Democratic Alliance Proposes New Compensation Supplement in Solidarity with IRS Negative Rates

This Wednesday, AD proposed a solidarity supplement to the remuneration, giving low-income families the value of social benefits currently received, as well as a supplement to ensure that increased income from work does not result in a loss of existing income.

According to the AD coalition’s macroeconomic program (which combines PSD, CDS-PP and PPM for the March 10 legislative elections) presented this Wednesday, the new addition envisages that low-income families will receive government transfers, expected monthly, by creating a negative tax .

The Solidarity Compensation Supplement will be based on IRS negative rates to combat worker poverty and will replace the wide range of social support measures currently in place.

The proposal, AD explains, aims to prevent the “sudden cessation of various social benefits” for people on lower incomes, such as family benefits, school social shares, exemption from moderate medical fees or social charges if you exceed “a certain income”. level for one euro” when you accept the job.

This proposal differs from the creation of the Unified Social Benefit (PSU), envisaged by the socialist government of António Costa in the Recovery and Resilience Plan, which aims to consolidate the non-contributory social benefits of the citizenship social protection system by considering the introduction of a citizen’s deduction. IRS rates are negative for the lowest incomes.

According to AD economists, the coalition proposes that each of these families would receive a premium for every euro of income earned up to a certain amount of income, after which the value of the supplement would stabilize – “in practice a negative IRS rate” – based on a single definition of income.

Starting at a different income level, this supplement is subject to a lower negative rate for each euro of additional income until the supplement is no longer paid—in practice, an “increasingly negative IRS rate.”

“This eliminates the absurd system of levels and gaps, resulting in a system of subsidies for working up to a certain income level and relatively low marginal tax rates during the phase of (phasing out) the removal of support, which guarantees an increase in income,” AD argues.

According to the coalition, this measure will increase the incomes of low-income workers, increasing them along with the number of dependents.

In other words, it helps promote “their integration and persistence in the labor market” and reduces “the risk associated with their income in the context of the labor market.”