D66 wants to abolish all surcharges in exchange for a discount on income tax. That writes D66 MP Steven van Weyenberg Monday, June 29 in a proposal to the House of Representatives. The plan costs EUR 40 billion.
D66 therefore wants to get rid of the allowance system, but prevent middle and lower incomes from ending up in a poverty hole. That is why Van Weyenberg wants to fundamentally change the tax system.
The core of the plan is that every household receives a redeemable tax credit from the tax authorities. For people with a high income it is deducted from the tax. People with a low income are actually paid that discount.
In addition to this radical change, childcare must become free, the minimum wage must be increased, the social assistance benefit and the AOW must be increased, the mortgage interest deduction must be abolished and the health care allowance must be halved.
Surcharge system needs to be overhauled
The government also believes that the allowance system needs to be overhauled. The system is susceptible to fraud. In addition, in many cases it pays little to go to work, because recipients then suddenly have to repay their allowance and get into debt with the Tax and Customs Administration.
Earlier this year, the system was frequently in the news due to the surcharge affair. MPs Pieter Omtzigt (CDA) and Renske Leijten (SP) played a major role in reporting the abuses.
Van Weyenberg hopes that the House of Representatives will consider the proposal before the March 2021 elections. He fears that a subsequent cabinet will decide otherwise that abolishing the allowance system is too difficult, he says NRC.
System impracticable and incomprehensible
In September 2018, the government commissioned an ‘interdepartmental policy study’ into the allowances. In November this resulted in several partial reports with damning judgments about the allowance system: impracticable and incomprehensible.
The result is crystal clear in advance: millions of households provide fine-grained income support, it seems to be a delusion, wrote THAT ONEjournalist Jeroen van Wensen. A more sober system, with only fine-grained government help for the poorest families, will save a lot of trouble.
Who will pay for the plans?
The ‘redeemable tax credit’ in D66’s plan costs a lot of money: almost 40 billion euros. While the abolition of the surcharges only yields 17 billion euros. Therefore, D66 wants to raise income tax rates, abolish mortgage interest deductions, and make retirees pay more tax. The 8 billion euros that remain, according to D66, must come from higher taxes on pollution, companies and wealth.
The Central Planning Bureau (CPB) calculated the plans and warns that the plan is so comprehensive that its economic effects are very uncertain. On average, households are improving, with the exception of the highest incomes. They are deteriorating.
What are the facts?
Every year, the Tax and Customs Administration pays out EUR 13 billion in the form of 7.5 million supplements to 5 million households. These allowances are estimated in advance and definitively determined afterwards – to provide timely and detailed income support. The downside is that millions of allowances are reclaimed afterwards because the income was estimated to be too low (in 2.3 million cases in 2016).
The benefit recipients who receive a chargeback are mainly those who started working on a benefit. Their income increases and the allowances decrease as a result. Recovery of allowances feels like a fine for work. And it is a fine that often comes unexpectedly and then leads to payment problems for many families. Half a million families have problematic debts – in many cases the Tax and Customs Administration is a creditor.
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