The rich get richer and the poor get poorer. Just about every week there is a report by an NGO, a book by an economist or an analysis by an official body with this conclusion. This week, the Central Planning Bureau published a new report on income and wealth differences in the Netherlands. This also shows: the richer households are, the better they are able to grow their income and assets faster.
Regardless of the CPB’s numerical analysis, which is very worthwhilethe explanation that the Planning Bureau gave for the growing differences was particularly fascinating and relevant. Whether you are left or right, the current tax system is simply ineffective and causes unnecessary economic distortions. On paper, taxes in the Netherlands are progressive, but in practice the highest incomes pay relatively less tax than the group below. And in theory, the concentration of wealth at the top can be slowed down through inheritance and gift taxes, but due to broad exemptions, this now only happens to a limited extent.
The CPB economists deserve all the praise for their tenacity in continuing to put this theme on the agenda. And the CPB is certainly not the only one that keeps harping on the concrete rot in the tax system and its disastrous consequences for the Netherlands. Note that the Ministry of Finance itself remains the same on an assembly line publish analyses which show that there are many opportunities for lower tax rates, better tax arrangements and a more understandable and simpler system.
The findings of all these experts all point in the same direction: the current tax system contributes to greater inequality, it is full of ineffective rules and laws, literally tens of billions are wasted every year on measures that do not work and in the meantime, households and companies that have the ability (both material and intellectual) to push the edges of the law benefit.
This can and must be done differently, because growing inequality is disastrous for future growth in prosperity. Intervention can be done along two lines: by tackling disruptions without much additional redistribution (read: abolish or adjust schemes that unnecessarily cost a lot of money and do something about the endless postponement of tax payments for entrepreneurs). Or tackle them and start seriously redistributing the burden (read: tax the different forms of income and assets more equally).
The question is gradually beginning to arise as to why ‘The Hague’ is turning a deaf ear to this flood of good arguments. Is it perhaps ignorance, inability, disinterest? Or is this a matter of political unwillingness? Probably a combination of all of them, and that’s bad news.
The CPB economists deserve praise for their tenacity to continue to hammer home the concrete rot in the tax system and its disastrous consequences for the Netherlands
Taxes are an extremely complex and technical subject and few politicians really understand how the current system works. More often, for electoral reasons, politicians prefer to turn one button on the fiscal machine to achieve a positive purchasing power effect for their own supporters. The technicians at the ministry can then solve the negative consequences for the rest of the system.
The mess caused by two decades of random button-twisting can be felt every day. The tax system, last thoroughly revised in 2001, is squeaking and creaking at the seams. And politicians refuse to fundamentally change this.
It is a myth that efficient redistribution of tax resources is a left-wing hobby. If one thing becomes clear from the pile of reports and advice, it is that the whole of the Netherlands benefits from a well-functioning system. There is no one in all those reports who advocates a communist fiscal blanket that smoothes out all income and wealth differences. In fact, the latest CPB report states plainly that income and wealth differences can bring a lot of good to a society, provided they are the result of talent, effort and entrepreneurship and not of ineffective rules.
What is more likely, and from a democratic perspective extremely bad, is that the parties in control have an interest in maintaining the status quo. Ironically, the current system is to blame for this: as long as the rich get richer, the risk of economic power concentration increases, allowing political influence to be used to serve sectional interests, instead of stimulating general prosperity.
As long as political parties are rewarded by their voters for extremely unwise ‘breaking points’ such as maintaining the mortgage interest deduction or unilaterally protecting (family) businesses, the tech sector or investors in box 3, a real major tax clean-up will not take place. The price for this is paid every day throughout the Netherlands, the poor pay a little more than the rich. Not to mention the long-term consequences for prosperity, the legitimacy of taxation and crumbling tax morale.
The solution is simple: parties, all parties, must step over their own shadows and jointly commit themselves to a thorough overhaul of the tax system. Waiting until taxation has finally come to a standstill is not an option. The good news is that there are piles of sensible reports ready to help politicians along the way. Now just gather courage.
