A deficit of nearly one billion euros may seem large, but if Estonia had not abolished the tax hump (a rule that reduced the tax free allowance for middle earners -ed.) and had introduced a banking tax, the situation would not have become nearly as critical.

Even now, there are several ways to improve Estonia's fiscal position, and the main obstacle is the dogmatic thinking of the governing parties. 

You cannot patch holes with an Excel sheet 

You certainly cannot fix the budget deficit with the same Excel sheet that caused us a financial crisis three years ago — shifting sums around without any analysis, taking money from wherever something still seems available, and patching holes without understanding the consequences. 

This is exactly how the vehicle tax was created, and the entire car‑sales sector fell into free fall. The same approach was used to raise income tax and VAT, which reduced consumption and damaged Estonia's business environment. Then the tax hump was abolished, and the resulting hole had to be borrowed into the state budget.

It is important to remember that the state's finances cannot be fixed without the economy. Fiscal repair must be done with measures that support the economy, not work against it. If you simply write a new tax into a spreadsheet — one that harms the business environment or people's ability to consume — then on paper the state's revenues and expenses may balance, but in reality the economy is harmed and the new tax will not bring in the expected revenue. 

This leads to the situation we are in now: the state budget constantly needs new and newer measures to stay afloat.

Former Reform Party finance ministers Mart Võrklaev and Aivar Sõerd have presented a package of proposals largely driven by the same Excel‑thinking and creating new problems. The package does include some obvious and necessary steps, such as reversing the online‑casino tax cut, but the core of the proposals is the familiar scramble for people's wallets.

One option the former ministers propose is taking money from municipalities. In other words, all municipalities that have managed to climb out of the economic downturn should give up an additional share of their residents' income tax. The slogan may be "Let's take it from Tallinn!", but the real idea is to reduce income‑tax revenue for all cities and towns where business has taken root and where enough people earn wages.

This money would come at the expense of those municipalities' residents and the services provided to them — from education to social assistance. The state already imposes ever‑greater obligations on municipalities without allocating money for them. Local governments have fewer and fewer options to decide how to use tax revenue for their residents. Voters in cities and towns have less and less say over what happens in their communities, because almost all money is tied up in fulfilling obligations imposed by the state. 

Municipal money is not a reserve fund for the central government to redistribute to cover its deficit. Nor should municipalities be sent the signal that improving their local economy will be punished by taking away their tax revenue.

A banking tax would bring hundreds of millions 

Even more cynical is the proposal from the former ministers to raise specialist‑doctor visit fees. This would take money directly from people — and from the most painful place. It essentially forces people to choose between paying or not going to the doctor. 

Estonia has a revenue source that our southern neighbors have successfully used without any negative consequences: a banking tax on extraordinary bank profits. 

At a time when Euribor is rising again, banks are earning increasing extraordinary profits from people's growing loan payments. A banking tax could bring the state up to half a billion euros a year. It is unclear why the government refuses to seriously discuss it. 

Rail Baltic — a train into the forest near Häädemeeste

There are also savings to be found. Several projects seem to operate as if money does not matter, with tens or hundreds of millions casually poured into them. It feels as if the money comes from another reality — but it does not. It is the same money later scraped back from people's pockets. 

For Rail Baltic, the government does not seem bothered that initial forecasts have become useless and the €3.7 billion project has ballooned — even in its trimmed form — to more than €15 billion. Estonia's share is now roughly the same size as the original total cost for all three countries. It has also become clear that Latvia will definitely not complete its section by 2030. 

It is also known that even for Estonia, finishing its section by 2030 would be a major effort that would overheat the construction market, raise construction prices and require an additional €200 million a year on top of the planned €500–600 million. This overheated market would also make private‑sector construction more expensive. 

Our prime minister has promised to find that extra €200 million every year. And for what? To operate only a domestic railway for several years. And the annual cost would be tens of millions regardless of whether the train continues past the Latvian border. 

Instead, Estonia should use Latvia's inevitable delay to calmly conduct a new, realistic cost‑benefit analysis of Rail Baltic based on current knowledge. It is completely irresponsible to spend an extra €200 million a year just to rush — only to run an expensive train into the forest near Häädemeeste for several years. 

The government must also review its initiatives to guarantee loans for wind‑park companies or provide price floors with taxpayer money. This would impose unpredictable long‑term risks on taxpayers, and as the bankrupt wind parks in Sweden, the Netherlands and elsewhere show, those risks are likely to materialize. 

A sustainable solution for renewable energy in the long term is one where the costs of non‑dispatchable electricity capacity are borne by the producers themselves, not spread between taxpayers and dispatchable power plants as is the current trend. 

Improving Estonia's fiscal position requires a change in mindset. State leaders must understand that money does not come from spreadsheets but from enterprise — and therefore the state's finances cannot be repaired without the economy. It is clear that the government that led us into this crisis cannot and will not correct its priorities, admit its mistakes or lead Estonia out of this crisis.

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