Since Prime Minister Kristen Michal devoted a good deal of his year-end interviews to the Social Democrats' role in shaping life in Estonia, allow me to weigh in.

By continually shifting tax responsibility onto the Social Democrats in his statements, Michal does not harm the Social Democrats so much as he betrays the core principles of fiscal policy. For decades, we have steered clear of a fiscal approach where expenses are not covered by revenue. We have avoided taxing people simply to funnel hundreds of millions of euros out of the Estonian economy in interest payments. That is no longer the case.

The prime minister criticizes the Social Democrats for insisting, during our time in government, that increased state budget expenditures must be matched by revenue. And it's true: it was only after the Social Democrats left the government that the Reform Party and Eesti 200 adopted a budget strategy that will increase the national debt burden by more than 25 percent over four years. In just a few years, we'll be paying €450 million annually in interest.

This means that 3.7 percentage points of each person's income tax will go straight to foreign banks to cover interest payments. In return for those payments, we get neither protection from missiles nor better public services.

Strong middle-class as a core pillar of the economy

Instead of taking on large loans to cover permanent expenses, it would be wiser to keep that interest money circulating within the Estonian economy. Yes, that would require slightly higher tax revenues, but as a society, we would be hundreds of millions of euros better off. That money could improve the well-being of families and, through consumer spending, reach Estonian businesses.

Estonia's success has stemmed from the fact that a large share of the population has had the opportunity to realize their potential and benefit from the things we now consider part of a normal life — from education to travel, from a warm meal to a home of one's own. A strong economy relies on the widest possible middle class, whose spending power is one of the cornerstones of economic growth. It was this principle that the Social Democrats defended when the government had to find a way to cover the sharp increase in defense spending.

Estonia's tax system is extremely regressive — in other words, the tax burden is heavy on the poor and light on the wealthy. That's why, in our search for revenue at the time, we ruled out ideas such as raising the VAT even further, cutting pensions or reducing the tax-free minimum income threshold. Instead, we agreed on a temporary "defense tax," with the idea that the entire society would contribute. After all, Estonia's security should not rest solely on the shoulders of the middle class and low-income earners.

Since the Social Democrats left the government, all that remains of the security tax is the VAT hike, which was changed from temporary to permanent. This is unfair and pushes Estonia's middle class into poverty. In addition to the social consequences, this leads to long-term economic problems: declining domestic consumption and, as people's ability to cope weakens, poorer health and education outcomes. Ultimately, that means fewer available workers for employers and much higher social spending down the line.

Lately, the prime minister has begun to emphasize how the Reform Party is a champion of progressivism and liberalism, standing up to the conservative parties. But the Reform Party's rhetoric, as the saying goes, does not stand up to scrutiny. The reason conservatives enjoy such strong support is precisely the Reform Party and the public's disillusionment with the current social model — when more people are losing than winning, the number of the disappointed grows.

Freedom and democracy are not defended with words, but with actions. In the past year, the number of children living in absolute poverty has doubled, reaching nearly 12,000. The frustration of these children and their parents won't be resolved by politically motivated attacks on the chairs of various supervisory boards. Many of these families will gain nothing from next year's tax changes; some may see an extra €10 to €30 a month. Meanwhile, these same children's parents will still be paying interest on state debt so the government can hand out a €1,848 tax break to high earners making €4,000 or more per month.

The Social Democrats left with half the government's rating

When the Social Democrats left the government, they took half of the coalition's support with them and it has stayed that way for nearly a year. This simple calculation should prompt some reflection on the public's expectations for the Reform Party's policies. It's also unwise of the prime minister to keep making cooperation with the Reform Party increasingly difficult for the Social Democrats.

However, Kristen Michal is right about one thing: with the state budget running such a large deficit, all parties must, before the 2027 Riigikogu elections, present a plan for how they intend to cover the major budget shortfall created by the Reform Party and reduce the national debt burden. As Finance Minister Jürgen Ligi has hinted, the task of finding new revenue for the budget will be left to other parties, those that form the next government after the elections.

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