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This chapter argues that in the U.S. federalist system, in which many traditional government functions are carried out not by the government in Washington but by states and localities, any durable reform of the federal system should take into account its effects on the tax collections and budgets of states. It presents the Competitive Tax Plan for the U.S. federal system. The chapter admits that the plan has certain drawbacks for the states, in that it will pressure them to eliminate their income taxes for families making less than $100,000; however, it also has a number of possible benefits for states, especially if they were to adopt similar consumption taxes themselves. The chapter also discusses the consequences of fundamental reforms for the states.

The Dutch tax system is in urgent need of reform, as acknowledged by a large number of official reports, none of which has been acted upon. The COVID-19 pandemic and the subsequent economic downturn, the energy transition to contain climate change, and the taxation of multinational enterprises all call for a more efficient, equitable, neutral, and transparent tax system. In this book, tax experts, from at home and abroad, offer their detailed views on directions for tax reform in the Netherlands. Following a brief overview of the Dutch tax system, this chapter reflects on the book’s main findings and provides recommendations for the taxation of capital income, the corporate income tax (its design and future in a global setting), the taxation of labour income, corrective taxation to deal with climate change and congestion, and the taxation of consumption, particularly financial services, and the use of excise duties.

Income tax is becoming very complex, as a result of the increasing use of income-dependent tax credits and tax rebates. As a result, it can be very difficult for households to assess the consequences on their tax liabilities of, for example, changes in their wages or household situation. Specific parts of the tax system can be simplified with limited redistributional consequences. In particular, the complex system of income-dependent tax rebates for rent, health, and children can be greatly simplified with a single tax rebate, with the same income thresholds, a single phase-out rate, and a uniform means test. Any adverse distributional effects can be remedied via the tax or benefit system. Furthermore, the income-dependent general tax credit can be made independent from income using suitable adjustments in tax rates and the tax credit for the elderly without any noticeable distributional impacts.

Of all OECD countries, the Netherlands has the most extensive tax benefits for the self-employed. The uneven tax treatment of employees and the self-employed causes undesirable effects, such as lower labour productivity, erosion of social security, and weakening of the negotiating power of labour. The tax privileges are partly due to the dual tax status of self-employed individuals: they are entitled to both the tax concessions for employees and those for entrepreneurs. However, proposals for restoring tax neutrality encounter wide political and social resistance. To break the political taboo on reform, the earned income-tax credit and the self-employed allowance should be converted into an employee’s tax credit and a self-employed tax credit, which gradually converge over time. This would reduce tax differentials and ultimately pave the way to greater symmetry in the tax treatment of employees and the self-employed.