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Switzerland rejects new tax on rich; IRS ends legal challenge against Swiss bank

Congress is getting ready to debate whether the United States' wealthier residents must pay higher taxes.

Hotels in mountains covered with snow, Klein Scheidegg Ski Area, Eiger Peak, Switzerland

But in Switzerland, that issue has been decided. The rich don't have to pay more taxes.

On Sunday, 59 percent of Switzerland's voters rejected a proposed 22 percent tax on residents with annual income of more than 250,000 francs, or just a little over $249,000 in U.S. dollars at today's currency exchange rate.

Opponents argued the minimum national tax would have interfered with the tax independence of Swiss cantons, the nation's equivalents of states.

Now, and for the foreseeable future, the cantons set their own rates. That means the 26 jurisdictions likely will continue what the Wall Street Journal's Wealth Report describes as a race to the tax bottom to attract more rich people and businesses.

And oh yeah, the tax would have made Switzerland less attractive to to the world's wealthy.

IRS ends legal action against Swiss accounts: The anti-tax vote comes on the heels of the IRS' decision to end its formal efforts to force the Swiss national bank UBS to disclose even more names of American account holders suspected of offshore tax evasion.

A federal court in Miami had issued on behalf of the IRS a summons seeking the identities of additional suspected tax dodgers. 

But the agency decided that the legal tactic was no longer necessary since Switzerland agreed, on behalf of UBS, to turn over to the IRS the names of about 4,500 American clients of the bank.

In addition to those accounts, around 15,000 other foreign account holders voluntarily acknowledged their holdings during a special IRS offshore amnesty. Those individuals agreed to pay back taxes and penalties in exchange for not being prosecuted for tax evasion.

And while the Swiss chapter of hidden U.S. tax money might be over, the IRS says it is ramping up scrutiny of other banks where the rich might be sheltering income.

In a brief telephone interview with the New York Times, IRS Commissioner Douglas H. Shulman said that the agency has "additional cases and banks in our sights right now," but he declined to provide details.

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