The government’s policy took a bath before seeing the light of day. The decision to jointly announce the fiscal adjustment and the increase in tax exemption showed that it was not willing to absorb the damage that the plan would cause to its social base without, at least, preparing the ground to try to mitigate this impact before the next election.
The format of the ad began to be discussed two weeks ago, in a meeting between Lula and his marketer. The president called on publicist Sidônio Palmeira to assess the political effects of the measures that would form the backbone of the fiscal adjustment, such as limiting the increase in the minimum wage and tightening certain social benefits.
The assessment that the plan could have disastrous effects on the government’s assessment led Lula to determine that the announcement be offset by bringing forward the Income Tax reform. When the president consulted ministers who make up the core of his government, he was the only one to vote against the proposal.
The project that expands the IR exemption range was delivered to the president by the Minister of Finance about three months ago, under the name Brasil Justo. Haddad wanted it to be released separately. After Lula’s order, however, the plan was incorporated into the fiscal adjustment, and the package received a unique slogan: efficient government, fair country.
Haddad lost on two ends. On the one hand, it ended up overshadowing the cost containment plan which, even discounted, could be sold as a concrete commitment from Lula. The joint announcement makes the minister’s effort to reduce the many uncertainties about controlling public debt much more costly.
Furthermore, Haddad was forced to use as a buffer a benefit that was supposed to serve as a springboard. The Income Tax exemption is an electoral bet by Lula, but it comes to the world in the bitter context of a tightening of accounts and, with no guarantee of approval until the end of 2024, it could take more than a year to reach Brazilians’ pockets.
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