Taxed capital fair – NRC

You don’t have to be a socialist to see that something is seriously wrong here. In fact, anyone who cares about a just society and an accessible economy with opportunities for everyone should be dissatisfied with this. I am talking about the way in which the Netherlands taxes large assets. Too little, too erratic, and with too many escape hatches for the smartest with a lot of money.

VVD, D66, CDA and ChristenUnie decided to largely ignore this abuse when they wrote their coalition agreement for a new cabinet. That was no ignorance: there were penetrating advice ready to do something about the cheese with holes. Civil servants and economists had long and widely shown in thorough studies that the maze of wealth taxes for the very rich contains many fun constructions. With its unequal taxes on different types of wealth, the tax system itself contributes to wealth inequality, officials from the Ministry of Finance noted in 2020. How clear and how harsh do you want it to be?

On Friday, a new study was added that makes clear how this cheese with holes works out in the real world. That’s not good: the strongest shoulders pay relatively fewer tax than people with low incomes, economists from the Central Planning Bureau conclude in a brand new study. The tax burden of the very rich, the top 1 percent, is significantly lower than that of the rest of the country.

Why? High-income earners derive a greater proportion of their income from property, and lower rates apply to them than to income from work. Think of income from letting properties, returns on investments and corporate profits in private limited companies of director-major shareholders.

Within the richest 1 percent, the tax burden continues to fall steadily. The richest 0.01 percent enjoy an even lower tax burden. I’ll give you one numerical example. Middle-income and high-income earners pay around 40 percent of their income in tax (the CPB also includes tax on consumption). The 0.01 percent highest incomes pay only 21 percent. There is a lot new about this study, but the most important innovation in my opinion is that the CPB makes an attempt to include all income from property. As a result, the view of the very highest incomes has become more complete.

Politically, this inquiry could not have come at a more sensitive time. Because it is precisely now that the parties in the cabinet are negotiating a new tax on wealth. A sensitive subject on which the four parties in Rutte IV think very differently. But the cabinet had to. Due to a ruling by the Supreme Court, the tax on income from capital in box 3 of the tax system was unsustainable. Now a new tax has to be devised.

MPs from D66 and the ChristenUnie immediately pointed on Friday to higher taxation of large assets, for example in box 2, where capital income from private limited companies is mainly taxed. The VVD is not happy about that.

But that the issue can no longer be ignored, it turned out on Fridayhe response from State Secretary Marnix van Rij (CDA) on the study by the CPB. To solve the problems in box 3, “we also have to look at box 2.” A formation isn’t over until it’s really over.

Marike Stellinga is an economist and political reporter. She writes about politics and economics here every week.