It is great to hear how Finland’s two right-wing parties are vying for voters’ votes but dangling the promise of income tax reductions.
“Lower taxes will bring economic growth” is their promise to voters, who lick their lips with the thought of piles of extra cash…
But there are a few problems that need to be considered before jumping for joy…
In the first place, Finland does have slightly higher taxes than most other countries in the OECD but you must into account the fact that tax payments cover free, or extremely low cost education for all, excellent public healthcare, a safe and clean environment and a well functioning basic infrastructure networks. In almost all other OECD countries you must buy some or all of these services from the private sector at a much higher cost, or simply not have them at all.
In almost all other OECD countries you must buy some or all of these services from the private sector at a much higher cost, or simply not have them at all.
Secondly, Finland is a big country geographically, with a relatively cold climate and very few people – well short of 6 million. We need to have a well-educated population with the maximum number of people working to run and maintain a relatively expensive country. We must be economically efficient and be able to sell products abroad because our own economy is so small.
Thirdly, we must remember that we are next door to Russia. Our governments have always wisely spent tax funds on ensuring a strong military system, just in case the likes of Putin decide to attack us. The present government has just decided to upgrade its jet fighters with some €10 billion – a huge investment for a small country.
Fourthly, we have also just seen two years of Covid and the related costs to keep businesses running and helping low income folk make ends meet when jobs were lost. We had an effective pandemic response where fewer people relative to the whole population died of Covid compared to the rest of Europe – only Norway was better.
Next, we have also just started the biggest healthcare reform in our history to reduce costs with more efficient preventive care and care of the aged. We, like many other European countries, are seeing the baby boomers getting old, something that the right-wing politicians here failed to noticed, even though it was a self evident fact! This is also a big investment that should have een made years ago.
Like the rest of the OECD, we are spending large amount of public cash to support the Ukrainians and on related hardships caused by rising energy and food bills.
Finally, Paul Krugman, a Nobel-winning economist, and Matin Wolf, the lead economist writer in the Financial Times both point out that there is not a shred of evidence that tax cuts cause economic growth, It just makes the rich richer and the rest less well off…
But the right-wing will say just about anything when they feel like it to win votes… Just look at Trump, Johnson and Truss for right-wing economic management! Without a shred of evidence and without any regard for the present economic stress they make absurd claims when it is perfectly clear that tax cuts are a maniac’s path.
Government spending can always be made more efficient, taxpayer grants to companies and unemployment benefits and other basic subsidies for the needy can be better targeted but they do not bring huge savings that would allow just now tax cuts.