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.

In line with the macroeconomic program of the AD coalition (combining PSD, CDS-PP and PPM for the March 10 legislative elections), the new application envisages that low-income families will receive a transfer from the state, monthly in advance, by introducing 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.

PSD vice-president António Leitan Amaro explained at a press conference to launch the program that there would be an “economic aggregation” of the set of social benefits and “if income from work leads to the loss of some or all benefits, social benefits”, the supplement will make up for “this loss disposable income.”

In other words, the proposal thus aims to prevent the “sudden cessation of various types of social support” for people on lower incomes, such as family benefits, school social action, exemption from moderate health charges or social charges if you exceed “certain income” level by one euro” when applying for a job.

This measure differs from the creation of the Unified Social Benefit (PSU) envisaged by the socialist government of António Costa in the Recovery and Resilience Plan and aimed at consolidating the non-contributory social benefits of the social protection system of citizens, since it is considering the introduction of a negative IRS withholding rate 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.”

Measures aimed at the labor market include “simplification of the Labor Code through rationalization of articles, aimed at reducing contextual costs through administrative procedures with low economic and social value, thereby ensuring wider implementation and understanding of the rules by parties” or modernization of rules “to confront market segmentation and adapt to changes in the world of work.”

The economic program also provides for “flexible transition limits between the lengths of the normal weekly working period, even if temporary, with a possible percentage adjustment of remuneration” at the “exclusive initiative of the employee,” as well as “greater flexibility in the use of vacation.” at the initiative of the worker, with the possibility of purchasing vacation days, with a limit to be determined in the contract between the parties” and the convergence of social protection for independent workers, “possibly informal carers, and even in new forms of employment.”