Inequality and Income Distribution in Brazil
Overcoming inequality is more than an ethical imperative in Brazil—a country marked by deep and persistent inequities. It is also a constitutional mandate. The social pact expressed in the CF/88 (Federal Constitution of 1988 – Brazil’s foundational legal document), in Article 3, defines as a fundamental objective of the Republic the reduction of social and regional inequalities and the promotion of well-being for all, without any form of prejudice.
This ethical imperative is also emphasized in major historical documents: from the Declaration of the Rights of Man and of the Citizen (1789 – French Revolution), the amendments to the U.S. Constitution (1787 – United States), to the UN Charter (1945 – United Nations), the Universal Declaration of Human Rights (1948), and the ILO Conventions (International Labour Organization – global labor standards), which address worker protection and dignity.
Equality and social justice have been a constant pursuit of modern societies. Yet they remain distant from reality. Capitalism has proven to be an extraordinary engine of production and innovation, but it continuously fails in distributing wealth and income.
This is no coincidence: the very dynamics of capitalist competition lead to the concentration of income and wealth. Large corporations are evidence of this trend.
The market is not a mechanism for distribution—it is a driver of technological progress and innovation. Therefore, poor income and wealth distribution is not a market failure; it is a consequence of how the market operates.
Countries in the OECD (Organisation for Economic Co-operation and Development – group of the world’s most advanced economies), which lead in technological capacity and social indicators, have shown that it is possible to address this issue and have implemented redistributive policies for decades.
A study by CEPAL (Economic Commission for Latin America and the Caribbean – UN regional commission) highlights OECD indicators clearly. The Gini index (measure of income inequality) for market income is, on average, about 30% higher than after state intervention through taxes and transfers.
This indicator prompts reflection on the role of the State (government as a corrective agent) in addressing the social and economic consequences of market operations. Public policies aim to reduce inequalities. In the case of the OECD, a progressive tax structure taxes those with greater ability to contribute more, and those with less ability, less. Thus, tax policy itself becomes a tool for income redistribution.
But that alone is not enough, as public spending can also be a source of concentration. Therefore, throughout the post–World War II period, public policies in these countries sought to build welfare programs (social protection systems) across the life cycle—from cradle to grave—as stated by Lord Beveridge (British economist and architect of the welfare state).
At the same time, governments promoted productivity through industrial, science, technology, and innovation policies. Welfare policies are only sustainable in the long term within an environment of economic growth and rising systemic and labor productivity.
The years of dominance by neoliberal policies (economic approach favoring market deregulation and reduced state intervention), which sought to dismantle this legacy, undermined the advancement of the welfare state but did not destroy it. If OECD countries still maintain robust social and economic indicators despite neoliberal attempts to reverse history, it is due to the post-war structures that resisted complete dismantling, even if weakened.
In Brazil, the Federal Constitution of 1988 aimed to establish the legal framework for building a welfare state—a social pact constantly challenged by political forces that do not see a free, just, and supportive society as a desirable future.
There are many reasons for this, from the preservation of centuries-old privileges to the belief that social Darwinism (ideology that the strongest should prevail) would be more functional for national development – a form of perverse meritocracy.
Despite setbacks, there have been advances in this construction:
- In health, we have the SUS (Unified Health System – Brazil’s universal public healthcare system), with vast reach, crucial during recent epidemics from H1N1 to the devastating COVID-19.
- In social assistance, SUAS (Unified Social Assistance System) provides protection to highly vulnerable individuals, with BPC (Continuous Cash Benefit – income support for the elderly and disabled) as one of its main programs. Bolsa Família (Family Grant – conditional cash transfer program) supports families in extreme poverty. The minimum wage policy, created in the 1940s, has been revived as a tool for income security.
- In housing and infrastructure, programs like Minha Casa Minha Vida (My House My Life – affordable housing), Luz para Todos (Light for All – rural electrification), the semi-arid cistern program, and the São Francisco River transposition stand out.
