New Amendments to the Constitution: Lessons from Switzerland

American scholars, lawyers and ordinary citizens often think that their constitution is the best one in the world. Although I agree that it is a great legal document, I admit to not having read all constitutions in the world and therefore I cannot make this judgment call.

But I can definitely say this: beyond any reasonable doubt, the Constitution of the United States is much better than that of my own country, the Czech Republic which is a quickly drafted and quickly adopted piece, child of its own age short after the Velvet Revolution and even shorter before the amicable divorce with Slovakia — therefore quite understandably full of unclear passages and propositions prone to cause political crises.

However, not far — both geographically and culturally — from the Czech Republic lies Switzerland, a well-developed decentralized democracy with a lot of history. Its constitution of 1848 was inspired by the American one, perhaps now the time has come that America learns a lesson from the Swiss.

Let me list three provisions of the Swiss Federal Constitution that I think are worth looking at.

1. Balanced-budget amendment
Balanced-budget provisions have been added to the constitutions of most U.S. states, the constitutions of Germany, Hong Kong, Spain, Italy, Switzerland and others. The wording of the Swiss Constitution in Article 126 states simply that: “The Confederation shall maintain its income and expenditure in balance over time.” It was approved by 85% of the population. (Note: Although historically a confederation, Switzerland is now a federation consisting of 26 cantons.)

Even though, the specific provisions of the law are a little more complicated, they do not constitute leeway for continuous deficit spending. Since its adoption in 2002, this Article has been a massive success — reducing the Swiss public debt from 57% of GDP to roughly 40%. Remember that this happened during a decade that has seen government budgets explode all over the worlds. During this very decade, the US public debt almost doubled from 59% of GDP to over 100%.

2. Highest-tax-rates amendment
The second provision that I would like to present is an amendment that would specifically limit the federal tax rates. Article 128 of the Swiss Constitution says “The Confederation may levy a direct tax: of a maximum of 11.5 per cent on the income of private individuals,” and “of a maximum of 8.5 per cent of the net profit of legal entities.”

The power to levy value added tax — that is something akin to the sales tax, only worse — is sanctioned by the Article 130, with the standard rate of a maximum of 6.5 %.

This might not seem as impressive here in the US where sales tax rates are relatively low but the Swiss VAT is by far the lowest in the region. By EU legislation, the lowest VAT rate is 15% and it is 15% only in Luxembourg. It is well above 20% in a lot of EU countries.

Some readers might think that in the USA, the federal constitution cannot dictate the rate of sale tax to the States as it would be an attack against the States, impermissible under the idea of federalism. But consider two scenarios:
(1) Governments of all state jurisdictions malevolently create a cartel and charge not 5%, not 10% but 50% sales tax. Or 100% or even more (yes, it is possible). Would that not be an attack on the freedoms safeguarded by the Constitution? Why not limit the state governments more specifically?

(2) The Congress of the United States takes the EU as an example and sets the lowest sales tax rate at 15%. Do they have a mandate for that? Possibly not. Will anything stop the Congress from doing so? Possibly not. What about the looming internet sales tax? Why not be there first and set the upper limit?

3. People’s-Veto Amendment
Another key feature of the Swiss constitutional arrangement is direct democracy. For laws already passed in the federal parliament, the law is subject to a referendum if 50,000 people or eight cantons petition to do so within 100 days of its approval. A referendum has to take place if an amendment to the constitution is proposed or Switzerland’s accession to a multi-national entity like the European Union is proposed. Many laws on all three levels (municipal, cantonal and federal) have been declined by this procedure. It is often the case that the threat of calling a referendum is enough for the bill to be dropped.

Several scholars, politicians and pundits have argued that institutions like these slow political process down which results in fewer lass being passed and that it also contributes to political stability and happiness of the citizens.

It is true that there also exist something called People’s Initiative where people can propose new laws. Such a proposition can have serious drawbacks if not implemented well (and it is difficult to implement well) as we could see in California. But giving the people the right to veto extremely unpopular and harmful legislation is the way forward for limiting the power of the State.