Polish government proposes middle-class tax cuts funded by increased rates for wealthiest

Poland's government has proposed sweeping changes to its income tax structure aimed at providing relief to the country's growing middle class. Under the plan, nearly 3.5 million people earning around or just above average salaries would see their tax rates reduced. These cuts, however, would be offset by increases in taxation for large corporations and high-income earners. The proposal was announced by Prime Minister Donald Tusk and Finance Minister Andrzej Domański during a press conference earlier this week, with implementation set to begin next year ahead of parliamentary elections. The current tax system divides income into two brackets. Earnings up to 120,000 zloty (approximately €27,800) are taxed at 12%, while anything beyond that is subject to a 32% rate. Additionally, individuals earning more than 1 million zloty annually face an extra 4% "solidarity levy." A tax-free allowance exists for earnings up to 30,000 zloty. The proposed reforms aim to adjust these thresholds significantly. The lower tax bracket would extend to 130,000 zloty, with a new 24% rate introduced for incomes between 130,000 and 150,000 zloty. Above 150,000 zloty, the tax rate would remain at 32%. The tax-free allowance would also rise from 30,000 to 60,000 zloty. According to statistics released by the Central Statistical Office, average monthly earnings in June reached 9,401.58 zloty, translating to roughly 113,000 zloty per year. This suggests that many workers are already entering the higher tax bracket. Tusk emphasized that the policy targets the middle class rather than the wealthy. He stated that the government wants to ensure that those working hard to achieve average wages feel the benefits of economic stability. The funding for these tax cuts would come from higher corporate taxes and increased levies on the wealthiest individuals. Corporate income tax for firms generating over €50 million annually would rise from 19% to 22%. The solidarity levy for individuals earning more than 1 million zloty would also increase by one percentage point, reaching 5%. Domański highlighted the growing number of ultra-wealthy individuals in Poland, noting that their ranks have more than doubled since 2021, a rate of growth unmatched elsewhere globally. This demographic shift, he argued, makes it feasible to redistribute the tax burden more equitably. Despite the government's assurances, challenges remain. The proposed changes must pass through Parliament, where Tusk's coalition holds a majority but faces potential resistance from within. President Karol Nawrocki, known for aligning with the right-wing opposition, has previously used his veto power frequently. His stance could complicate the legislative process, even though the government has a clear mandate. Public reaction to the proposal has been mixed. Supporters argue that reducing the tax burden on the middle class will stimulate consumption and boost economic activity. Critics, however, question whether raising corporate and top-tier individual taxes will actually yield sufficient revenue to fund the cuts without negatively impacting business investment or deterring high-income earners from contributing to the economy. Further details regarding the exact mechanisms of implementation and the projected financial impact of the reforms have yet to be fully disclosed. The government has indicated that more information will follow in subsequent statements and official documents. As the debate unfolds, the focus will likely turn toward how effectively the new tax structure balances the needs of different income groups while maintaining fiscal responsibility.