June 1998

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A social welfare state which encourages job creation

The creator of this model, Kati Peltola, Director of Social Services of the City of Helsinki, thinks that solutions like citizen’s income or favouring labour intensive sectors through levelling of value added tax do not confront the source of the problem which, in her view, is that tax systems favour capital intensive production and punish labour intensive production.

Peltola wants a radical simplification of the structures of taxation and social security. In her model, legally determined social insurance is financed through a general production tax and not through social insurance payments. The production tax is levied on the whole added value in production. This change in taxation has the effect of allowing the use of human labour to compete on equal terms with the use of other production devices.

In this model, low incomes will not be taxed. The amount of income exempted from taxes equals a sum which in general terms should meet basic needs, approximately 600 ecus a month. This basic tax reduction will decrease the need for social aid in order to be able to pay income tax, as now is often the case.

See also:

          Archbishop of Finland supports Citizen’s Income (June 1998)

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