Tax increase likely option to replace health insurance plan

An increase in income tax is likely to replace the new coalition’s plans to reduce the income gap between rich and poor, according to media reports at the weekend.


The new coalition agreed on Friday to drop plans to make health insurance premiums income-dependent, following an outcry from mainly VVD supporters, who said the plan would hit middle-income families particularly hard.
Ministers and party financial experts have now come up with alternative plans which are currently being studied for their effects on spending power. The revisions are expected to be finalised by Tuesday, when new ministers will hold their first debate with parliament.
Income tax
The Financieele Dagblad says the third tax band may now be increased from 42% to 45%. The government had originally planned to cut the third tax band to 38% to compensate people for the higher health insurance costs. The fourth tax band, currently 52%, could also be put up, the paper says.
Another option could be to press ahead with making health insurance premium’s income-dependent but to reduce the effective health tax from 11% to 8% and spread it over incomes up to €150,000.
Labour leader Diederik Samsom has stressed the new plan must meet the conditions of the coalition agreement by strengthening the economy, getting the government’s finances in order and reducing the gap between rich and poor.
This means some form of wealth redistribution is inevitable, insiders say.
Consumers
Meanwhile, the Parool reports that consumer confidence has plummeted because of the ‘chaos’ in The Hague surrounding the new cabinet’s plans.
‘The cabinet was formed very quickly and that gives rise to certain expectations,’ ING economist Charles Kalshoven is quoted as saying. But that momentum has now been lost in the row over income-dependent health insurance.
‘The uncertainty that followed is extremely bad for consumer confidence,’ he said. Early research by ING involving 62,000 people shows consumers have been hard hit and their willingness to spend money has reduced still further.
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