Years ago you had top civil servants who compared the government to an old car: sometimes it starts badly, sometimes it falters, but in the end we always get it to work again.
This resigned optimism has become scarce in recent years. There is great skepticism about the tensile strength of the state in The Hague – among politicians and especially among civil servants.
The loss of expertise. Politicians with no interest in feasibility. The constant tension between the obligation to inform the House of Representatives and IT systems that are outdated or insufficiently coordinated.
The result: the simplest tasks are handled with care. The coalition agreement promises that the ‘donation exemption for owner-occupied home’, known as the jubelton, ‘will be deleted’. Minister Sigrid Kaag (Finance, D66) replied the House in its second week that this cannot come into effect before 2024 due to ICT adjustments.
The coalition agreement also includes the plan to abolish VAT on fruit and vegetables and to introduce “a sugar tax” in due course. Tax office officials reported to the Chamber last week in a hearing that ‘the VAT systems’ probably cannot be modernized before 2026.
Issues that also raise reservations in other departments. On the one hand, they see new ministers who enthusiastically want to realize the ambitions from the coalition agreement. On the other hand, a worn-out administrative apparatus that sometimes starts beeping at the smallest plan of such a minister.
You had all those ministers with a burnout under Rutte III, a senior official sighed this week.
“But you know who also has a burnout? The government itself.”
And on Tuesday, for the same dilapidated government, a gigantic issue was added. NRC revealed that the coalition fears a multi-billion dollar loss because, according to the Supreme Court, the Tax Authorities have charged too much tax to savers with more than a ton (box 3) since 2017.
A setback that requires immediate intervention – but you do not know whether the government can also do this.
It’s not all. The issue also involves substantive, political and demographic dilemmas, which together are enough for the opening chapter of a book about Rutte IV. Working title: The Great Regret.
First the substantive dilemma. In 2020 published Finance, then led by Wopke Hoekstra (CDA), Building blocks for a new tax system, in which it was calculated that costs on labor have risen since 2001, while those on wealth have fallen. People with a job or a company contributed more to the government. Savers or investors less.
And worldwide the insight has matured – keyword: Piketty – that growing wealth inequality requires the opposite: higher taxes on wealth, lower taxes on work. This was also apparent from last year’s election programs, in which all four coalition parties promised this, although the ChristenUnie and D66 wanted to go further than VVD and CDA.
Yet little of this can be found in Rutte IV’s coalition agreement: except for smaller posts, assets remain untouched. And it continues. Because now that the Supreme Court has declared the levy on savings illegal since 2017 (because the government worked with a fictitious return, not an actual return), this amounts to a retrospective reduction of the wealth tax. While coalition parties in the campaign wanted a further increase.
Then there is the political dilemma – not a detail either. Within the coalition you hear various explanations for the limited approach to capabilities. According to some parties involved in the formation, the parties dropped out when it became concrete: did they have to tax a former entrepreneur who had sold his company for his pension? Other parties involved call the agreement a layered compromise, in which parties that value climate, nature and education received almost everything they asked for, and therefore left the theme of wealth to the VVD.
The fact is that in a parliamentary debate on the ruling of the Supreme Court on Wednesday, it turned out that D66, CU and CDA want to have the billions of dollars compensated by the highest wealthy people. The VVD kept a low profile – in the coalition they recognized this from the debates in Rutte III about the dividend tax: 3-1 for D66-CDA-CU.
“And we know how that ended.”
Then there is the demographic dilemma – the link between wealth accumulation and ageing. Statistics Netherlands published at the end of last year overviews on wealth development since 2006: at the time, just under thirty percent of the wealthy were over 65, in 2020 already almost forty percent (which together amount to 708 billion euros).
And since the rise of elderly parties, from 1994 onwards, the incomes of the elderly have improved spectacularly, thus an Interdepartmental Policy Survey from 2013. Household income rose by 16 percent in 1990-2010, while that of the elderly grew by 26 percent. Poverty among the elderly almost disappeared. The net wealth of the elderly quadrupled in that period.
Even after this, The Hague continued to hand out benefits to the elderly, with the result that people with two AOW benefits now receive about 10 percent more than people with two social assistance benefits. wrote two economists recently in ESB.
Yet The Hague persists. Now, on the proposal of PvdA and JA21, a majority in Parliament wants the link of the state pension to the (rising) minimum wage to remain intact. The result would then be that AOW pensioners with a ton of savings would also receive more AOW.
Professor of the labor market Pierre Koning (VU) was surprised about this recently in NRC. “You’re spilling an incredible amount of money with the rich,” he said. And parties that have “something else” with young people are “doing it all wrong”.
The net result of all recent decisions and debates on the elderly and wealth: progressive parties give climate and education higher priority than tackling wealth, the classical left and nationalist right continue to champion an aging Netherlands, the coalition leaves wealth globally untouched, and thus aging wealth.
It is routine in The Hague to hide the handling of complex issues in a larger whole, so it may be an escape route for the cabinet to deal with the financial gap created by the Supreme Court in the Spring Memorandum. Someone will have to pay, so this will never provide good news, the advantage is that the Spring Memorandum will only appear after the municipal elections.
This does not alter the fact that this issue exposes serious dilemmas. Such as: is it really wise to leave most of the wealth undisturbed, and continue to prop up aging wealth from within the realm?
In the order For yet another new Interdepartmental Policy Study into wealth distribution, which is still ongoing, it will not be for nothing that it has been noted that young people and the elderly are also being looked at in this regard, and that ‘wealthy individuals are increasingly being looked at for the costs of the corona crisis’.
Equally important is the question of whether this worn-out government, whether or not in burnout, should not be strengthened as a matter of priority.
Because a government that needs four years to change a VAT rate, or a government that is not sure whether the executive apparatus is able to respond in time to a court decision with presumably significant financial consequences, is of course saying that she can no longer take on new assignments.
How did Rutte IV think he could get away with that at all?
A version of this article also appeared in NRC Handelsblad on 5 February 2022
A version of this article also appeared in NRC on the morning of February 5, 2022