Dutch budget leak shows tax hikes on high incomes to support lower wage earners

The Dutch Cabinet's proposed budget for next year will increase taxes for people who earn larger sums to offset a two billion euro package of measures to provide support for households who earn less, or are in an otherwise "vulnerable" position, wrote outgoing Finance Minister Sigrid Kaag in her foreword to the budget. The memo and portions of the proposed budget were leaked to media outlets RTL Nieuws, NRC and the Telegraaf on Friday, just a few days before the Cabinet presents its final version.

The budget is released annually on Prinsjesdag, the third Tuesday in September, a day which traditionally includes a speech by the current monarch setting out their vision, and a presentation of the budget by the minister of finance. Portions of the budget are often leaked to media outlets on the Friday before Prinsjesdag. After it is officially unveiled, it will be debated in the Tweede Kamer, the lower house of Dutch parliament, where members can propose different changes to the budget.

Without addressing the diminished purchasing power that many people in the Netherlands currently face, the total number of people below the poverty line was expected to rise above one million next year. Kaag claims in the foreword to the budget that the figure will remain at 825,000 next year by adopting the caretaker Cabinet's plans, which are far less ambitious than in previous years. That means about 4.8 percent of the population of the Netherlands will be considered impoverished in 2024.

To help keep that in check, households earning more money will wind up paying about 1.6 billion euros more in taxes next year, according to RTL Nieuws. This money will be collected as part of a "balanced package" to ease the possibility that others will face growing financial problems. Kaag described this as a form of "redistribution," where "people with a higher income pay slightly higher taxes," the Telegraaf reported.

"Too many adults and children in the Netherlands live in poverty. They can barely afford their fixed costs, and have no money left for a healthy meal or new clothes," Kaag said.

The measures that the Cabinet will enact should increase purchasing power by 1.8 percent. This includes a 1.1 billion euro earmark to increase subsidy for child-related costs, called the kindgebonden budget. The maximum amount a household receives for a first child should increase by 750 euros per year, and by 883 euros for every additional child below the age of 18, the Cabinet proposed. Parents with children over the age of 12 years could also see a boost in benefits.

Those in the workforce who earn between roughly 23,000 and 37,000 euros should also receive a higher employment tax credit. Other workers may also benefit from an increased employment tax credit. This will reduce their income tax burden by about 115 euros. Meanwhile, the huurtoeslag, a subsidy for rental housing tenants, is also expected to rise by up to 416 euros next year. The Cabinet will also maintain the emergency fund for energy use, so that those who cannot afford a higher energy bill have a safety net, though the energy price cap will disappear.

Another 30 million euros will be added to the budget annually to tackle poverty issues in the Dutch Caribbean Island.

Aside from raising income taxes, the Dutch government expects to collect up to 100 million euros more per year by increasing the excise duty on both tobacco and alcohol. The price per pack of cigarettes will jump by a euro at the start of April, bringing the price to about 10 euros per pack.

The Cabinet is also standing firm on plans to dramatically increase the amount of traffic fines, despite objections from prosecutors. The Cabinet will also press forward with its proposal to eliminate the temporary reduction in excise duty on motor fuels, which could see the price of petrol jump by 21 cents per liter starting on January 1. Many politicians and interest groups have come out against returning the excise duty to higher levels.

The impact of these proposals on national debt levels will likely be mixed. The national debt should actually shrink to 46.9 percent of gross domestic product, the Telegraaf reported. That figure would be down from 47.4 percent as the CPB government think tank predicted last month. The European Union set a ceiling on public debt at 60 percent of GDP.

At the same time, NRC noted that the budget deficit will rise from the CPB projection of 2.4 percent up to 2.9 percent. That is just barely below the EU limit of 3 percent.