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Lula allies urge decree as income tax relief stalls in Congress Politics valorinternational.txt
Arthur Lira — Foto: Ton Molina/Fotoarena/Folhapress - 6/5/2025 As debate intensifies over a bill granting amnesty to former President Jair Bolsonaro and as dezenas mais sorteada da loteria federalothers involved in an alleged coup plot, concern is mounting among government allies over delays in voting on a key tax proposal. The bill would exempt workers earning up to R$5,000 per month from income tax, and frustration over the holdup has led some supporters of President Lula to advocate for a provisional presidential decree (MP) to fast-track the benefit. Some Lula allies believe Congressman Arthur Lira (Progressive Party–Alagoas), the bill's rapporteur, has been stalling the proposal while throwing his weight behind Mr. Bolsonaro’s amnesty. Mr. Lira’s inner circle rejects the accusation. But a senior senator, who said he has pitched the idea of an MP to Finance Minister Fernando Haddad, argued that the government can no longer afford to wait for the House to act. Expanding the income tax exemption is one of President Lula’s top bets to boost his popularity and strengthen his reelection bid. But to take effect in 2026, it must clear both chambers of Congress by December, under the annuality principle that requires tax law changes to be approved the year before they come into force. A provisional decree would also need congressional approval by year-end, but it would immediately take effect and block the House's agenda after 45 days if left pending. Mr. Lira's report on the tax exemption was approved by a special committee on July 16 but hasn’t progressed since. Political turbulence has grown with Mr. Bolsonaro’s trial at the Supreme Court and mounting pressure from the U.S., while the House’s agenda has been dominated by the amnesty debate. For this reason, the senator warned, it’s unclear whether the tax bill will be voted on in September, or even October, as there’s no sign that the political tension will ease soon. Still, Workers’ Party (PT) leader Lindbergh Farias of Rio de Janeiro opposes bypassing Mr. Lira with an MP. “The only path forward is to force Congress to vote,” he told Valor. In a show of restraint, Institutional Relations Minister Gleisi Hoffmann said in a GloboNews interview on Friday (5) that Mr. Lira remains an ally, despite the Progressive Party (PP) leaving the governing coalition. She added that she doesn’t believe he supports amnesty. “I didn’t see him break with Ciro Nogueira [president of the PP], so he must have stayed [in the coalition]. And obviously, the congressman still has a role in the government,” she said. Behind the scenes, Mr. Lira is believed to have played a key role in nominating Carlos Vieira as CEO of state-owned bank Caixa Econ?mica Federal. In the same interview, Ms. Hoffmann said the government was satisfied with Mr. Lira’s report on income tax reform: “I think it’s a very good report.” Even so, allies of the president question whether Congressman Lira remains committed to helping pass the bill. Mr. Lula is believed to have made a political gesture to Mr. Lira by appointing prosecutor Marluce Caldas to Brazil’s Superior Court of Justice (STJ). She is the aunt of Maceió Mayor Jo?o Henrique Caldas (Liberal Party-PL), who is expected to withdraw from the 2026 Senate race—clearing the way for MR. Lira in what is shaping up to be a contentious contest. All parties involved deny any deal or political connection to her appointment. Mr. Lira was named rapporteur in early May. His proposal exempts income up to R$5,000 from taxes and introduces progressive deductions for those earning up to R$7,350. Upon the report’s approval, Mr. Lira said the bill could go to the floor in August, depending on House leadership, but warned of intense debate ahead. The sticking point: who will foot the bill. Lawmakers have pushed back against taxing currently exempt income sources such as dividends, real estate and agribusiness securities (LCIs and LCAs), and incentivized debentures, especially for earners above R$600,000 a year. Political tension But political conditions have since deteriorated. Following Mr. Bolsonaro’s house arrest in early August, his supporters revolted against Lower House Speaker Hugo Motta (Republicans Party–Paraíba). Shortly after, the amnesty issue returned to center stage, coinciding with the Supreme Court trial and a visit to Brasília by S?o Paulo Governor Tarcísio de Freitas (Republicans). On September 1, Congressman Lira visited Mr. Bolsonaro. Though the two met privately, aides from both camps later confirmed that the amnesty bill was discussed. The issue gained fresh momentum the next day, when the Progressive Union coalition (composed of Brazil Union Party and PP) announced its departure from the government coalition. In a meeting with Mr. Motta, leaders from Brazil Union and PP joined Mr. Bolsonaro’s Liberal Party in calling for the amnesty to be brought to a floor vote. Sources close to Mr. Lira denied claims that he shelved the tax proposal in order to push the amnesty agenda. “The floor schedule is up to Hugo Motta,” said one. The person added that Mr. Lira had long warned—well before the amnesty debate reemerged—about the competing interests surrounding how to offset the tax break. The same source noted that “the atmosphere of hostility” in Congress isn’t Mr. Lira’s doing, and that the current political environment has stalled the entire legislative agenda. Mr. Motta’s own priority—administrative reform—has also made no progress. The source also pointed out that Congressman Lira’s report was approved unanimously in committee and that he has been calling for more dialogue in Congress. “He’s been saying that people aren’t talking anymore, they’re just fighting,” the source said. When contacted by Valor, Finance Minister Fernando Haddad said he was unaware of any plan to issue a provisional presidential decree. This article was translated from Valor Econ?mico using an artificial intelligence tool under the supervision of the Valor International editorial team to ensure accuracy, clarity, and adherence to our editorial standards. Read our Editorial Principles.
