Jetten Cabinet in trouble as left-center income & asset tax deals pass despite VVD protest

A majority of the parliamentarians in the Tweede Kamer voted to approve an amended form of the Cabinet's tax package for 2027, including a proposal to assess a a new Millionaire's Tax on earnings from savings and assets in the Box 3 section of income tax returns. While the unpopular tax plan itself came from the Cabinet, comprised of a coalition of D66, VVD, and CDA, the amended version emerged from a compromise D66 and CDA struck with left-wing faction PRO and centrist party Volt. The deal made without the knowledge of the right-wing VVD has caused a chasm in the coalition.

Prime Minister Rob Jetten will speak with Deputy Prime Ministers Dilan Yeşilgöz (VVD) and Bart van den Brink (CDA) on Friday morning, he confirmed after the votes. Yeşilgöz was especially displeased when the tax amendments were announced a day earlier. Jetten said he will "do everything" he can to mend the coalition, reiterating that a coalition of D66, VVD, and CDA is "a very good combination for the Netherlands, with which we can get a number of issues moving again." He cited housing construction and nitrogen emissions as examples.

The lower house of Parliament approved the comprise version of the amendments from PRO and Volt before the Tweede Kamer took a dinner break for members to discuss the situation with their factions. That vote came after about ten hours of political debate and wrangling. Following the dinner break, a majority approved the tax plan with the attached amendments, which aims to shift 1 billion euros in tax burden away from middle- and lower-class households, and towards higher-income households.

Ultimately, 76 MPs voted in favor of the tax plan, a narrow majority of a single politician. The plan kept the support of D66, CDA, PRO, and Volt, as well as ChristenUnie, DENK, animal rights party PvdD, and 50Plus. The VVD voted against their coalition partners. It is not yet clear if it will be able to pass through the Eerste Kamer, the Dutch Senate. Another five senators will need to jump on board if the whip count is along party lines.

With the adoption of the tax plan, "a center-left majority in the House of Representatives is taking responsibility for governing the country," said PRO leader Jesse Klaver. "By doing so, we are preventing chaos." He was also pleased that he is slightly lowering the burden on working people at the expense of millionaires.

Christine Teunissen from PvdD said it came down to a choice between "chaos or cooperation." She pointed out that millionaires will pay more due to the adjustments to the tax plan. "It is not perfect, but it is a start."

There was broader support for the Box 3 asset tax plan, which was ultimately supported by hard-right parties JA21, SGP, and BBB. This suggests the measure will be able to win a majority in the Senate, even though the three hard-right parties had threatened to vote down the proposal if the earlier tax plan vote was approved.

The Box 3 tax plan will introduce a new, higher tax band for earnings of over 60,000 euros derived from savings and assets. This rate will be at 38.5 percent. For these earnings below 60,000 euros, the rate of 36 percent will be reduced to 35.5 percent.

The original bill to levy tax in Box 3 on actual returns earned from shares and savings has been sitting before the Senate for some time. Under that plan, investors would also pay tax on returns from shares that they earned only on paper. This was amended to ensure that profits from shares are only taxed when they are sold, which was an initiative from Minister of Finance Eelco Heinen (VVD). He said this was necessary because otherwise the bill would not gain a majority in the Senate.

Passage means disagreement within the coalition has grown further. "You will really have to ask the VVD first what happens next," said Jesse Klaver.