Lula evaluates measures to contain the PT’s attrition with the middle class

Members of the PT summit assess that the party is worn out with the middle class and argue that President Luiz Inácio Lula da Silva (PT) makes nods to this slice of the electorate in the first half of this year, already thinking about the repercussions that this may have on the assessment of the government in the first year of the new administration.

However, the history of PT administrations and statements made by Lula in the past play against this strategy and add to measures recently adopted that tend to generate dissatisfaction in the segment, such as the return of federal taxes on gasoline and ethanol.

To try to alleviate this dissatisfaction, Planalto technicians are already working on a package of measures aimed at the middle class, which Lula intends to present over the next few weeks. In addition to expanding income tax exemption ranges, the president wants to create a specific line of financing for Minha Casa, Minha Vida, a program for debtors and the expansion of the National Support Program for Micro and Small Companies (Pronampe).

By monetary criterion, the middle class is class C, which is in the average income of the Brazilian population. In general, it is a portion of the population that depends almost exclusively on income from work, whether formal or informal.

According to Tendências Consultoria, for example, the middle class has a monthly household income between R$2,900 and R$7,100. In the accounts of the Center for Social Policies of the Getulio Vargas Foundation (CPS/FGV), the C class has a household income between R$ 2,284 and R$ 9,847 per month. In the government’s calculations, the package should benefit those who earn salaries of up to R$ 10,000 per month.

Lula changes his speech and says that the middle class is “orphaned” by the government

Lula’s first nod to this movement took place on February 16, when he said that middle-class families end up not being contemplated by public policies and, therefore, are “orphans” of the government.

“We are also going to try to serve the middle class. We need to serve the middle class because, deep down, it is the middle class that is not contemplated in almost any of the government’s public policies. We have to take care of people in the middle class, because they are what support the economy of this country”, said the president.

But recent statements mark a change in the PT’s position. Last year, Lula went so far as to state that the middle class “boasted a standard above the necessary”.

“We have a middle class that boasts a standard of living that the middle class does not have anywhere in the world. We have a middle class that boasts a standard of living that Europe does not have, that many places do not have. Here in Latin America , the so-called middle class boasts a much higher standard of living than necessary,” Lula said during the pre-campaign.

Privately, members of the PT point to the demonstrations that contributed to Congress approving the impeachment of former president Dilma Rousseff (PT) and the connection of part of the segment with the government of former president Jair Bolsonaro (PL) as indications for this distancing of the middle class in relation to legend.

End of exemption for gasoline and ethanol

Contrary to the measures to try to bring the government closer to the middle class, the end of fuel tax exemptions, announced on February 28, will put pressure on the federal administration, will have a political cost for Lula and could also raise inflation.

The president decided that he will not once again extend the exemption for gasoline and ethanol, and the collection of Pis, Cofins and Cide Combustíveis for these items has already been resumed this Wednesday (1st). The decision divided the PT.

The Minister of Finance, Fernando Haddad, has always defended the return of taxes to increase revenue. In the fiscal adjustment package announced in January, he included the end of tax relief as of March as a measure responsible for guaranteeing BRL 28.88 billion in revenue by the end of the year.

The president of the PT, Gleisi Hoffmann, declared that she was not against fuel taxation, but said that ending the exemption at this moment would “penalize the consumer, generate more inflation and fail to fulfill a campaign commitment”. After Lula’s decision, however, she turned her attacks on Petrobras’ pricing and dividend distribution policy.

Expansion of income tax exemption will not affect upper middle class

Recently, the government extended the income tax exemption for workers who earn up to two minimum wages. The update should reach around 13.7 million people who earn up to R$ 2,640. The value of the exemption, however, was below Lula’s campaign promise, which was to exempt those who earn up to R$ 5,000 from the tax.

In addition, the measure is not a complete update of the progressive income tax table – the one that determines the IR rates levied on income such as salaries, rents received, pensions and retirements. The measure announced by Lula only caused an increase in the income tax exemption range, which will rise from the current R$ 1,903.98 to R$ 2,112.

With this, the floor of the first tax bracket, subject to the rate of 7.5%, will also increase, to R$ 2,112.01. The government also intends that all taxpayers are entitled to a simplified monthly deduction of R$ 528, which in practice will exempt all taxpayers who earn up to R$ 2,640 per month. The other values ​​remain the same.

Government members already admit that a complete update of the IR will only be possible after the approval of reforms such as the tax and the new fiscal anchor, which will replace the spending ceiling. In January, the Minister of Labor, Luiz Marinho, said that the government will observe fiscal responsibility to implement the promise to raise the exemption range to R$5,000, and indicated that it will be a gradual process.

Government leaders admit that the announced change on income tax is still not ideal to attract a good part of the upper middle class. However, they believe it is a nod to the government’s intentions with the segment for the coming years.

“We need to serve the middle class, because deep down, deep down, it is the middle class that is not contemplated in almost any of the state’s public policies. 10,000 reais, that is, there is no affordable housing for them, they don’t want to live in a 40 square meter house”, declared Lula at the Planalto Palace.

Minha Casa Minha Vida will allow financing of used properties

At the same time, the Lula government created the possibility of financing used properties in the new version of Minha Casa Minha Vida. In previous governments, housing programs were restricted to the construction of new units.

Government technicians believe that the measure will reach members of the middle class who were previously not interested in government housing projects. The rules will be defined by the Ministry of Cities and the expectation is that they will allow the purchase of second-hand properties for middle-income families, between R$2,640 and R$8,000.

To attract this public, property financing through Minha Casa Minha Vida will be subsidized with resources from the Severance Indemnity Fund (FGTS). As a result, interest rates will be lower than those practiced in the market.

The FGTS subsidy for this segment will vary according to income, family composition and location of the property, and may reach R$ 47,500 in Rio, São Paulo and Brasília. The program’s interest rate for those who are able to borrow varies between 4.25% and 8.66% per year. The payment period will be up to 35 years.

Debt renegotiation program is also part of the effort

The government is also going to take the opportunity to officially launch the “Desenrola” debt renegotiation program. Details are being drawn up by the Ministry of Finance and the government’s expectation is to renegotiate the debts of the poorest and members of the middle class. Lula’s package also includes reinforcement of Pronampe to offer credit to micro and small entrepreneurs.

“We are putting in place a program that will take care of those in debt, Desenrola Brasil, which will take care of those who are in debt, and the support program for micro and small companies [Pronampe]in an initial phase, with appropriate credits and fees and thereby stimulate entrepreneurship”, explained the Minister of Social Development, Wellington Dias.