The House of Representatives is taking steps to increase the tax system; there is consensus that the current tax system is not working well. The 2023 tax plan is being debated. These include raising the minimum wage by 10 per cent. Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, discusses how to tackle the tax system reform.
Kavelaars says it is a good signal to look at whether assets can be taxed a little more heavily and labour a little less heavily. However, the approach is complicated. For this, he points to advice from previous committees that have looked at revising the tax system, to which little has happened.
Allowances
One example is a 2013 opinion by the Van Dijkhuizen committee on surcharges, an issue labelled as one of the worrying issues of the tax system. The effect of the allowance system is that an extra euro earned leads to a decrease in the amount receivable as an allowance, Kavelaars explains. In the new childcare allowance system, the level of income no longer plays a role, decoupling income and the amount of the allowance. There is also an obvious downside to this: opponents of this approach point to the unfair consequences, now that people with high incomes would also start receiving money for childcare.
Marginal tax burden
The marginal tax burden can be as high as 87 cents per euro earned. Kavelaars even points to cases where the marginal pressure exceeds 100 per cent: this means that an extra euro earned costs money. Mainly middle-income earners are affected: in their situation, the tax on income increases somewhat, while allowances disappear. In some cases, the marginal pressure on middle-income earners is higher than the marginal pressure for people in the highest bracket.
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You can listen to the broadcast of BNR Newsroom Den Haag, 31 October 2022, here.