What are the effects of wealth taxes? A study shows that the effects on the distribution of wealth in the cantons are concentrated at the upper end of the scale.

This guest commentary by by Isabel Martínez, Samira Marti and Florian Scheuer was originally published in German in NZZ on 21 February 2025. Translated and edited for layout purposes by the UBS Center.

Wealth inequality is a topic that is on the minds of people worldwide. While income inequality in Switzerland is low by international standards, the concentration of wealth in this country is at least as high as in the USA, or even higher. The persistent upward trend in wealth concentration is also striking: while the richest one percent of all taxpayers still held 33 percent of all taxed wealth in 1981, this share has recently grown to 45 percent.

Wealth tax in Switzerland

Today, Switzerland is one of the few countries in the world that still levies a wealth tax. This tax has a long tradition: it has been levied by the cantons since the 18th century, and in the first half of the 20th century it was also taxed by the federal government. Today, the wealth tax accounts for almost 10 percent of cantonal and municipal tax revenues.

But how much does a wealth tax contribute to reducing inequality? Using tax statistics from the cantonal archives, we have reconstructed the concentration of wealth within the cantons back to the 1960s. In the canton with the lowest wealth tax, Nidwalden, which has a top tax rate of 0.1 percent, the wealthiest one percent of the population owned an impressive 70 percent of the canton's total wealth in 2018, the highest of any canton. Schwyz follows with 60 percent, although in the 1990s the value here was only just over 30 percent and has thus almost doubled since then.

In contrast, the share in cantons such as Zurich or Bern has hardly changed over the decades and remains stable below 40 percent. The upward trend in wealth inequality is thus not equally apparent in all cantons.

During the same period, the tax burden on wealth has also changed differently from canton to canton. While the overall trend is clearly downward, some cantons have seen both tax cuts and tax increases. These differences allow us to measure the impact of cantonal tax policy on wealth inequality within the cantons.

In an analysis of around 40 major tax changes between 1976 and 2015, we show that a 0.1 percentage point reduction in the top marginal tax rate increases the share of wealth held by the richest one percent by almost 1 percentage point after five years. For the richest 0.1 percent, the effect is even more pronounced at 1.2 percentage points, especially since their share of total wealth in recent decades was “only” 16 percent on a national average, while the richest one percent owned an average of about 34 percent of all wealth.

Other factors are key

On this basis, we estimate that around a quarter of the increase in wealth concentration among the richest 0.1 percent over the last fifty years can be explained by wealth tax reforms. The wealth tax does have an effect on inequality, but this is concentrated at the very top end of the distribution. For the richest one percent, tax changes explain only just under one-fifth of the increase, while for the richest 10 percent, we no longer find any significant effects.

Tax cuts for the rich alone cannot explain the increase in wealth inequality. Other factors such as the abolition of inheritance taxes for direct descendants and the growing concentration of capital gains among the super-rich, for example due to rising asset prices in the low interest rate environment, are likely to play a role as well. In addition, the effect that we measure in the Swiss context is also due to taxpayer migration across cantons in response to cantonal tax changes.

Isabel Martínez is a lecturer at KOF (ETH Zurich), Samira Marti is an economist and SP National Councillor; Florian Scheuer is UBS Foundation Professor of Economics of Institutions at the UZH Department of Economics. They are the authors of The impact of wealth taxes on wealth distribution in the Swiss cantons, 1969–2018, in “Social Change in Switzerland 40”.