If passed into law, the proposal would see all 26 Swiss cantons ban the arrangement, which is already the case in five cantons, including Zurich.
Latest government figures from 2010 indicate that more than 5,000 people benefited from the deal which nets the state nearly 700 million francs ($760 million) in revenue.
Left-wing and green party supporters of the proposal described the existing deal as offering "shameful inequality".
The tax break — instigated in Vaud canton in 1862 — also ran contrary to the Swiss constitution and created rivalry between cantons, supporters of the "Stop Tax Privilege" initiative maintained.
Before it becomes law, the proposal must pass a host of administrative and legal obstacles and then a national referendum, most likely no earlier than two years from now.
While tax exiles pay much less tax in Switzerland than in their own country, the federal government raised the bar recently when it said wealthy individuals would have to pay tax in future at a rate of seven times their rent or the rental value of their home as opposed to the current rate of five times.
To date, five cantons have banned the existing tax deal, following Zurich's lead in 2009.
But the western Swiss canton of Bern, home to French rocker Johnny Hallyday in the ultra-chic ski resort of Gstaad, voted to keep the tax deal in the national referendum on September 23rd.
Those opposed to the latest proposal point out that after Zurich eliminated the system, the canton saw almost half its foreign millionaires leave.