Can you elaborate further? I'd be quite interested.
In the Netherlands the tax rate is 36% and then caps out at 52%. There's no scenario in which you will net less than 48% on an increase.
But, if you look at it from a more holistic perspective, there's not just taxes on wages. When you earn little you get rent and healthcare insurance subsidies. You lose these once you earn more, so there are income ranges where extra income leads not only to a tax rate of 36 to 52%, but also a loss of subsidies which can be the equivalent of a tax rate. The marginal net income can therefore be < 30 cents per euro earned.
But that isn't necessarily tax related. Further, there's some non-tax consequences that are left out of the story. (e.g. social housing subsidy is only possible for social homes, which you typically don't want to live in if you don't have to).
- Gross to net includes 13.07% employee side social security contributions. The state somewhat lowers those for the lowest income earners. This increases the gap.
- Progressive taxation. Under 24k gross, you pay 40%. Up to 41k, you pay 45%.
- A large part of the bottom 25% tax bracket is actually 0% (~9k tax free base).
- Local taxation (usually about 7%, but 0% in the richest enclaves) gets tacked onto the tax amount.
I did some calculations because it seemed strange to me.
Gross | Gross New | Net Delta | Total taxation
2000 €2600 €155 31.00%
3000 €3600 €262 38.00%
4000 €4600 €253 42.00%
It is possible to pay more for an increase on the lower levels, but you will still pay a lower tax rate overall. Yes, taxes are high in Belgium but to add some nuance, you get a lot in return. (Free healthcare, free university education, pensions, social services, no capital gains tax)
Interesting, did you take these from a calculator? I'd love to see a graph of the marginal tax rate from 1k till say 6k.
Because here it seems from 2k, 3k or 4k, an extra 600 is taxed consistently by more than 50%, and sometimes even 75%. That's a very high marginal tax rate. I wonder if that's cherrypicking something and the x600 to x000 range looks better.
I also wonder what the taxes break down into, I think it's always good to separate pure taxes (going to the government for the public good) from various social safety net contributions (some of which go to a general fund for the public good, but some are also individually-accrued benefits by paying a monthly premium, e.g. unemployment insurance of your particular salary).
When making cross-country comparisons, I find there's a ton of apples to oranges comparisons like this, where taxes and other things aren't properly separated and just lumped together.
Another example: in some countries healthcare is arranged as a benefit on-top of gross income. In others healthcare is subsidised by 80% by the government, and paid for through a tax on gross income. It could very well be that compensation in both these countries is the same, but that the former looks like you're earning more because you get paid out more of your gross income.
For any earnings over 41.060€ gross per year, net is approximately 1/3 of gross:
- 13.07% employee side social security contribution. The ~35% of gross salary employer side social security contribution comes on top of this, so is not included.
- ~53.5% taxation. This includes national and local tax, but excludes regional tax.
Note that from about the top tax bracket, you receive no extra health, unemployment or pension rights in return:
- Health care is universal.
- Unemployment compensation is not limited in time. It has recently become degressive with time though, and it's capped at a relatively low maximum.
- Pensions are repartition based as opposed to individual capitalisation based, meaning current employees pay for current pensioners. They're also capped at a fairly low maximum.
In the Netherlands the tax rate is 36% and then caps out at 52%. There's no scenario in which you will net less than 48% on an increase.
But, if you look at it from a more holistic perspective, there's not just taxes on wages. When you earn little you get rent and healthcare insurance subsidies. You lose these once you earn more, so there are income ranges where extra income leads not only to a tax rate of 36 to 52%, but also a loss of subsidies which can be the equivalent of a tax rate. The marginal net income can therefore be < 30 cents per euro earned.
But that isn't necessarily tax related. Further, there's some non-tax consequences that are left out of the story. (e.g. social housing subsidy is only possible for social homes, which you typically don't want to live in if you don't have to).
I'd be interested how it works in Belgium.