Analysts expect the Polish government to implement PIT reductions before the 2027 elections to prevent losing power. Rather than doubling the tax-free amount to 60,000 PLN as previously promised, the government is likely to raise the first tax threshold to manage current budget constraints.
Why is the 60,000 PLN tax-free threshold unlikely?
The ruling coalition’s primary election promise—doubling the tax-free amount from 30,000 PLN to 60,000 PLN—remains unfulfilled. Initial calculations suggest this change would cost the state budget over 40 billion PLN.
Geopolitical shifts have forced a radical increase in defense spending, making the original tax-free amount promise unfeasible. While social initiatives suggested funding this by eliminating the 800 plus program and 13th and 14th pensions, such a move carries high political risk.
These social programs cost the budget approximately 80 billion PLN. Although more people are reportedly agreeing to the liquidation of the 800 plus benefit than defending it, the government faces significant political consequences for such a decision.
How does inflation affect the middle class?
Inflation and rapid wage increases have pushed millions of taxpayers into the 32% tax bracket. This group includes many teachers who recently received wage regulations.
The tax burden is intensified by the 9% health insurance contribution. Before 2022, when the 120,000 PLN threshold was set, the total burden was approximately 33.25% after accounting for tax deductions.
Currently, taxpayers hitting the 32% threshold face an effective rate of 41% when the 9% health insurance contribution is included. This has made the lack of threshold indexation an urgent issue for the middle class.
What legislative changes are currently being considered?
Two bills are currently being processed in Sejm committees. One is a presidential proposal, and the other comes from a group of MPs, both aiming to raise the second tax threshold from 120,000 PLN to 140,000 PLN.
A citizen petition sought to increase this threshold to 171,000 PLN. However, that petition was rejected at the end of May.
Ultimately, the government’s decision may depend on the political impact of different tax relief models. Raising the tax-free amount provides benefits to almost all taxpayers, while raising the 32% threshold benefits a smaller, more dissatisfied group.
Frequently Asked Questions
Why hasn’t the tax-free amount been increased to 60,000 PLN?
The government cannot afford the estimated 40 billion PLN cost due to poor state finances and increased spending on defense.
How much is the effective tax rate for those in the 32% bracket?
When including the 9% health insurance contribution, the effective rate is 41%.
What is the status of the 171,000 PLN threshold petition?
The citizen petition to raise the threshold to 171,000 PLN was rejected in late May.
Will political necessity or economic reality dictate the next set of tax reforms?
