Struggling households spend more on vehicle taxes than wealthy ones: CPB

Lower-income households with a car pay on average more in motor vehicle taxes relative to their income than high-income households. The Netherlands Bureau for Economic Policy Analysis (CPB) reported this after conducting research into the difference in taxes among households. Low-income households with a car pay an average of six percent more on car taxes. This share is four percent for high-income homes.

The CPB mapped out all expenditures on car taxes and discounts via reduced rates for the purchase, ownership, and use of passenger cars for the year 2022. Car taxes, at around 40 percent, form a significant part of the total costs.

Including households without a car, lower-income households spend around three percent of their income on motor vehicle taxes. For higher-income households, who almost all own a car, the share is still four percent.

According to the CPB, these results show that lower motor vehicle taxes would not have any benefits for people with a low income, including the homes without a car, than for the group with a high income. It would, however, benefit the lower-income households that own a car.

The effects of tax breaks for electric cars differ between higher income households and lower income households. The cars are more often bought by the wealthier households, which means that the tax breaks often go to these homes. These tax breaks are being abolished over the next few years.

The most significant differences in motor vehicle taxes are within the income groups themselves. The differences in the number of driven kilometers and the number of cars owned play a significant role in this.

Where you live is also a factor. Within the cities, an average of three percent of the income goes to motor vehicle taxes, compared to five percent in the countryside. When only households with a car are considered, the differences are smaller: 4.4 percent in the city versus 5.2 percent in the countryside.