The next five years will be crucial. Public finances should come out of huge deficits, and the lesson from the previous crisis is clear. Tax increases will never be temporary. Pulling the tax brake can serve as an additional “austerity” argument in the discussion on lowering the deficit.
Prior to the crisis triggered by the COVID-19 outbreak, the Lithuanian economy had been enjoying a rapid growth. Yet, while the number of available jobs had been increasing, the number of unemployed had remained steadily high.
The study presents different models which take into account the consequences for the individual, the state budget, and the labor market. The suggested reform variants make it a significantly more attractive option for Hartz IV recipients to work more, by raising income retention by up to 40 percent.
There is evidence showing that increases in mandatory minimum wage might force some firms to increase prices, lay off workers, cut fringe benefits for employees and engage in other revenue-boosting or cost-cutting measures.
With several policy proposals on introducing a progressive taxation model put on the table, the upcoming parliamentary session in Lithuania is sure to become a heavily debated one. In fact, every tenth taxpayer is threatened with higher tax burden as personal income tax might increase from a flat 15%up to 20%.
Two interesting debates are being led simultaneously in Slovakia. One on subsidies to support the mining of lignite in the upper Nitra region and the other on the unconditional basic income for all. The interconnection between the two could bring so many positive effects that I am left to wonder why nobody has thought of this so far.