More than 90 percent of voters in the Swiss Canton of Obwalden have voted for a flat tax of just 1.8 percent. This is positive news for tax competition within Switzerland, and it doubtlessly will put even more pressure on Europe’s welfare states to reform oppressive tax regimes. Presumably voters in other Cantons will now petition for a chance to vote for low-rate flat tax systems, and maybe it is just a matter of time ‘til one of them decides to completely eliminate the income tax. Swissinfo reports:
(source)Obwalden has become the first Swiss canton to adopt a flat income tax rate, with more than 90 per cent of the electorate voting in favour of the move. The decision, announced by the authorities after a vote on Sunday, comes after a court ruled the canton’s previous degressive tax model unfair. From January Obwalden will impose a rate of 1.8 per cent on all categories. The new model also exempts the first SFr10,000 ($8,700) of income from taxation, a measure designed to benefit those on lower incomes the most. …In Switzerland there is high competition among the cantons to set the lowest tax rates to attract wealthy individuals and companies. …European neighbours have frequently expressed outrage that their rich citizens are opting to empty their pockets into Swiss coffers rather than their own. But Switzerland has defended its position as providing healthy competition.
As Bishop Hill says: One of the main barriers to the introduction on flat tax regimes in the developed world has been the argument, supported by bodies like the OECD, that this kind of system would not work in developed economies. We're about to see this argument tested empirically for the first time, and I've no doubt that the naysayers are going to be proved resoundingly wrong.
No doubt Libertarians everywhere will be watching this experiment very closely.
