Deferred care raises health costs
Confidence: Low
On by default
When health care is cut, queues grow and conditions worsen. Part of the saving comes back later as costlier treatment, and that part grows as long as the cut continues.
Cause-and-effect chains
Changes to spending and taxes have indirect consequences: a cut can partly come back as other costs, and a tax rise can change behaviour. This page lists every effect in the model with its assumptions and evidence. Disputed and speculative effects are off by default.
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What affects what
Point at a box (or tap it) to highlight what it is connected to. Red border = disputed, dashed = off by default. Click an effect's name to open it.
All effects
Longer queues raise sickness absence
Confidence: Low
On by default
When people wait longer for treatment, sick leave gets longer and Kela's sickness allowance spending grows.
Part of benefit cuts shifts to last-resort assistance
Confidence: Medium
On by default
When social security is cut, some people apply for last-resort social assistance, so the real saving is smaller than the cut.
Maintenance backlog grows
Confidence: Low
On by default
When maintenance of roads and railways is cut, repairs get more expensive later and part of the saving returns as a growing cost.
⚠ Education cuts weaken future tax revenue
Confidence: Speculative
Off by default
When education is cut, skills and productivity weaken after several years, which lowers future wages and tax revenue.
⚠ Income tax changes work and reported income
Confidence: Medium
Off by default
When income tax is raised, some people work less or shift income to lower-taxed forms, so revenue grows less than the static estimate. A cut works the other way.
⚠ Corporate tax moves investment, profits and activity abroad
Confidence: Low
Off by default
When corporate tax is raised, firms invest less in Finland, shift profits to lower-tax countries and some move activity abroad over a few years, so part of the extra revenue disappears. With a cut, part of the loss comes back.
⚠ Higher taxes on high earners drive them to move or shift income
Confidence: Low
Off by default
When taxes on high earners are raised, some of them move abroad, don't return, or shift income to lower-taxed forms, so Finland collects less than the static estimate. A cut works the other way.
Higher taxes on low and middle incomes cut consumption and VAT revenue
Confidence: Medium
On by default
People on low and middle incomes spend most of their income. When their taxes rise, consumption falls by nearly the same amount, and the VAT on that spending is lost. A cut raises consumption.
Lower consumption weakens company profits
Confidence: Low
On by default
When people on low and middle incomes spend less, company sales and profits fall, which lowers corporate tax revenue. Wider effects on jobs and growth will be added later with multiplier effects.
Higher income taxes cut consumption and VAT revenue
Confidence: Medium
On by default
When everyone's income taxes rise, consumption falls, especially among low and middle incomes, and VAT revenue is lost. The effect is smaller than for a rise on low and middle incomes alone, because high earners save more of their income.
A VAT increase reduces consumption
Confidence: Low
On by default
When VAT is raised, prices rise and consumption falls somewhat, so revenue grows less than the static estimate.
Alcohol tax increases shift purchases to Estonia
Confidence: Medium
On by default
A small increase raises revenue almost fully, but with a larger increase more people buy their alcohol in Estonia, and part of the extra revenue is lost.
Alcohol tax increases lower harm and health costs
Confidence: Speculative
Off by default
Pricier alcohol reduces consumption and alcohol-related harm, which lowers health care spending after a few years.
⚠ Benefit cuts raise employment
Confidence: Low
Off by default
The government estimates that social security cuts encourage work, which raises tax revenue after a few years. If the cuts are reversed, this effect is lost.
Outpatient care cuts raise disability pensions
Confidence: Low
On by default
When outpatient care – for example primary care and mental-health services – is cut, some illnesses drag on and lead to a disability pension a few years later. The increase shows in sickness and disability spending.
Poverty raises the need for child welfare and family support
Confidence: Speculative
Off by default
When social security is cut, poverty deepens among the lowest-income families. Research links child poverty to the need for child welfare and later problems, so part of the saving comes back over the years as spending on family and children's services.
⚠ Basic research cuts weaken future productivity
Confidence: Speculative
Off by default
When basic research is cut, less new knowledge and innovation emerges, which slows productivity growth and lowers wages and tax revenue after a long lag. Finland has a statutory target of raising R&D spending to 4% of GDP by 2030.
⚠ Cuts to business R&D support weaken future tax revenue
Confidence: Speculative
Off by default
When research and development support for business (for example Business Finland funding) is cut, firms do less product development, which slows productivity and lowers later profits, wages and tax revenue.
Elderly care cuts block hospital beds
Confidence: Low
On by default
When elderly care (service housing, home care) is cut, some older people have to wait in hospital for a care place. A hospital day costs about twice a day in service housing, so part of the saving comes back as health spending within the same year.
Student aid cuts make students work more
Confidence: Low
On by default
When student aid is cut, some students make up for it by working more. Their wages are taxed, so part of the saving comes back as tax revenue straight away. (Some take a student loan instead, and some spend less.)
⚠ Student aid cuts slow down graduation
Confidence: Speculative
Off by default
When students work more alongside their studies, some graduate later and some drop out. Skilled workers enter jobs matching their education later, which lowers tax revenue after several years.
⚠ Higher capital income tax delays selling shares and property
Confidence: Low
Off by default
Capital gains tax is only paid when an asset is sold. When the tax is raised, owners put off sales, so fewer gains are realised and the extra revenue falls short of the static estimate. A cut works the other way.
Health staff cuts raise unemployment spending
Confidence: Low
On by default
When health care spending is cut, part of the saving comes from staff: some employees are dismissed or their fixed-term contracts are not renewed. They receive unemployment benefit until they find new work – most within a year – so the effect is largest in the first year and then fades. A change to medicines and equipment doesn't trigger it, as no own staff are involved. Extra spending works the other way, but probably less strongly, as new staff are often hired from other jobs.
Health staff cuts lower tax and contribution revenue
Confidence: Low
On by default
When health care spending is cut and some employees become unemployed, they pay no income tax or social contributions on a wage, and no employer pension or other social contributions are paid for them, until they find new work. The effect is largest in the first year and then fades. A change to medicines and equipment doesn't trigger it, as no own staff are involved. Extra spending works the other way, but probably less strongly.
Education staff cuts raise unemployment spending
Confidence: Low
On by default
When education spending is cut, part of the saving comes from staff: some employees are dismissed or their fixed-term contracts are not renewed. They receive unemployment benefit until they find new work – most within a year – so the effect is largest in the first year and then fades. A change to student aid doesn't trigger it, as it is a cash benefit. Extra spending works the other way, but probably less strongly, as new staff are often hired from other jobs.
Education staff cuts lower tax and contribution revenue
Confidence: Low
On by default
When education spending is cut and some employees become unemployed, they pay no income tax or social contributions on a wage, and no employer pension or other social contributions are paid for them, until they find new work. The effect is largest in the first year and then fades. A change to student aid doesn't trigger it, as it is a cash benefit. Extra spending works the other way, but probably less strongly.
Elderly care staff cuts raise unemployment spending
Confidence: Low
On by default
When elderly care spending is cut, part of the saving comes from staff: some employees are dismissed or their fixed-term contracts are not renewed. They receive unemployment benefit until they find new work – most within a year – so the effect is largest in the first year and then fades. Extra spending works the other way, but probably less strongly, as new staff are often hired from other jobs.
Elderly care staff cuts lower tax and contribution revenue
Confidence: Low
On by default
When elderly care spending is cut and some employees become unemployed, they pay no income tax or social contributions on a wage, and no employer pension or other social contributions are paid for them, until they find new work. The effect is largest in the first year and then fades. Extra spending works the other way, but probably less strongly.