(MENAFN- The Rio Times) Brazil just did something rare in politics: everyone agreed. The Chamber of Deputies voted 493–0 to lift millions of workers out of income tax while setting a minimum effective tax for the wealthiest.

The bill now goes to the Senate and, if approved and signed, applies from January. What changes for ordinary people: salaries up to R$5,000 ($943) a month become tax-free, with partial relief up to R$7,350 ($1,388).

Government and congressional tallies say roughly 16 million Brazilians would pay no income tax , and many just above the threshold would pay less.

That means bigger paychecks and more spending power in a country where inflation has often pushed workers into higher brackets without real wage gains.

How it's paid for: lawmakers created a progressive“minimum effective income tax” for high earners, starting on annual income above R$600,000 ($113,208) and reaching 10% from R$1.2 million ($226,415).



They also added a 10% withholding on dividend payments above R$50,000 ($9,434) per month to individuals, including when paid to people and companies abroad. Dividends already calculated and approved by December 31, 2025 remain exempt if paid by 2028.

The price tag: Brasília initially put the annual cost at R$25.8 billion ($4.87 billion). After lawmakers widened the relief band and made technical tweaks, estimates rose to about R$31.2 billion ($5.89 billion).

Mayors warn city budgets could be squeezed, citing a projected R$4.8 billion ($905 million) hit tied to payroll withholding; expect the Senate to haggle over compensation.

The story behind the story: this is tax politics and campaign strategy. President Luiz Inácio Lula da Silva promised to raise the exemption and to make the tax system feel fairer.

Speaker Arthur Lira-often aligned with the powerful Centrão bloc-and opposition leaders all backed the deal, signaling broad appetite for“tax justice” ahead of the 2026 elections.

The new dividend levy also targets a long-criticized gap: many high earners have paid far lower effective rates than salaried workers.

Why readers outside Brazil should care: this is a major emerging economy tilting its tax mix toward progressivity while trying to protect the budget.

It could boost consumer demand, nudge inflation and interest-rate debates, and change after-tax returns for investors receiving Brazilian dividends-residents and non-residents alike. The Senate's final edits will decide how far the shift goes, and who ultimately pays for it.

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