"Socialism gone wild" in the Netherlands?
While Dutch PM Jan Peter Balkenende recommends the Dutch negotiation-based economic system to the world, US writer and sociologist Russel Shorto is helping his efforts by promoting the Dutch approach to taxation. Should the Obama administration go Dutch?
In a much-quoted story in the New York Times describing his experiences as a Dutch resident, Shorto recounts his shock at the number 52. "For the first few months I was haunted by a number: 52. It reverberated in my head; I felt myself a prisoner trying to escape its bars," he writes. The number is in fact the percentage of income tax levied on Shorto's earnings. People in lower income bracket pay lower rates.
A good deal of the revenue is channelled back to the tax payers, Shorto notes. Parents of children aged up to 18 receive a quarterly payment, the child benefit, to help cover the costs of raising a child. Under similar schemes, parents also receive money from the government into their accounts for school books, day care for small children. It's not "Socialism Gone Wild", the sociologist hastens to add.
Quoting an American accountant, he reminds us that the US income tax rate of 35 percent is misleadingly low. Add social security at 6.2 percent, plus state and local taxes, and real estate taxes, and the rate rapidly approaches the Dutch level. But the 52 percent in the Netherlands includes social security and pension premium payments.
It's a rosy picture that Shorto paints. But is that right? Dutch expat and career woman Heleen Mees, a New York resident, says in NRC Handelsblad,
"Shorto is rather disingenuous in portraying the Dutch welfare state as a fairy tale come true without ever mentioning Fortuyn, Van Gogh (other than the famous painter) or Wilders. Shorto is a sojourner, and he doesn't need to worry about what lies ahead for the country that I grew up in."
Il quarto stato (The Fourth Estate) Giuseppe Pellizza da Volpedo (1868-1907)
Mees also points out that Russel Shorto is in a privileged position:
"[...] the Dutch welfare state isn't as beneficial to low-skilled immigrants as it is to Shorto. [...] Due to the high costs of labour (25 dollar per hour at minimum wage level) many low-skilled immigrants can't find a job and hence are forced to spend their lives in subsidized isolation."
And the system is much less generous than Shorto's experiences suggest. As the Economist wrote a while ago,
"A welfare state that is too generous, and a labour market that is too rigid? Follow the Dutch example of chipping away at the first and quietly introducing flexibility into the second. Taxes that are too high and public spending that defies cutting? Look at the Dutch tax reforms that sharply lowered the burden of direct taxes, and at the finance ministry's tough spending controls."
In fact, Russell Shorto settled in the Netherlands well after a serious pruning exercise by Dutch policy makers that removed the excesses of the welfare state. Dutch Blogger Jurgen Reinhoudt, writing on the new conservatism site New Majority, reminds us about the recent past:
"[...] the Dutch welfare state brought the Netherlands to the brink of economic disaster in the 1980s. One can describe this, in effect, as an unintended overreach: when Dutch policymakers expanded entitlement programs in the 1960s, they did not expect these programs to grow as fast as they did in the 1970s and 1980s."
The main element of the Dutch system that most commentators agree is worth copying in the US is the health care system. National health insurance in the Netherlands is semi-privatised: everyone is insured and pays a standard monthly premium, but people in the lower income brackets receive, you've guessed it, government support to cover the costs of the premium.
Health insurance companies are private, profit-making concerns - there is no state-owned health insurer, and clients are free to switch between companies to get the best deal. The law ensures that insurance covers most essential health care, from blood tests to heart surgery and chemotherapy.
Is that the way to go for the US, too? The debate continues.