The limited effect of an increase in take-home pay

Peter Kavelaars, Professor of Fiscal Economics at Erasmus School of Economics
Erasmus School of Economics

In a recent article from EenVandaag, Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, discusses the positive picture of an increase in net wages. Net wages are set to rise this year. Good news, but Kavelaars does make some comments.

Changes in the Dutch tax system will push take-home pay somewhat higher this year. For instance, working people will pay lower pension contributions this year, the tax burden in the first bracket will go down a bit and most working people will benefit from higher tax credits. A positive change, but the money to finance this has to come from somewhere. You quickly end up with the government, which gets a lot of revenue from taxes. ‘So in effect we are all paying for tax breaks,’ the Professor said.

Compensating for inflation?

Last year, inflation was around 10 per cent. ‘So although every little bit helps, that far outweighs inflation,’ says Kavelaars. ‘Ultimately, the inflation correction has to come from an increase in gross wages from employers,’ the Professor adds. ‘Not for nothing do you see strikes in many industries.’

More information

You can read the full article from EenVandaag, 26 January 2023, here

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