Health insurance premiums can be deducted

Parliament is demanding higher tax deductions for health insurance premiums

The National Council and Council of States want to almost double the maximum deductions for insurance premiums. This is supposed to serve the middle class, but top earners would benefit more. The Federal Council and the left are against it.

And suddenly parliament gives way. In recent years, the National Council and Council of States have rejected a number of proposals that pursued the same goal: the federal government should finally increase the maximum allowable deductions that can be made on the tax return for the health insurance premiums paid. Now it worked. On Wednesday, the Council of States clearly approved a motion by SVP National Councilor Jean-Pierre Grin with 30 to 13 votes, which had already found a majority in the National Council. The Federal Council rejects the proposal, but now has to work out a proposal and bring it to parliament.

The benchmarks are already fixed with the motion text. Single people can now deduct CHF 3,000 per year for the premiums they pay to health insurers and other insurance companies. Today it is 1,700 francs. For married couples, the deduction increases from 3500 to 6100 francs. And for every child who lives in the household, you can now deduct an additional 1200 instead of 700 francs. For people who do not make any pension contributions, higher rates continue to apply. However, only taxpayers who have to pay federal tax can benefit from the higher deductions. Because the move only relates to these, but not to the cantonal and communal taxes.

A maximum of 470 francs for top earners

The SVP propagates the successful initiative of its National Council as an important step to relieve the burden on small and medium-sized enterprises. However, this is precisely what her own Federal Councilor, Finance Minister Ueli Maurer, doubts. He defended himself vigorously against the move in the Council of States. This will hardly have any effect and is "very inefficient," said Maurer. In its statement, the Federal Council also reminds that in progressively structured tax systems, it is inevitable that the upper income brackets in particular will benefit if the deduction options are expanded. That is the main reason why the SP rejects the move.

This can be illustrated with a simple calculation example. According to the latest available data from the Federal Tax Administration, the average taxable income of all single people who pay federal tax at all is around 47,000 francs. Taxpayers in this category will save almost 35 francs a year thanks to the increase in deductions. The top percent of taxpayers, on the other hand, who pay tax on income of CHF 210,000 or more, can expect relief of CHF 170. The situation is similar for married couples, with the maximum savings for top earners here being 470 francs. According to the administration, these distribution effects are also problematic because the health insurance premiums are precisely not income-related. As a result, they are less of a burden for households with higher incomes than for the middle class, which generally does not receive any premium reductions.

Even in Appenzell the premiums are higher

The Federal Council goes even further in its argumentation and says that medium-sized businesses in particular will have to pay for the consequences of this decision. The higher deductions mean that taxpayers have to deliver around 465 million francs less per year. The federal government would have to compensate for these tax shortfalls through savings or other tax increases. In addition, the threatening words of the Federal Council: This “counter-financing” will “tend to affect those taxpayers who are to be relieved with the motion”.

The cantons would also be financially affected because they receive a fixed portion of the federal tax. With the tax reform, which comes to the polls on May 19, this share would rise from 17 to 21.2 percent. Thus, the cantons would lose a total of almost 100 million francs if the deductions were increased as planned.

According to tax theorists, the increase in the deduction can be justified. They refer to the “subjective net principle”, according to which, among other things, the unavoidable cost of living can be deducted from the gross wage. This includes at least the premiums for basic insurance. In addition, these are now so high in all cantons that they exceed the current maximum deductions for federal tax. This even applies to Appenzell Innerrhoden, where the premiums are still enviable low. The average monthly premium for adults is 264 francs here, just 100 francs less than in Zurich. But even in Appenzell, even with the highest deductible, you can no longer find an offer with which the annual premium charge remains below 1,700 francs.