Reinventing the Dutch tax-benefit system: exploring the frontier of the equity-efficiency trade-off

European governments aim to raise labour supply, cut unemployment rates and, at the same time, maintain social cohesion. Yet, economists have always stressed the trade-off between these objectives. This paper explores whether the frontier of the equity-efficiency trade-off can be shifted outwards in the Netherlands by using an applied general equilibrium model. In particular, we consider various balanced budget reforms that shift the marginal tax burden between groups and across the extensive and intensive margins of labour supply. The reforms include in-work tax benefits, an individualisation of taxes and benefits for couples, selective tax credits for secondary earners, and flat tax proposals. The analyses reveal that shifting the tax burden either away from elastic secondary earners (who typically occupy part-time jobs in the Netherlands) or away from the extensive margin of participation have the potential to raise employment, without sacrificing equality between abilities.