An Economist’s Fact-Based Response to Polarizing Tax Claims

A social democratic think tank recently sought to fuel polarization between low- and high-income earners by claiming that the government’s decision to slightly ease tax progression would only benefit the very highest earners. To support this argument, the think tank used euro-denominated comparisons, which naturally make the differences appear large—especially between the very top earners and the rest of the population.

This narrative was swallowed whole by Finland’s two biggest media outlets—namely the publicly owned Yleisradio and the privately owned Helsingin Sanomat. Both repeated the claims without any critical scrutiny, effectively acting as a loudspeaker for a politically aligned left-wing think tank. Their coverage was soon challenged by Sami Pakarinen, Chief Economist of the Confederation of Finnish Industries, who presented a series of facts on social media.

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According to Pakarinen, “Finland will lower its top marginal tax rate at the beginning of next year from 58% to 52%. This has been recommended for years, as Finland’s top rates are among the very highest in the world.”

He elaborated by noting: “In 2017, the IMF recommended that the top marginal rate should be capped at 44%. The OECD average is around 35%. Even after the reform, Finland remains well above this ceiling.”

Pakarinen also reminded readers that “the top 14% of earners pay 49% of all income taxes. When it comes to net public transfers, the top decile shoulders the lion’s share.” In fact, he emphasized that “Finland redistributes income through taxation more than any other OECD country.”

Furthermore, contrary to the social democratic think tank’s claims, he argued that “the self-financing ratio of the tax cut is very likely above 100%. In other words, by lowering taxes, the state will actually collect more revenue. Recent research points in this direction, and there is finally a growing consensus among economists.”

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For international readers, it is worth noting that research shows the majority of journalism students in Finland lean toward the green-left. Perhaps this helps to explain why Finland’s otherwise exceptionally free press—at least in international comparison—can nevertheless appear remarkably one-sided. In practice, it often leans toward planned-economy thinking and value liberalism, as this very case illustrates.

As a result of all this, one is entitled to ask: what exactly are Yleisradio and Helsingin Sanomat aiming at by repeating the left’s polarizing and misleading claims as if they were facts? A society divided along American lines—or even outright revolution?

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