the 2025 budget is getting closer and state services are being continuously expanded. He had to say that in German and clearly, Stocker said: “This council handles tax revenue more carelessly than my grandson does with his pocket money.”

It was of no use. The comfortable majority of SVP, FDP and GLP accepted the move by 100 votes to 76. It is now the responsibility of the government council to develop a template to balance warm progress within two years.

Ernst Stocker missed a second penalty. Together with the GLP, Mario Senn submitted a postulate to study how employees who use their employer’s electric car privately can get tax relief. It was said that the charging infrastructure and the purchase of electricity are considered part of the salary, which will be reflected in the tax return up to 2,000 francs.

This time, however, the opposition, including the SVP, saw no need for action. The problem will resolve itself in the future as electric vehicles become cheaper and political pressure increases on companies to electrify their vehicle fleets in general, it is said.

In its statement, the government council also said that covering the costs of the cost of institutions is part of taxable income, which is why Canton Zurich does not have a track. The council rejected the posting by 123 votes to 52.