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With Income Primarily Derived From Taxed Salaries, The Middle Class In Brazil Feels the Budget Shrink While Millionaires Concentrate 71 Percent Of Exempt Income, Pay A Lower Effective Rate, and See The Tax Reform Approved In 2023 and Regulated In 2025 Advance Slowly In Congress Under Political Pressure And Resistance.
Between The End Of 2023, When The Tax Reform Was Approved After Three Decades Of Debate, and The Regulation Steps Voted In The Chamber In July 2025, The Middle Class In Brazil Experienced The Combination Of Persistent Inflation, Pressured Wages, and An Outdated Income Tax Table Increasing The Sense Of Squeeze In The Monthly Budget.
At The Same Time, The 2024 Income Tax Data, Referring To The 2023 Calendar Year, and Studies By Sindifisco, Ipea, and Oxfam Brazil Show That Millionaires Hold 71 Percent Of Exempt Income And An Effective Rate Of 5.28 Percent, While Workers In The So-Called Upper Middle Class Reach 11.40 Percent, More Than Double The Proportional Burden Of The Very Rich.
Taxable Income Tightens The Middle Class Budget
One Of The Central Explanations For The Imbalance Lies In The Composition Of Family Income. While Higher Income Levels Receive A Good Portion Of Income From Profits, Dividends, and Asset Appreciation Often Exempt From Tax, The Typical Income Of Middle Class Families Comes From Salaries, Pensions, and Service Provision, Almost Always Fully Taxed.
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A Study By The National Union Of Tax Auditors, Based On The 2024 Income Tax Declarations, Shows That Those Earning Over 240 Minimum Wages Per Month, About 316 Thousand Reais, Declare 71 Percent Of Their Income As Exempt.
In Contrast, Workers Earning Between 1 And 2 Minimum Wages, From 1,320 To 2,640 Reais, Have Exemptions On Only 10.7 Percent Of Their Income.
Economist Sergio Gobetti, From Ipea, Highlights That In Recent Years, Income Transfer Programs Have Improved The Base Of The Pyramid, But The Top Has Grown Even Faster In Terms Of Wealth Concentration.
In His Assessment, The Middle Class In Brazil Has Ended Up Squeezed Between The Poor Population Protected By Social Benefits And The Very Rich Shielded By Exemptions And Tax Planning.
Outdated Income Tax Table Increases The Effective Burden
Another Factor That Silently Erodes Purchasing Power Is The Outdated Income Tax Table For Individuals.
According To Dão Real Pereira Dos Santos, President Of Sindifisco, Years Of Insufficient Adjustments Have Led To Salary Increases Linked To Inflation Pushing Taxpayers Into Higher Tax Brackets Without Real Income Gains.
In Practice, When Wages Only Grow To Offset Inflation But The Income Tax Brackets Do Not Keep Up, The Tax Base Increases And The Taxpayer Begins To Pay Higher Rates On An Income That Has Not Actually Become More Comfortable.
It Is The So-Called “Bracket Creep” Effect, Which Helps Explain Why Those Earning From 6 Thousand Reais Per Month Pay Proportionately More Income Tax Than Many Millionaires Who Hold Exempt Earnings.
This Scenario Should Experience Some Relief Starting Next Year, With The Expansion Of The Exemption Threshold For Income Around 5 Thousand Reais, A Project Sent By The Federal Government And Approved By Congress At The End Of 2025.
However, Experts Warn That A One-Time Adjustment Does Not Erase The Accumulated Impact Of Decades Of Lagging, Nor Does It Alone Solve The Problem Of Tax Inequality.
Same Income, Different Taxes, and The Advancement Of “Pejotização”
The Pressure On The Middle Class Also Explains The Differential Treatment Among Taxpayers With Similar Income.
Gobetti Reminds Us That Among People Earning Around 10 Thousand Reais Monthly, There Is The Salaried Worker Who Pays An Effective Rate Of About 15 To 16 Percent And The Small Business Owner Who Withdraws The Same Amount As Dividends, With A Zero Rate Of Income Tax On That Portion.
This Asymmetry Stimulates The So-Called “Pejotização,” When Companies Replace Contracted Employees With Independent Service Providers, Even Though Daily Requirements Are Similar To Those Of A Formal Employment Relationship.
The Company Reduces Labor Costs, And The Professional Starts Paying Less Taxes By Organizing Their Income As Distributed Profit Rather Than Salary.
For The Middle Class In Brazil, This Creates A Scenario Where Those Who Cannot Transition To Juridical Structures Continue To Bear The Heavier Tax Burden, While Groups With Greater Bargaining Power Access More Favorable Models.
The Result Is A System That Rewards The Ability To Legally Reorganize Income, Not Just How Much Each Person Actually Earns.
The Weight Of Consumption Taxes In The Daily Lives Of Families
In Addition To Taxable Income And The Outdated Table, The Structure Of Consumption Taxation Amplifies The Sense Of Financial Tightness.
