Lula Announces New Income Tax Exemption to Boost Economy and Tackle Elite Privileges
President Lula unveils a new income tax exemption for earners up to R$5,000 monthly to support economic growth and reduce elite privileges starting 2026.
- • President Lula announced a new income tax exemption for individuals earning up to R$5,000 per month, effective 2026.
- • The exemption is expected to inject R$28 billion into the Brazilian economy.
- • The increased exemption threshold will be offset by higher taxes on wealthy individuals to maintain fiscal balance.
- • Lula emphasized tackling elite privileges as a key rationale behind the tax reform.
Key details
In a significant policy move, President Lula on December 1, 2025, announced a new income tax exemption aimed at alleviating the burden on low and middle-income earners and combating the privileges enjoyed by the elite. During his speech, Lula highlighted the importance of tax reform to promote fairness and economic growth. Beginning in 2026, individuals earning up to R$5,000 per month will be exempt from income tax, a change expected to inject approximately R$28 billion into the Brazilian economy.
The president stressed that this increase in the exemption threshold will be financially balanced by imposing higher taxes on upper-income brackets, ensuring fiscal responsibility. This approach is intended to provide immediate relief to many taxpayers while maintaining overall economic stability.
While Lula's government seeks to implement this tax reform, it currently faces challenges on other legislative fronts. Notably, tensions persist with congressional leaders over non-economic issues, such as pending security proposals, which could divert attention from fiscal reforms. Nevertheless, the administration's focus on equitable tax policy reflects its broader commitment to reducing social inequalities and enhancing economic inclusiveness.
This article was translated and synthesized from Brazilian sources, providing English-speaking readers with local perspectives.
