20.2.2 The effect of cold progression without tariff adjustment: Switzerland

In the graph below, you can see how the cold progression would work if the tax rates were not adjusted. You compare the tax rate of an initial year (pink) with the tax rate that would result if this rate were adjusted with the inflation rate (red). Both the marginal tax rates (thin) and the average tax burden (thick) are being displayed.

This comparison shows by how much the tax burden would be reduced for the same nominal income. The income regulator gives you the possibility to display the comparison in Euro and in percent. This information is exactly equivalent to the additional tax burden that would result if income increases with the inflation rate (i.e. real income remains constant) and the rate would not change. Thus, it indicates the unadjusted burden of the cold progression.

The longer the period, the stronger the effect is noticeable. In the course of time, the additional burden would be some thousand Euro. Unfortunately, for Switzerland there are only tax rates for the period from 1999 onwards and only for federal taxes.

Tariffs between 1999 and 2016 can be chosen. The initial year must be before the end year.

Initial Year End Year

(c) by Christian Bauer
Prof. Dr. Christian Bauer
Chair of monetary economics
Trier University
D-54296 Trier
Tel.: +49 (0)651/201-2743
E-mail: Bauer@uni-trier.de
URL: https://www.cbauer.de