Marriage penalty: Yes or No?

In everyday counseling, the question of whether or not the marriage penalty really exists comes up again and again. Although the question seems simple, it is not so easy to answer. It is primarily the family model that is lived that decides.

Traditional family model

The Swiss tax law tends to support traditional family models. This means that if there are large income differences between married couples, these couples generally benefit from being married in terms of taxation. For families in which one person takes a step back, for example when there are children, it is usually worthwhile to be married, as the overall tax burden is reduced in such a structure.

Family models with similarly high income structures

For families that choose to have both partners reduce their employment levels after e.g., becoming parents (typically both work between 60 - 80%), the overall tax burden is usually higher than for couples living together in cohabitation.

Additional note

These are merely basic statements that do not necessarily have to be correct in individual cases. It is worth analyzing the situation on an individual basis and seeing to what extent it can be optimized from a tax perspective.

Individual taxation

The topic of the "marriage penalty" is also discussed time and again in politics. Currently, individual taxation is being discussed as an alternative. This would mean that everyone would have to file their own tax return, regardless of marital status. Couples currently affected by the marriage penalty would be treated in the same way as cohabiting couples and there would practically no longer be a marriage penalty.

The situation would be different for families living the traditional family model. These would tend to be worse off in tax terms as a result of individual taxation, since the lower income would tend to be awarded too high deductions, which would hardly be noticeable in the tax burden. In turn, the higher income would be reduced by too few deductions, which would result in a higher overall tax burden in some cases.

Alternative proposal

Another proposal is being discussed as an alternative to individual taxation. The idea is not to change the current way of declaring tax returns. Cohabiting couples each file a tax return and married couples file a joint tax return. During the assessment process, the tax authorities then check whether the total tax burden would be lower for married couples if they were assessed separately or jointly, and depending on the result, the lower of the two tax rates would be applied. This method would change the current system the least and still eliminate the marriage penalty for the couples impacted. On the other hand, it would also mean a reduction in the administrative burden compared to individual taxation. However, the calculation of the provisional tax liability based on the tax return would no longer be as easy to perform, as two different variants would have to be calculated.

It is also important to note that couples living the traditional family model would not be worse off under the alternative proposal. It is rather difficult to argue that the families that have benefited from being married so far are likely to face a higher overall tax liability in the future.

Abolition of the AHV (old age insurance) cap for married persons

Together with the alternative proposal, the abolition of the AHV cap is being discussed. Currently, married couples receive a maximum of 1.5 times the simple AHV pension. Since it makes sense for mostly economic reasons that couples return to work after the birth of children and thus everyone pays into the AHV individually, it would certainly be an incentive to lift the AHV cap for married couples and to calculate the AHV pension for everyone individually when they reach retirement age - just as with cohabiting couples.