The Miljoenennota (Budget Memorandum) shows households will bear most of the financial burden for 2027: purchasing power will decline slightly and higher incomes will pay an additional €750 million. Assistant professor Heike Vethaak: 'Planning agencies warn of an accumulation of negative income effects, which could hit low-income households particularly hard.'
The cabinet claims it aims to spare middle incomes as much as possible, and vulnerable groups will receive compensation. Yet, the planning agencies warn of a cumulative effect. And there is still no clarity on 'box 3' (asset tax): this new system based on actual returns is not expected to take effect until 1 January 2028.
Redistribution, or a list of compromises?
Is this budget a deliberate plan for redistribution, or merely a list of political compromises? According to Vethaak, the former is at least partially true, even if the cabinet does not explicitly state it. 'As a result of the Budget Memorandum, there is indeed a degree of redistribution, although it is not explicitly stated that redistribution is a policy goal,' he says. 'I assume that, when making individual choices and considering their combined effects on income distribution, the distributional effects were taken into account to prevent certain groups from falling too far behind.'
Yet, this balance is more fragile than it seems. Vethaak points to the increase in the eigen risico (annual deductible for healthcare before health insurance starts reimbursing) starting in 2028: 'Households with low incomes are hit relatively harder, due to often higher healthcare costs,' he explains. 'On the other hand, the result is that the nominal health insurance premium will decrease for everyone because collective healthcare expenditures are lower. However, low-income households benefit less from this, as they also receive less healthcare benefit due to the lower premium.'
Additional funds for the lowest incomes
The cabinet is attempting to mitigate this effect partly through municipalities. 'It should be noted that the cabinet is making additional funds available to municipalities to soften the impact of its policies on the lowest incomes,' says Vethaak. This includes €100 million via the municipal fund for tackling poverty and problematic debts, and €400 million for compensation for chronically ill people.
But whether this is sufficient remains to be seen: 'Municipalities can decide for themselves how to allocate these funds. And there are already significant differences between municipalities in this regard. The planning agencies also question whether the additional funds are sufficient for people facing multiple problems.'
The top tax rate: symbolic, or substantial?
One of the most concrete measures is the inflation adjustments of tax brackets, which are only minor. Despite this, higher incomes will also pay more tax. 'The measure to limit the indexing of tax brackets indeed leads to higher costs, even for higher incomes,' confirms Vethaak. 'The planning agencies explicitly mention this as one of the key measures with a negative impact on purchasing power. At the same time, the effect of this measure is likely limited compared to the development of income disparities between households in recent years, particularly at the top.'
According to Vethaak, the real leverage lies elsewhere: in wealth, not income. 'A more important point might be that the taxes on wealth are not being increased,' he says. 'Work is being done on revising box 3, but no decision has been made on this in the Budget Memorandum. Choices regarding the taxation of capital could have much greater long-term consequences for the distribution of income and wealth.'
