Marginal tax rate of more than 50%

I am used to determine my differential tax rate. This is not the amount tax you pay respective to your income but the amount of tax you pay if you earn 1000.- more.
It is a very important number because it tells if it is worth to make an effort or to take risk in order to increase your cash flow.
I discovered recently that in canton Bern there is a subtle trick, if you do not earn enough dividend or interest from your capital you get a special discount on your tax on capital. This because if for example if you get no gain from your capital (the bank notes stored in a safe for example) then the tax on capital would be like a confiscation.
I realised while filling my tax declaration for 2017 that my differential tax rate is 62% on my income from my capital (not my salary).
This is confirmed by a claim respective to my tax declaration for 2016. I managed to reduce through this claim the income on my capital by a 4 digit number (sorry I will not put numbers here) and I got a tax reduction which is 68% of the reduction of income. This means that in my situation for 2016 my differential tax rate on income from my capital was 68% which I never expected in Switzerland.

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More commonly it’s called marginal tax rate

Yes, Switzerland is not a land of low taxes as it’s so often pimped to be. I was recently shocked to find out that I’m paying in ZH about same level of taxes as I could be in WA or FL - US states without state income tax. I’m seriously considering moving to Seattle, much better job market and better pay too. No capital gains tax is a big plus for CH however


That would be helluva loss for this forum!

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Sorry for my broken english, and thank you for marginal tax rate.
The absence of tax on capital gain is why I am convinced that the best way to get rich in this country is by capital gain without cash flow.
Buy more shares!

Indeed it’s called marginal rate. However I didn’t get how your trick works. And how can your marginal rate be 62%? And what is “tax on capital”?

Seriously? I thought nothing beats Switzerland when it comes to job market. USA is like a different planet. Have to go everywhere with a car, stuck in traffic a lot, cities are laid out on a grid like from a computer game, everything is big.

It beats the rest of Europe for sure, but top tech companies in the US absolutely do pay more, much more. Here I know exactly one (1) tech company that’s starting new grads at $200k+ total comp (and they, too, pay somewhat more in the US). Routine thing at FAAANG in the US (link). News recently broke than median at FB is $240k; must have been the median across the globe I presume, I’m pretty sure that’s on lower end for US. Even lower tier companies on average pay about double in the US for same work (link).


How do you call this in German?

Are there any ETFs with minimal dividends and maximal growth of value? You mentioned Berkshire Hathaway in one thread, but that’s a single company, which could loose its value permanently unlike an ETF.


It’s highly diversified and exceptionally well managed. Sure there’s some extra risk vs index, as it’s just a single company, but it’s quite probably one of the least riskiest one of all. Also beware there’s some tax drag with them as with any company - if they’d just invest everything into an index, they’d underperform it as they have to pay corporate taxes. So just to keep on par with index, they have to outperform it which is getting difficult with their size. Personally I like holding them as a bank/financials sector proxy (in which they heavily invest) a lot more than any bank, I don’t trust myself to pick banks at all.


Wow, that’s a nice link. I used to work for a company that collects remuneration data from the companies and then sells reports for a lot of money.

I thought 150k is the average for software engineer in the west coast, and based on this it looks like it’s the entry salary.

That’s an impressive median. The most IT guys I know in Switzerland that have a few years of experience earn between 100-150k on a salary. For contracting the daily rates go around 1000-1500, reaching 2000 for the top managers. So in order to reach Facebook’s median in Switzerland, you need to be on a contract (assuming your source is correct).

I don’t get it, the site you’re linking quotes the median for IT positions to be around 100k. How is that the double of Switzerland? And how does that correspond to that survey from the first link?

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This is total comp, including stock which is a big component at FAANG and alike and contractors can forget about. The higher the level the more you’re taking in stock vs base salary.

Well it’s double of other european countries, they don’t have data on CH. The median for US is probably skewed lower by non tech regions. In CA/WA/NY it should be definitely quite a bit higher

The first survey is about FAANG and other top tier companies. The second is industry in general including all sorts of low paying firms and focuses on salary than total.

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Yes, I remember this form the remuneration survey company. They have the so called “Long Term Incentive” and “Vested Benefits”. For example they receive shares which are frozen and they can’t sell them for the next 5 years.

I’m pretty sure that in Switzerland the numbers should be similar to those in the US.

So you’re saying that the industry pays 100k and FAANG pays 250k? This would mean that really cherry pick only the best guys on the market.

