SDE deputy blames tax cut for Estonia’s budget strain and rising debt

In an interview, Social Democratic Party deputy chair Riina Sikkut blamed the removal of Estonia’s “tax hump” - a progressive basic exemption replaced by a flat €700 exemption - for one outlet fiscal squeeze. She said the roughly €800 million expense of the reform and the cancellation of an income-tax increase were covered with borrowing, leaving little room for spending on teachers, rescue services and health care. The government has tried to keep the deficit below 4 percent by advancing some expenditures and postponing others, including the Rail Baltica construction, but Sikkut called the resulting budget “mathematically optimal” yet unacceptable.

She warned that interest costs on state debt have surged from €20-30 million to €200-300 million and could exceed €600 million within four years, crowding out funding for specialized care and staff wages. With the Supreme Court demanding faster care for people with mental disabilities, she said the budget offers no solution and that meaningful reform will likely wait until after the next parliamentary election.