Opinion – Marcos Mendes: Inconsistent arguments support bad public policies

A newspaper usually concerned with the good use of public money ran the following headline on Thursday (18): “Relief of burdens for sectors that employ the most advances”. He was referring to the approval, by the Chamber, of the bill that extends the “payroll exemption”, a tax benefit for 17 sectors of the economy.

The complimentary report did not bother to mention the arguments against the project. The press, which is among the beneficiaries, has given this treatment to the issue.

As I have written several times in this space, each job generated by the payroll tax has a high tax cost, and its main effect is to increase the profit margin of companies. It also increases the administrative cost for payment and tax inspection, contributing to the famous “Brazil cost”. Several well-founded studies demonstrate that the costs to society outweigh the benefits. The most recent is by Baumgartner, Corbi and Narita.

In public debate, however, what has prevailed is the version, not the facts. Whenever there are gains for well-articulated interest groups, the proposals advance, supported by inconsistent narratives about creating thousands of jobs, preserving the environment, reducing poverty or stimulating innovation. The quality of the arguments doesn’t matter.

This week, the Chamber also approved the inclusion of truck drivers as individual micro-entrepreneurs. The MEI is extolled, in speeches and versions, as an instrument for the formalization and inclusion of poor workers: paying just over R$50 per month, participants have access to all Social Security benefits. Outside the MEI, a self-employed worker pays more than twice as much: R$121.

The first problem is that a large part of the subsidy is given to those who are not poor. Access to the MEI is allowed for those with a gross income of up to R$ 6,700 per month, while the average income from work, measured by the Pnad-Contínua, is around R$ 2,500. In the case of truck drivers, the access limit was increased to R$ 21,000 per month. Ansilieiro and Costanzi estimate that only 16% of MEI participants are among the poorest 50% of the population. The present value of the actuarial deficit of this modality — to be paid by all Brazilians — is at least R$ 436 billion, in the calculations of Costanzi and Sidone, in a study that has not yet been published.

The prevalence of version over facts is everywhere. Defenders of the Manaus Free Trade Zone, for example, have argued that it is essential for reducing deforestation in the Amazon. I do not know of a study with a minimally acceptable methodological and statistical pattern that proves the information.

An estimate sponsored by Suframa found that, “for every 1% increase in the population employed in the industrial activity of the ZFM, there was a 0.006% contraction in deforestation in the state of Amazonas.” If we trust the result, if we double the size of the ZFM, at an annual cost of R$30 billion per year, we will reduce deforestation by 0.6%. There are certainly cheaper and more effective ways.

The Rota 2030 program, a subsidy to the automobile industry, provides benefits in the form of encouraging investments in technology. It ignores that large multinationals concentrate innovations in their world headquarters. What remains is just an increase in the profit margin and commercial protection against imported vehicles, which do not have the same benefit.

The Renovabio program is sold as a kind of national carbon market, with a positive impact on environmental preservation. It is, however, nothing more than a tax on fossil fuels, the collection of which is transferred to the sugar mill owners. It has the same effect as taxation via Cide, except that the money does not go to the Treasury. Cide can be quickly reduced in times of high gasoline, as the gain for mill owners is more difficult to cut. There are dozens of other examples of versions overlapping the facts. For these to have any chance to guide public policies, technical assessments need to gain space.

Fortunately, the Ministry of Economy has advanced in this area. But that’s not much: a network of universities and independent evaluators is needed, who can scrutinize the programs in progress and the proposals under discussion.