Anyway, I would not trade the no-bullshit contracting job in CH for some silicon valley corporate sect.

These are different figures, total comp incl bonus and stock vs salary. Salary is maybe only 50-70% of total in big tech and yes they in general they pay quite a bit more. (In startups on other hand you might be rewarded by much higher stock appreciation than its dollar value at issue.) If you can make it past their hiring bar and some corporate BS I think you’re being irrational passing on these opportunities, pay is much better and stable and salaried job is less stressful

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ok so you mean they pay for example 150k salary and 100k in stock, and the second link only shows the salary part.

Yes I think SO data is only the base salary. Which in many jobs might be all you get

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Hi Bamboo
The Grenzsteuersatz on income (sum of salary+dividends+interest) maxes out at about 40% in most of CH.
Is yours >60% because u r adding the Vermögenssteuer to it?
Like for example one pays Vermögenssteuer of 0.1 to 0.3% (“normal range” covering most cantons and Vermögen <1000000), earns an interest of 0.5% (very high for a savings account). From the 0.5% I pay say 33% Einkommenssteuer, leaving 0.33%. Now subtract 0.2% Vermögenssteuer, leaves = 0.13%. My Steuersatz is therefore 0.37/0.5 = approx 70%.
This is due to ultralow interest on saving accounts at the mo. Of cos cud even be over 100%. Hopefully most (on this forum at least) are high on ETF’s where dividend yield is better than interest rate on savings acct, plus a capital gain for free.
But if my assumption to your high marginal rate is correct, please do give us more details of how it was reduced. It hurts at the mo to be in the red on cash in the bank (or the safe) due to the taxman, but I am not aware of the taxman reducing or cancelling the Vermögenssteuer for such low-return cash. It wud be justified in a way tho!

In my opinion it would not be justified. I see wealth tax as an annual fee for being able to keep your wealth. WIthout a stable country with rule of law, it would be very easy for someone to take your wealth from you, or you would need to invest much more than 0.3% to protect it. And it doesn’t matter what you do with it.

Calculating like this can lead to some funny conclusions. Like, imagine there was an inflation of 0.2%, as a result of money printing. that leaves you with negative income and something like 120% tax :smiley:

Ok ok, 0.3% Vermögens-“fee” for law and order is ok, in a way :wink: although 0.1% wud be better.
My “funny calculation” is only me trying to understand how to reach a 60%+ Grenzsteuersatz on Vermögens-einkommen, or anything above 40% for that matter.

OK let’s look closer what’s going on here and thanks to Rolandinho for bringing the post back to the track defined by the title. :blush:
The “Art. 66 Steuergesetzt Bern” tells that the “Vermögensteuer” shall not be larger than 25% of the income obtained from capital and shall not be smaller than 0.24% of the capital.
In my case my “Vermögensteuer” is (sum of canton and village and church tax) 0.56% of my capital which is larger than 0.5% (25% of the 2% dividend you get on the S&P500 ETF). I also have some Swiss shares (or 100% swiss ETF) where a part of dividend is labelled as capital gain and does not appear as income on my tax declaration. I also have some cash sleeping on some account as I refuse to invest in government bonds with -0.75% yearly output. In order to achieve a good balance there is a piece of real estate with excellent cash flow some years and no cash flow some other years according to how much renovation is done and 2016 was a year with lots of work done in the real estate.
In my situation I am in the transition regime where I pay more than 0.24% “Vermögensteuer” but less that 0.54% as it should be with the capital declared to the taxman. If I take the number of 40% marginal tax rate on income as given by Rolandinho and I add 25% of the limitation of “Vermögensteuer” due to low income I get 0.65% of marginal tax on the dividend of my shares or the income of my real estate. Which is what I observe in the reality.

Thanks for the explanation. It’s still quite confusing to me. Maybe I can put it into an example, and you tell me if that’s correct or wrong.

Let’s say you got an income of 200’000 and a wealth of 1’000’000. Using this calculator for canton Bern, it tells us that the total tax will be 65’796. If we increase the income by 1’000 to 201’000 to calculate the marginal tax rate, the tax is now 66’211. 415 of tax paid on the extra 1’000. That’s 41.5%. How do you get 65%? :confused:

Hello Bojack,

the calculator you mention is just not as complex as the tax law of Bern as it does not make any difference between your income from your work and the income from your dividends or coupons. You have to use this calculator which I hope runs well under MSFT XLS because in the computer I have here with LibreOffice it is buggy.