Reto and Damian both studied law at the University of Zurich and entered the workforce almost simultaneously. It was still in the last century. Reto’s father passed away early, and Reto lived with his mother for a long time. Since his girlfriend had a tiny rental apartment, it was difficult for him to move in with her. However, since they both dreamed of a future together with children and a good life, they decided to buy a house, get married, and start a family together. The path was challenging, and without a loan from the family, it was nearly impossible, but due to their strong determination, they managed everything. They bought an old small house, renovated it, even with a lot of their own effort, got married (also for the sake of security in case of death because of the house), and had two children. Both worked full-time, and they hired grandparents to take care of the children, paying them a small salary.

Damian, who is not from the canton, lived in a shared apartment during his studies. His girlfriend lived in a small cooperative apartment, which was big enough for Damian to move in with her after his studies. They, too, dreamed of a future together. However, their desires were not materialistic. They wanted to travel the world and regularly attend theater and concert events. They also had two children but never married because it didn’t make financial sense due to tax progression. With their first child, they were able to exchange their 2-bedroom apartment for a 3-bedroom one within the cooperative, and five years later, with the second child, they moved again to a 4-bedroom apartment with a large balcony. They lived very centrally without a car in a very nice apartment with a rent of 1420 CHF. Both worked part-time (60 and 50 %), and they shared childcare responsibilities for years. As the children grew older, they increased their working hours to 80 and 70 %.

The tax burden on both families has been different until now and will change again next year in the canton of Zurich, as the majority of homeowners can expect higher tax bills. The tax office expects additional revenues of around 45 million from income tax and 40 million from wealth tax. The reason for this is that the value of the property is considered as wealth, and the notional rental value for owner-occupied properties is considered as income, with deductions for interest and repairs.

The value of the properties is recorded as 70 % of the purchase price. According to federal court rulings, this value should not be less than 60 % of the market value. The last adjustment in the canton of Zurich was made in 2009. Wüst and Partner have calculated that an increase in wealth tax values of 49 % can be expected. This means that next year, all owners will receive higher valuation notices for their properties.

What does this mean for Reto and Damian’s families? Reto and his wife were forced to repay a portion of their mortgage from the beginning. Those were very difficult years because their incomes were still relatively modest, and expenses with children and renovations were noticeable. The mortgage continues to be reduced. Due to the low interest rates in recent years, the interest burden was easy to bear because their incomes have also increased significantly over the years. From next year onwards, instead of the wealth tax value of 850,000, they will have to declare a value of over a million for tax purposes, and the notional rental value, which currently stands at an additional income of 15,200 CHF, will also increase.

For Damian and his family, nothing changes. The rent has remained almost unchanged. Since the cooperative had reduced the reference interest rate in the past, they raised it this year. The rent for the 4-bedroom apartment, after the increase and excluding additional costs, is 1420 CHF per month. Damian benefits greatly because in the city of Zurich, the cheapest quarter of private apartments corresponds in price to the most expensive quarter of non-profit housing.

Reto and his family pay significantly more taxes than Damian and his family, even though they have the same education and earn very similar salaries when measured in terms of full-time employment. This is due to the performance of the two families. Three factors are essential: Reto and his wife’s 100 % employment, the fact that they are married, and the notional rental value. The higher workload and notional rental value lead to a higher progression level for Reto’s family. Reto and his wife have more income available due to their 200 % compared to Damian and his wife’s 150 %, which are both taxed individually. At the end of the month, almost the same amount remains available to both families for discretionary spending.

Everything is correct according to the law. The question is whether it is intended that homeownership, full-time work, and marriage only partially pay off.

The notional rental value of a self-occupied property must be taxed. And the more responsibility one takes on and the more mortgages one pays off, the higher the tax to be paid. In non-profit housing construction, where land/loans are subsidized, lucky residents achieve an advantage that can amount to tens of thousands of francs per year compared to the private housing market. This is not taxed. If more than 50 % of the apartments were non-profit, it would not be worth mentioning. So, some lucky people benefit for decades without contributing to the general welfare. Over a lifetime, we’re talking about a difference of more than half a million.