In order to get rid of the allowances, D66 not only wants to drastically change the tax system, but also make childcare free, increase the minimum wage, increase the social assistance benefit and the AOW and abolish the mortgage interest deduction. Member of Parliament Steven van Weyenberg thinks that major interventions are needed to abolish the benefits without people with lower and middle incomes falling back. And to make work pay for those groups more. “You have to do this big.”
The fact that the allowances are a major problem is recognized by the Cabinet and the House of Representatives: the care, rental and childcare allowance too often lead to financial problems for households. A motion to investigate whether the allowance system could disappear was supported by all 150 MPs at the end of 2019. D66 Secretary of State Menno Snel had to resign at the end of 2019 because of the affair around the childcare allowance, in which many thousands of families were wrongly labeled as fraudulent due to an overly rigid investigation policy of the Tax and Customs Administration. MPs Pieter Omtzigt (CDA) and Renske Leijten (SP) played a major role in putting the abuses on the political agenda. Van Weyenberg acknowledges that it took too long for the magnitude of the errors to be realized. “The problem is bigger than just the very serious surcharge affair. The system doesn’t work. ”
Van Weyenberg is submitting an initiative note to the House of Representatives on Monday on behalf of his group. A Member of Parliament can make proposals with such a note and ask the cabinet for a response. Van Weyenberg hopes to enter into discussions with scientists and political parties in the Chamber before the elections in March 2021. “Otherwise, we will soon conclude with the formation of a new cabinet that it is too complicated to abolish the surcharges. And do we not help those hundreds of thousands of people who are now broken in the allowance system? We don’t have that luxury. ”
Van Weyenberg had his plan calculated by the Central Planning Board. This warns that the plan is so comprehensive that its economic effects are highly uncertain. In general, households are improving, with the exception of the highest incomes. They are deteriorating. But the differences are large, also within income groups: from a plus of more than 10 percent to a minus of more than 6 percent.
Redeemable tax credit
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. D66 does not want to make the discount dependent on what people earn, but on whether they live together or have children. This would amount to EUR 2,600 per year for couples, EUR 3,600 for singles, EUR 7,000 for single parents and EUR 2,300 per child.
According to Van Weyenberg, this solves one of the current problems: the retrospective assessments if it turns out afterwards that people received too much allowance. “Now you can just lose a bonus if you earn a little more. As a result, there are hundreds of thousands of people in debt with the Tax Authorities, or people dare not apply for a supplement. The redeemable tax credit is simpler: you don’t have to apply for it, it goes through your tax return. ”
The redeemable tax credit costs a lot of money: almost 40 billion euros. While the abolition of the surcharges only yields 17 billion euros. That is why D66 wants to increase the income tax rates (by more than 9 billion euros), to abolish the mortgage interest deduction (almost 9 billion euros) and to make pensioners pay more tax (more than 5 billion euros).
To make the allowances less necessary for people with low incomes, D66 wants to increase social assistance and the AOW by 5 percent and the minimum wage by 10 percent. D66 wants to make the childcare allowance superfluous by making childcare free: 4 days for children under 4 and completely free up to 12 years. Costs: 3 billion euros. The care allowance could lapse because D66 wants to halve the care premium. The government should compensate health insurers for that loss of income.
A gap of 8 billion euros
All in all, Van Weyenberg shifts by 100 billion euros. There is a gap of 8 billion according to the CPB. D66 wants to fill that gap with higher taxes on pollution, companies and wealth, Van Weyenberg writes in the initiative note. But he did not pass on those taxes. “At one point I was writing half of our election program. That went too far for me. I don’t pretend it’s finished. There are also positive income effects that CPB does not include now: a higher minimum wage can lead to higher wages. I wanted to know if the surcharges could be abolished at all, without lowering people through the ice. Well, it is possible. ”
Why this great renovation? Couldn’t it be simpler?
“No. The allowances are extremely important for people’s income. If you only enter the redeemable tax credit, the highest incomes will improve significantly, and the low and middle incomes will decrease. I want to support low incomes and I want more work to be more rewarding than it is now. Because now you quickly lose your right to allowances. That is why I also look at the systems behind the allowances and I take tough measures. ”
Do you cycle all kinds of D66 wishes?
“I admit that free childcare is an ardent desire of D66, as is a housing market reform. But if you abolish the housing benefit, it is wise to also abolish that other subsidy, the mortgage interest deduction. Then you disrupt the housing market less. And no, I did not opt for a national healthcare fund, as the SP wants. This is intended as a kick-off. It is clear that each party wants different things. Will it be difficult to compromise on this? Yes. But we must now begin this discussion. The solution lies in the political center. ”
You take measures that have nothing to do with allowances, such as a higher property tax of 3 billion euros. Doesn’t that cloud the results?
“Abolishing the allowances without hitting people on low incomes costs a lot of money. I need this kind of item to pay for this. But they are separate from the core of this proposal. ”
The CPB shows that there are large differences in people’s incomes.
“Yes, but in general all groups are improving, except the highest incomes. I think that is justifiable, so that people with low incomes can no longer be completely ground up in the allowance system. We now have a super-detailed system that is precisely geared towards certain households. If you replace that, people will inevitably deteriorate. ”
Retirees are not progressing.
“People with only AOW pension do. We ask a contribution from people with a higher pension. ”
This plan is drastic, while the Tax and Customs Administration is struggling with problems and in need of rest, officials said.
“Ultimately, this is a huge simplification; we will abolish the complex allowance system. The redeemable tax credit is new and that demands something from the tax authorities. But we cannot afford to do nothing. I’m not going to accept that. ”
A version of this article also appeared in June 29, 2020, in nrc.next