Budget: Finance Minister Katainen proposes EUR 800 million in tax cuts
The tax cut policy in the budgetary proposals put forward by Minister of Finance Jyrki Katainen (Nat. Coalition Party) is coming under close scrutiny by the National Coalition Party’s government partners.
The Centre Party, the Green League, and the Swedish People’s Party are calling for measures that would favour those with low and medium incomes. Such moves were not contained in the proposal put forward by Katainen on Wednesday.
Katainen himself also wants to examine the possibility of a tax model that would favour low income-earners by the time the whole government meets to discuss next year’s budget. However, he is staunchly opposed to moves for steeper income tax progression.
“The profitability of work is a very great value to me”, Katainen said on Wednesday as he presented the Finance Ministry’s proposal for next year’s budget.
Katainen is proposing cutting income taxes by a total of EUR 800 million, to be spread out evenly among pay earners of all income levels.
In addition, Katainen proposes EUR 500 million worth of inflation and earning level adjustments, which means that the proposals would lead to a cut of EUR 1.3 in state earnings in 2009.
Household purchasing power would increase next year by 3.5 per cent, according to the Finance Ministry’s calculations, compared with 2.5 per cent this year.
Katainen emphasised that the buying power of pensioners and others with low incomes would also increase.
Anni Sinnemäki, chairwoman of the Parliamentary group of the Green League, denounced the proposed moves as “irresponsible”, saying that the government should leave more leeway for itself for the remainder of the electoral term.
The government’s policy programme earmarks EUR 1.1 billion for “genuine” tax breaks.
“I am worried that high nominal wage increases might be written off as inflation adjustments. We should not create such a mechanism”, Sinnemäki says.
She also feels that the income tax cuts should focus on those with low incomes, who are worst hit by inflation.
Agreeing with Sinnemäki is Mika Lintilä (Centre), the chairman of the taxation division of the Parliament’s Finance Committee.
Lintilä said that the government needs to make adjustments to the taxation policy line to focus the tax cuts more on those with low and medium incomes.
Lintilä also criticises the size of the inflation adjustments proposed by the Ministry of Finance. He feels that large wage increases cannot be “patched” with large tax cuts.
The government also plans to cut the taxation of pensions. Katainen says that pension taxes are to be reduced at a cost of EUR 177 million to state coffers.
Katainen also promised to fix problems related to married couples on pension. In the future their taxation must not be higher than that of partners earning income.