Social Democrats want to increase tax-free income to minimum wage

Money.
Money. Source: Siim Lõvi /ERR

The Social Democratic Party (SDE) says it wishes to change the tax income law so that the tax-free income threshold would increase to the same level as the minimum wage, meaning that from July 1, 2022, the monthly tax-free income would be €654 in a month, and €7,848 in a year.

According to the draft legislation, the tax amendment would help to reduce people's coping risks next to the electricity crisis.

In the explanatory letter of the draft legislation submitted by the Social Democratic Party and Raimond Kaljulaid, it's noted that the tax-free income would be increased to €7,848, from the current level of €6,000, were the bill to pass.

The Social Democrats say that the increase in tax-free income improves the coping of low-wage earners, increases motivation to work and remain in the labor market, and reduces the burden on the social system.

"Rather, a lower effective tax rate increases the motivation to work and reduces wage poverty. Deriving from the structure of households, the risk of poverty for children will also reduce as a result of the increase in the minimum wage," the draft states.

Considering the distribution of Estonian beneficiaries, the impact of the change on the general government budget position in 2022 is approximately €44 million in 2022, and €84 million in 2023.

A majority of votes in favor is required for the adoption of a bill at the 101-seat Riigikogu, meaning 51 votes or more are needed. SDE has 10 seats.

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Editor: Roberta Vaino

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