Income Concentration Increased Among the Richest

Income Concentration in Brazil has intensified since the end of the pandemic, reflecting a worrying reality.

This article will explore the exorbitant income growth of the richest 0.1%, which has far outpaced the national average, and how profits and dividends have significantly contributed to this disparity.

Furthermore, we will analyze the situation of the richest 1%, the impact of pejotização and the growing inequality between social classes.

The situation becomes even more alarming in states like Mato Grosso, where income concentration has reached alarming levels, requiring urgent tax reforms to combat this problem.

Evolution of income concentration in Brazil post-pandemic

A income concentration in Brazil has witnessed a dramatic increase since the end of the pandemic, intensifying inequality in the country.

The select group of 0.1% richer experienced significant growth in its income, achieving an annual growth rate of 6,9% between 2017 and 2023, while the national average only advanced 1,4%.

This notable increase in income at the top of the pyramid contrasts with the slower pace among the rest of the population.

Macroeconomic conditions after the pandemic have largely favored the super-rich, with a substantial increase in dividends and profits benefiting this group.

Although pejotização has contributed to the reduction of labor income among the 1% richer, overall income growth at the top was not affected.

As a result, the difference between classes expanded, with the income of the richest 0.1% representing 12.5% of total income of Brazilian families.

To address this growing inequality, tax reforms are suggested as a vital strategy.

More information on the growth of the richest 0.1% can be found in a detailed study on the Richer 0.1% increases concentration.

Who makes up the richest 0.1% and their weight in national income

The socioeconomic profile of 0.1% richer from Brazil reveals a group of 160 thousand people which has a significant influence on the country's income distribution.

These people have a monthly income above R$ 146 thousand and are responsible for 12,5% of the total income of Brazilian families.

This growth in its participation is highlighted by the increased income concentration in recent years.

Demographic characteristics indicate a predominance of individuals associated with sectors such as finance, technology and agribusiness.

Through access to profitable investments and asset management, this group expands its role in the national economy.

A crucial aspect we consider is the contribution of profits and dividends to the income growth of this segment.

In this way, we observe a
privileged positioning
within the social pyramid.

For more details, see the full analysis published in MinuteMT.

Profits and dividends: drivers of income growth at the top

The concentration of income in Brazil has revealed an intriguing phenomenon: profits and dividends are responsible for 66% of the increase in income of the richest 0.1%.

This group, made up of around 160,000 people, witnessed a asset appreciation substantial since 2017. Tax changes and the structure of the tax system have sparked ongoing debates about equity.

The figures highlight a growing preference for capital-linked income rather than wages, raising questions about profit taxation versus income taxation.

According to a recent study, this dynamic has expanded post-pandemic, reflecting a scenario where pejotization also emerges as a relevant factor.

When considering this scenario, studies show that these transformations require a profound review of the country's fiscal policy, to mitigate growing inequality.

Income of the richest 1%, decline in employment and the effect of PEJOTIZATION

The increase in income of the richest 1% in Brazil between 2017 and 2023 represented a growth significant of 4.4% per year, but still fell short of the growth observed in the richest 0.1% group, whose income rose 6.9% annually, as revealed by a study on income concentration in Brazil.

This phenomenon is closely linked to the concept of PEJOTIZATION, a strategy where many professionals migrated from CLT contracts to legal entities, aiming for tax benefits.

This change resulted in a drop in labor income, since many of these incomes began to be classified as capital income, especially exempt profits and dividends, impacting tax progressivity.

Such income represented 66% of the increase in income of the richest 0.1%.

Income concentration has intensified in states such as Mato Grosso, where, according to a study released, the income of the richest 0.1% more than doubled in the period analyzed.

This data makes clear the growing disparity between the rich and the Brazilian middle class.

Regional inequality: the case of Mato Grosso

In Mato Grosso, the income of the richest 0.1% more than doubled between 2017 and 2023, a phenomenon driven mainly by the agricultural sector and the appreciation of commodities.

The state, being one of the largest grain producers in Brazil, saw the prices of these commodities rise significantly, benefiting the already wealthy.

Data shows that this group's share of total state income jumped from 9.7% to 17,4% in 2023, as indicated by studies available in Globo Value.

Furthermore, state tax policies favored large landowners, widening the gap between the rich and the middle class.

This cycle of uneven growth has promoted a significant concentration of wealth, with the super-rich capturing more than 108,5% increase in per capita income during the period.

Graphs available from external sources can complement this analysis, further highlighting this disparity.

Tax reforms to reduce inequality

The growing income concentration in Brazil demands structural reforms in the tax system to mitigate inequality.

The current scenario where the richest 0.1% holds a significant share of the national income drives the need for change.

According to data, labor income has been decreasing for the middle class, while the increase in profits and dividends without due taxation perpetuates inequalities.

In view of this, we present the following recommendations:

1. Adopt a progressiveness higher income tax, ensuring that higher-income individuals contribute proportionally more.
2. Implement the taxation on profits and dividends, thus addressing the current exemption that favors the richest [reference available at Income Tax Reform].
3. Review tax exemptions that disproportionately benefit high-income earners, correcting distortions.
4. Establish mechanisms for the combating pejotization, ensuring justice for all workers [more information at Income concentration and IRPF reform].

Only with social justice will we achieve a more equitable country.

Income Concentration in post-pandemic Brazil reveals an alarming reality and growing inequality.

The need for tax reforms is becoming increasingly pressing to ensure a fairer and more equitable future for the entire population.