Will the government listen to Shustershchik's proposal to cut taxes and eliminate the deficit at the same time?

Economist Dr. Janez Šušteršich has published a new fiscal policy guide arguing that Slovenia’s current trajectory of public spending growth is unsustainable and that a specific combination of expenditure caps and tax reforms could eliminate the budget deficit by 2030. In his manual for guiding fiscal policy, he proposes limiting the growth of public spending and implementing a radical tax overhaul. According to his calculations, these measures would allow the state to generate a surplus of two billion euros by 2030 while significantly increasing net wages for employees. The analysis highlights a sharp divergence between economic output and government costs. Between 2019 and 2025, state expenditures in Slovenia rose by 14 billion euros, representing a 66 percent increase. Over the same period, gross domestic product grew nominally by only 50 percent. In 2025 alone, public spending increased by 3.6 billion euros, or 11.6 percent. Šušteršič argues that this pace is not viable. He notes that despite higher revenues, the country ended 2025 with a deficit of approximately 1.8 billion euros, while public debt stands at around 46 billion euros. He warns that historical data shows how quickly debt can become critical, citing the near quadrupling of Slovenian public debt between 2008 and 2013 during the financial crisis. To reverse this trend, Šušteršič suggests capping the growth of public spending at the level of target inflation. Under this scenario, the state could achieve a primary surplus by 2028, reaching roughly 2.2 percent of GDP by 2030. His proposal does not call for uniform cuts across all budget lines. Instead, it prioritizes specific areas. Spending on defense, public order, safety, and education would continue to grow. Conversely, expenditures for certain public services, subsidies, and general administrative functions would decrease. Overall, total public spending would rise by 14.2 percent through 2030. Specific reductions include a one-fifth cut for general economic affairs and employment, a one-quarter reduction for environmental protection and media services, and a one-tenth cut for parts of the civil service and legislative bodies. The core of the plan involves a substantial tax relief package aimed at labor. Šušteršich proposes raising the general income tax allowance to match minimum living costs, indexed annually to inflation. With monthly living costs at 643.41 euros in December 2025, the annual allowance for 2026 would be approximately 7,914 euros. Crucially, he advocates extending this allowance to employee social contributions, which currently apply at a combined rate of 23.1 percent from the first euro earned. He argues that because social contributions are mandatory and their link to future individual rights is indirect, they should be treated similarly to taxes for allowance purposes. This change would provide fiscal relief worth about 1.76 billion euros. Net wages for employees earning the minimum wage would rise by 15 percent, average earners by nine percent, and those earning twice the average salary by 5.5 percent. Additional measures include introducing contribution caps tied to pension bases. Employee contributions would cap at the highest pension base, while employer contributions would cap at two times the average gross salary. This aims to reduce hiring costs for high-paid staff, potentially lowering total labor costs by 4.5 percent for workers earning three times the average salary. Šušteršich also recommends abolishing the top 50 percent income tax bracket, viewing it as inefficient and detrimental to international competitiveness. Corporate taxation would undergo significant changes. The standard corporate tax rate would drop to 15 percent, eliminating most existing incentives except for loss carry-forwards. Smaller businesses would benefit from tiered rates: 12.5 percent for medium-sized firms, 10 percent for small firms, and 7.5 percent for micro-enterprises. The total effect of this tax reform is estimated at 2.3 billion euros. This proposal aligns partially with the coalition agreement, which mandates that spending not grow faster than target inflation, though an exception was made for 2026 due to prior commitments. The government’s strategic council previously suggested similar steps, including reducing the lowest income tax bracket from 16 percent to 10 percent and cutting the corporate tax rate from 22 percent to between 15 and 17 percent. However, current government budget plans project deficits of 2.9 percent of GDP this year and 2.5 percent next year, figures that do not yet reflect the effects of the proposed reforms or the intervention law subject to a referendum. The Institute Razvojnik, which commissioned the analysis, has released an online simulation tool allowing users to adjust parameters and observe potential impacts on deficits and debt through 2030. Šušteršich describes his detailed spending scenarios as an intellectual provocation intended to encourage broader strategic planning rather than incremental adjustments.