- In labor, beyond training programs from the Ministry of Labor and the Sistema S (S System – vocational training network), there are the FGTS (Severance Indemnity Fund) and unemployment insurance, created before 1988.
- In education, progress includes FUNDEB (Basic Education Fund), the inclusion of preschool education, and school meals. Despite increased spending, quality still faces serious challenges.
Thus, the five dimensions of the original welfare state vision, formulated in post–World War II Europe, are evolving in Brazil – albeit unevenly.
We have relevant instruments and progress, yet Brazil remains among the countries with the highest income inequality in the world.
Historical factors must be considered. Brazil endured 350 years of slavery. The deep mark of racism persists and is reflected in barriers to social mobility, despite the guarantees of the CF/88. Just look at the income pyramid: at the top are white men, followed by white women, Black men, and Black women. This pattern is consistent across all regions and is mirrored in unemployment data.
The Land Law of 1850 (Brazilian law requiring land purchase and registration) is another historical contributor to inequality. It made purchase the only way to acquire public lands, excluding donation, thus preventing access for those without resources – especially freed slaves and poor farmers – and requiring costly registration. Land access remained in the hands of large landowners.
Women also face discrimination, especially Black women. They suffer more due to both race and gender, in a society that still treats them as secondary labor. Their wages are lower, they occupy subordinate positions, rarely hold leadership roles, and face higher unemployment—even though, on average, they have higher educational levels than men.
During periods of economic growth, labor conditions generally improve – including income distribution—but always slowly and disproportionately to economic progress.
Many privileges persist and reproduce inequality. It is common to claim that Brazil’s tax burden (total taxes as a percentage of GDP) is among the highest in the world. It is not. Brazil’s burden (33.43%) is close to the OECD average of 33.9% and lower than that of France, Italy, Denmark, Sweden, Finland, or Norway.
The issue is not the size of the burden, but its distribution and how resources are spent. Studies show that Brazil’s tax system is regressive (taxes fall more heavily on lower-income individuals): it burdens those who earn less and own little or nothing. And there is strong resistance from beneficiaries to change this structure.
A survey by the Ministry of Finance found that tax expenditures (subsidies, exemptions, and waivers) at the federal level total BRL 544.47 billion. Including states and municipalities, the figure may exceed BRL 800 billion.
Fiscal privileges are not inherently harmful – if part of a development plan that stimulates strategic sectors. But that is not what we see. These billions are poorly monitored and do not yield significant economic or social returns: they do not increase productive investment, productivity, or innovation; nor do they reduce prices or generate quality jobs. Essentially, they become sterilized privileges in the financial cycle, concentrating income and wealth.
Another structural issue is tax evasion, estimated at BRL 500 billion annually. It undermines public financing, creates unfair competition, and shifts the burden to honest taxpayers.
This vicious cycle prevents Brazil from building sustainable development. Between tax expenditures and evasion, over BRL 1.3 trillion is transferred annually to privileged segments. The State spends more than it collects, incurs debt, and loses resources in a mechanism of spurious accumulation. Instead of financing growth, innovation, jobs, and stable prices, these mechanisms feed a growing public debt—driven by high real interest rates (estimated above 10% per year, according to the Focus Bulletin), low growth, and tax evasion.
Privileges, as instruments of inequality reproduction, must be central to economic debate. The average income gap between the richest 1% and the poorest 50% in Brazil is 36.2 times. In countries like Germany and Sweden, this ratio is around 12 times. While public policies are moving in the right direction, exorbitant privileges remain in many areas and must be reviewed or eliminated.
Brazil’s current tax structure places excessive burdens on goods and services and proportionally little on income and wealth. This means the heaviest burden falls on those who spend most of their earnings on basic needs. The ongoing tax reform (legislative overhaul of Brazil’s tax system), which began with consumption, aims to address this issue—but its regulation and transition phase will determine its effectiveness.
A healthy democracy requires that the law be equal for all, without extravagant benefits for the privileged and with constant oversight of those granted to stimulate strategic sectors and support vulnerable segments of the population.
Regional Council of Economics – 2nd Region – São Paulo (CORECON-SP)