Alessandro Vieira: Tax reform must be the flagship of a pact for the majority

a brazilian alone earned more than BRL 1 billion in 2019 on which he did not have to pay a penny of Income Tax.

It’s not just billionaires who benefit from our system, which allows 0% tax rates for incomes of the richest 1% of Brazilians in the IR. There are several “permanent aids” for those who are already at the top.

Almost two years ago, when Congress approved emergency relief, this leaf reported it as a relatively small benefit, for about 20 million people. It was still unclear how the government’s proposal had been changed.

As rapporteur for aid in the Senate, however, this senator managed to lead the effort to extend it to more than 60 million people, understanding that not only informal employees should be entitled to help in the deadly pandemic that was approaching, but also the unemployed. , the self-employed.

The emergency aid reduced extreme poverty and inequality to unprecedented levels – unfortunately temporarily – and contributed to a smoother fall in GDP. It mainly benefited women, blacks, children.

To do more for this majority of the population, it is necessary to overcome the “permanent aid” that elites receive from the state, such as exemptions from the tax system. What do 4 of the 5 richest men in the country have in common? Companies that receive indirect government expenditures via tax waivers (tax expenditures).

Fighting inequality and poverty is not only an ethical imperative, but also a necessity for sustainable economic growth. Economists have produced extensive scientific literature linking more equality with more growth. Without opportunities for everyone, society is deprived of human capital that is not developed and is, therefore, wasted.

Doctors or engineers who are never trained, due to the deficient allocation of resources in policies for child development, education, and the job market. Unequal societies also have greater instability – the opponent of investment – ​​and encourage patrimonialism – the enemy of the effort in innovation.

It’s changeable. Studies show that it is not so much inequality that is atypical in Brazil, but the State’s inability to reduce it. Finland or France would have Gini similar to ours if it weren’t for the state taxing the richest and spending on the poorest.

We can go beyond the advances of the PSDB and PT governments, in which the coverage of assistance, health and education was significantly expanded – but in which the bite of the richest 1% of income even went up.

This senator has been presenting proposals for three years for the majority to appropriate public resources. The PEC of the poverty ceiling to reorder spending -and tax the most profitable banks more- in favor of child development. The PEC that prioritizes children in social protection and their parents in labor policies. The amendment to increase the inheritance tax to combat poverty. The proposal to include in the tax triggers the suspension of IR exemptions on the income of those who earn more than R$ 40 thousand.

Tax reforms by recent governments did not end there. But this ideology, of a modern social democracy, is shared by other projects from Cidadania (such as the one that taxes the highest incomes to fund an early childhood budget, by Senator Eliziane) and Credo (such as the one that includes tax expenditures in the spending ceiling by Mrs Tabata).

Tax reform — for greater equality, productivity and environmental efficiency — must be the cornerstone of a pact for the majority. But there is still an agenda for improving spending (military pensions, administrative reform) and inclusion in areas regulated by the state (opening up the job market, cities, the banking system).

If this change seems impossible – and it is difficult – it also seemed impossible to reform the Social Security or pay a basic income as assistance. The tragic legacy of the pandemic is a chance to break down taboos and build a more radical pact for greater equality.

Series brings economic thinking from presidential candidates. The Mercado section publishes articles on economic issues considered sensitive by pre-candidates for the Presidency of the Republic. The proposal is to start the debate of themes that should guide a good part of the campaign. The articles are mostly signed by economists who participate in the support group for pre-candidates.

According to his advice, Senator Rodrigo Pacheco (PSD-MG) is initiating conversations with economic consultants and still does not have a spokesperson in the area. Invited to represent President Jair Bolsonaro, who will run for reelection, Economy Minister Paulo Guedes prefers not to speak at the moment.