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State Budget Profits the Most from Minimum Wage Hike

Gábor Sarnyai 2019.01.25.

The gross minimum wage has doubled under Fidesz’s governance. The government launched the “Hungary is performing better” campaign, proudly boasting the minimum wage data. However, it’s often overlooked that the state is profiting the most from the increase.

While in 2010, the income tax on minimum wage was 34 212 Huf (Approx. 100 Eur), the government has increased this amount to 81 205 HUF over the last eight years. This means that the government now earns 137 percent more revenue than before.

According to Mfor.hu’s calculations, the gross value of minimum wage before taxation has doubled in Fidesz’s last two parliamentary terms. However, the website also claims that the actual increase of the net minimum wage was ‘only’ 64, 5 percent (from 60 236 Huf to 99 085 Huf).

Government-friendly pundits and media outlets have argued that workers earning minimum wage have experienced higher raises in the last eight years than in the Socialist period. Fidesz recycled its old slogan stating that “Hungary is performing better,” and the party continually touts its double minim wage claim.

 

It’s a fact that the gross minimum salary rose by 47 percent (23 500 HUF) between 2002-2010. In fact, it has increased by 103 percent (75 500 HUF) over the last nine years. On the other hand, the tax on minimum wage was much lower during the Socialist period, whereas, under Fidesz, it is currently the second highest rate in Europe.

The minimum wage numbers in Hungary have always been vague and could lead to misinterpretation. In order to avoid taxation, many small and medium-sized business only pay the mandatory minimum wage officially, giving an additional amount to workers under the table.

The tax on minimum wage increased when the government introduced the single flat-rate tax. According to reports, the tax on minimum wage increased from 58 thousand Huf to 126 thousand after 2013. Meanwhile, the tax burden of the top earners decreased. The tax rate may vary due to family taxation allowances. Fidesz has been putting a heavy focus on demography, and the income tax is reduced by the number of children a family has.

Inflation in Hungary from 1991 to 2017. Via: Mti

Despite the high taxes, this is a significant improvement in the quality of life for low earners nevertheless. Taking the low inflation rate of the previous period into account, people earning minimum wage can now bring home more money than before.

Via: Hir24/Hungary Today/Index.hu

Featured Image: 444.hu/ The government slogan “Hungary is performing better,” propagating the rise of the minimum wage