Strongest shoulders do not carry the heaviest burdens: the richest pay less tax | NOW

In the Netherlands, you pay less tax the more you earn. This means that we do not have a progressive tax system at all, as has always been the case. The richest 1 percent of households pay on average even less tax than the other households.

“The study shows that the strongest shoulders do not carry the heaviest burdens,” the Central Planning Bureau (CPB) wrote of the report published on Friday. Inequality and redistribution

“High-income earners do not pay a higher share of their income in taxes than low-income earners,” is another striking conclusion from the study. It was long believed that this was the case, because the more you earn, the more tax you pay. This is called a progressive tax system.

That progressiveness is denied if you also look at the consumption taxes that you pay through VAT and excise duties. High incomes spend a relatively smaller portion of their income on this than low incomes.

Redistribution therefore does not happen so much through the tax system, but through public expenditure, writes CPB. It is often benefits, such as social assistance and allowances, that go to households with the lowest incomes. This group also benefits more from other public expenditures that cannot be expressed directly in money, such as education and care.

The richest pay less tax on average

CPB has divided all households into three groups. Half of the population earns about a fifth of their entire income (average 17,500 euros gross per year) and pays an average of 55 percent tax on it. The middle group – 40 percent of all people – earn half of all income (with an average annual salary of 55,000 euros) and pay 40 percent in taxes.

According to CPB, this difference is partly due to the fact that people with high incomes spend relatively less on groceries and fuel and therefore also pay less indirect tax. In addition, the social contributions are limited to an income of approximately 52,000 euros. It is also in favor of high incomes.

The last 10 percent of all people earn a third of all income (annual salary of 143,000 euros) and pay 36 percent of it. The absolute top incomes in the Netherlands – the 1 percent of the very richest – pay even the smallest tax on average. Their income consists mainly of capital and corporate profits, and these are taxed less than wage income.



‘New light on inequality and income redistribution’

The results of the study are “innovative”, says Arjan Lejour, CPB researcher and one of the authors of the report. For the first time, research into inequality and income redistribution has looked much broader than just household income. The effects of indirect taxes (excise duties and VAT) and government spending (including education and care) are also included.

“You now see the picture of the total tax burden for households. We have always had access to a lot of data, but it was never the whole economy. For example, we have now been able to link households to corporate profits,” explains Lejour. All in all, according to the CPB, it sheds new light on inequality and income redistribution between Dutch households.

Inequality is not so much about income inequality. It is reasonably stable and relatively low compared to other countries, writes CPB. Inequality in the Netherlands is striking when looking at wealth: international inequality is relatively high. This is due to savings, investments and the value of your own home.

Increased political will to tax wealth harder

The CPB does not make recommendations, leaving room for political discussion. In The Hague, more and more voices are being raised to tax wealth harder than wages from work. The coalition of VVD, D66, CDA and ChristenUnie has not yet reached a solution.

In their election manifestos, the parties talked (to varying degrees) about billions of euros extra in taxes on profits and capital, but none of this can be found in the coalition agreement. Later in the year, the Cabinet will have research into the possibilities of moving the tax between wealth tax and income tax.

The Netherlands is increasingly becoming a “renewed economy”

The conclusions are reminiscent of DNB chairman Klaas Knot’s comments that the Netherlands is becoming a “rental economy”. The Netherlands takes relatively little tax from wealth and “relatively much tax from income tax,” Knot said in early February.

“Our research describes something else, but goes in the same direction,” says CPB researcher Lejour about that comparison. Prime Minister Mark Rutte strongly contradicted Knot’s claims in early February.

“In a rentier country, everyone would be a little sluggish and on their way to their country house by the Vecht to look at the day with cognac and cigar in hand after a drink and to find that the weather was a little bad. Has gotten smaller,” he said. Route at the time: The Prime Minister pointed out, among other things, the high economic growth figures and the low unemployment.

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