Tax Attorney Marcus Vinícius Nunes Morais Highlights That Studies From The Federal Revenue Service And Research Institutes Show How Low And Middle-Income Families Commit A Much Larger Share Of Their Salaries To Taxes Embedded In Products And Services.
A Large Portion Of This Burden Comes From Indirect Taxes Such As ICMS, PIS, And Cofins, Charged On Practically Everything Purchased, From Food To Energy, Transportation, and Telecommunications.
Meanwhile, The Rich Concentrate Their Contribution In Direct Taxes On Income And Wealth, Which Can Be High In Absolute Values But Represent A Smaller Percentage Of Available Income.
In A Survey Presented By Morais, A Family Earning Up To 1 Minimum Wage, At 1,518 Reais, Faces An Effective Rate Close To 50 Percent, Almost Entirely Linked To Consumption Taxes And Social Contributions. For Those Earning Between 1 And 5 Minimum Wages, The Average Burden Drops To 40 Percent.
From 5 To 10 Minimum Wages, The Rate Falls To 35 Percent, With A Greater Weight Of Income Tax And Social Security Contributions. Between 10 And 20 Minimum Wages, The Burden Hovers Around 30 Percent; From 20 To 40 Minimum Wages, About 28 Percent.
Above 40 Minimum Wages, Around 60,720 Reais Monthly, The Effective Rate Drops To 26 Percent.
In Practice, This Means That A Family With An Income Of Up To 1,518 Reais May Pay Around 750 Reais In Taxes, While Another Earning Up To 75,900 Reais Monthly Spends Around 19,700 Reais, But With A Much Smaller Impact On Their Standard Of Living.
The System Becomes Regressive Precisely Where A Significant Proportion Of The Middle Class In Brazil Finds Itself, Consuming A Large Portion Of What They Earn, And Unable To Save Or Invest With The Same Intensity As The Wealthy.
Tax Reform: What Has Changed And What Still Needs To Change
After Three Decades Of Discussion, The Tax Reform Was Approved At The End Of 2023.
In July 2025, The Chamber Completed The First Stage Of Regulation Of The New Taxes On Consumption Of Goods And Services, But The Changes Are Not Expected To Come Into Full Effect Until 2033, Prolonging The Wait For Concrete Relief In The Middle Class’s Wallet For Years.
The Second Phase Of The Reform, Focusing On Income Taxation, Is Still Under Debate. Among The Central Points Are The Permanent Expansion Of The Exemption Threshold For Individual Income Tax, The Taxation Of Profits And Dividends Currently Exempt, And The Creation Of A Minimum Rate For The Wealthy, Aiming To Reduce The Differences Between The Effective Rates Of Workers And Millionaires.
Viviana Santiago, Executive Director Of Oxfam Brazil, Emphasizes That Despite Representing Progress, The Reform Still Keeps Brazil As A Country That Taxes Consumption More Than Income And Wealth, Which Particularly Penalizes The Poor And The Middle Class That Spends Almost Everything On Basic Expenses.
Experts Assess That A New Cycle Of Changes Will Be Necessary For The Taxation Of Wealth, Property, Profits, And Dividends To Approach More Progressive Standards.
There Is Also The Political Obstacle. The Government May Face Strong Resistance To Approve Tougher Measures On High Incomes In 2026, An Election Year, Increasing The Risk That Some Promises Of Fiscal Justice Will Be Postponed Indefinitely.
Middle Class In Brazil Between Urgency And Future Promises
While The Debate Advances In Brasília, Daily Life Does Not Wait. The Middle Class In Brazil Coexists With Higher Supermarket Prices, Services Pressured By Inflation, Rising Rent, And A Paycheck That Does Not Keep Up With The Increased Effective Tax Burden, Either From The Income Tax Table Or From Taxes Embedded In Practically Everything Consumed.
At The Base Of The Pyramid, Social Programs And Specific Exemptions Provide Some Cushion; At The Top, Capital Gains, Exemptions, And Sophisticated Tax Planning Structures Preserve A Good Portion Of Income And Wealth.
And You, Do You Believe That The Changes Being Discussed In The Tax Reform Will Actually Lessen The Tax Burden On The Middle Class In Brazil, Or Do You Fear That The Bill Will Continue To Fall Squarely On Those In The Middle Of The Pyramid?
O jeito é todos entrar na justiça pela correção da tabela do imposto de renda que está a anos e anos defasada. Isso vale também para a tabela do simples nacional. O comércio ta a muito tempo sendo esmagado pelo simples nacional.
Não acredito em nada que venha destes politicos independentes de partido , pois o justo seria taxar lucros e dividendo sim , e não salarios , e é primordial corrigir esta tabela defasada do I.R , se cumprissem a lei , não necessitaríamos desta papagaiada na isenção dos 5.000 como favor a classe menos favorecida , teríamos justiças nas cobrancas dos tributos.