March 25, 2022

Inequality and Redistribution in the Netherlands

How high is income inequality in the Netherlands? How progressive are taxes and how much income does government spending redistribute? This study presents the most exhaustive responses for the Netherlands to these questions to date.

We combine detailed administrative records on the universe of the Dutch population with national accounts aggregates to provide a thorough description of income inequality before and after taxation and government spending.

Overall, taxes and government spending reduce the top 10%'s income share from 31% to 26%. We decompose this difference between pre- and post- tax income and show two main results. First, the tax system is regressive due to high consumption taxes, flat social contributions and a low tax on capital income. Second, the entire reduction in inequality comes from government spending that is targeted at the bottom of the distribution.

We finally provide a wide set of alternative scenarios to investigate the sensitivity of our results to different distributional assumptions. Our main conclusions are robust to this sensitivity analysis.