Cabinet policies are making it less financially rewarding to work more hours, and people with average incomes are being particularly hard hit, the Telegraaf said on Monday.

In a worst-case scenario, the paper said, people who add €1,000 to their monthly salary only actually benefit by and additional €130 in spending power.

Last week, MPs voted in favour of being a bonus to part time workers who decide to increase their hours but economists and tax experts warn that the cabinet’s tax plans will hit some people’s extra earnings hard.

‘We have a big problem when it comes to the tax burden and it will only get worse with these plans,’ tax expert Leo Stevens told the paper.

The cabinet has agreed to spend €17 billion boosting spending power and is increasing various tax breaks and benefits as part of that.

‘The discounts and benefits are income-related and are lowered as you earn more,’ Rabobank tax expert Hugo Erken told the paper. ‘So you lose these discounts and benefits if your pay goes up. And that means the tax burden is higher on additional hours of work.’
Tax office figure show that the plans will increase the tax burden on earnings from €35,000 a year upwards. For example, someone earning €45,000 a year currently pays an effective tax rate of 57% on every extra euro, and that will go up to 87%.

A single income household with two children and a €45,000 salary will have net income of €37,722, taking tax breaks and benefits into account next year and that is only €800 a year more than someone earning €40,000.

Although both households will have more disposable income in 2023, the current difference is €1,500.

Development

Reinier Castelein from white collar union De Unie told the Telegraaf that there is no longer any point in investing in your own development to increase your earnings power, because of the impact on wages.

‘A lot of tax income goes to people who don’t work,’ he said. ‘Every impulse to stimulate higher earnings is disappearing, for both medium and lower incomes.’