What doesn't the defense of the IOF increase do? Once rivals, Haddad and Gleisi join forces

The conflict between Gleisi Hoffmann, the current Minister of Institutional Relations, and Finance Minister Fernando Haddad over tax increases at the beginning of Lula's third term seemed irreconcilable. However, the presidential decree that raised the Financial Transactions Tax (IOF) and soured relations with Congress seemingly transformed the relationship between the two Workers' Party members.

Their differences were set aside, and Haddad and Gleisi unified their stance in support of the measure. After Congress approved Bill 214/2025, which suspended the presidential decree raising the IOF (Tax on Financial Transactions), she took to social media and even replicated a post by Haddad, in which the minister stated:

"The IOF decree corrects an injustice: it combats tax evasion by the wealthiest to balance public accounts and guarantee workers' social rights."

The conciliatory stance does not seem to be limited to the relationship between the two PT members. Also on Tuesday night (8), Gleisi and Haddad met for the first time with the president of the Chamber, deputy Hugo Motta (Republicanos-PB), after Congress overturned the presidential decree that increased the tax.

The meeting was organized by Motta's allies so that the Executive and Legislative branches could reach an understanding before the conciliation hearing, scheduled by Supreme Federal Court (STF) Minister Alexandre de Moraes for next Wednesday (15). The judge suspended the effects of the Executive and Legislative decrees on the 4th.

Regarding Motta, Haddad declared last week that "when one doesn't want to, two don't fight," stating that he was waiting for a call from Motta about the matter. "We're not going to fight, because, in this case, neither of us wants to. We have many friends in common," the minister added.

Gleisi has adopted a seemingly conciliatory tone. Before the meeting at the Chamber's Official Residence, the minister conveyed to the congressman that the government wanted to discuss the issue. After Congress overturned the IOF tax, she even came to the congressman's defense ( see below ).

Disagreement on fuel tax re-imposition

The friendly attitude between Gleisi and Haddad pales in comparison to the warlike atmosphere of disagreement and mutual attacks that prevailed at the beginning of Lula's third term. One of the first signs of friction occurred in February 2023, when Gleisi, then president of the Workers' Party (PT), criticized Minister Haddad's proposal to increase fuel taxes.

"We're not against taxing fuel, but doing so now is penalizing the consumer and generating more inflation," she said on Twitter (as the social network X was then called). The Workers' Party member was one of the main opponents of the measure, which she described as a breach of Lula's campaign commitment.

Even though the topic was not addressed in Lula's electoral advertising, Gleisi's interpretation took into account the promise of bringing relief to the population's pockets after the increase in the cost of living.

On the other hand, Haddad advocated for the reinstatement of PIS, COFINS, and CIDE taxes on fuel to balance public finances. Lula defended the minister, taking responsibility for the reinstatement of the taxes himself.

Gleisi backed down and adjusted her speech after Lula's approval of the measure, stating that the president had the "sensitivity" to reduce the impact of the fuel tax increase on the "consumer's pocket."

For Gleisi, the framework left little room for spending

Another point widely criticized by Gleisi in 2023 was the fiscal framework, particularly the rule's spending cap, which allows expenses to grow up to 2.5% above inflation. In the view of a wing of the Workers' Party, publicly shared by Gleisi, this cap could jeopardize the fulfillment of campaign promises.

Later, in March of this year, upon taking over as Secretary of Institutional Relations, Gleisi stated that she found the spending limit "too small." In an interview with Senator Jorge Kajuru's (PSB-GO) podcast, PodK Liberados, she also stated that, despite her disagreement, the measure had been discussed and approved by Congress. "Life goes on," she said.

In April 2023, the Workers' Party member also complained about being "surprised" by a possible proposal from the economic team to change the spending ceilings for education and healthcare, considered a "historical party banner." "The minister (Haddad) never spoke about this with us. I hope the debate doesn't go that way," Gleisi told the newspaper O Globo at the time.

Gleisi defended the deficit as a driver of growth

In August 2023, the divergence regarding the spending limit deepened even further when Gleisi opposed the zero deficit target for public accounts in 2024, stipulated by Minister Haddad in the Budget Guidelines Bill (PLDO).

The Workers' Party member expressed skepticism about the target, arguing that revenue expectations could be dashed. If this were to occur, "severe budget cuts" would be necessary, which would jeopardize government investments in several areas. "There's no need for us to do this in a context where we need to stimulate economic growth," Gleisi said, opposing Haddad.

In October of the same year, the clash intensified, when the PT member echoed President Lula's statement that the government would "hardly" reach the fiscal target of a zero deficit in 2024.

Gleisi interpreted Lula's statement as an "accepted responsibility" when she described the target as "unfeasible." The Workers' Party member referred to the need to maintain the investments necessary for the country to "develop, generate jobs, and achieve growth," adding that "we can't have a zero fiscal target and a thousand hunger strikes."

PT assessed zero deficit target as "fiscal austerity"

In December of that year, at the PT's electoral conference, Gleisi once again criticized the zero target advocated by Haddad and argued that it should be a deficit of 1% of GDP, which would guarantee greater economic growth for the country.

Furthermore, a document from the Workers' Party's largest wing, to which Lula and Gleisi are associated, classified the economic team's proposed zero-dollar target as "fiscal austerity." However, it also placed blame on then-Central Bank (BC) president Roberto Campos Neto, appointed to the position by former President Jair Bolsonaro.

"Brazil urgently needs to free itself from the dictatorship of the 'independent' Central Bank and fiscal austerity, or we will not be able to respond to the country's needs," the document stated.

In a debate with Gleisi during the conference, Haddad opposed this view. "It's not true that deficits lead to growth," he said. "There's no such correlation. That's not how it works. It depends."

As minister, Gleisi changes her discourse in relation to Haddad

The change in stance toward the Finance Minister and the economic team's measures came with her appointment as Minister of Institutional Relations. At the time, Gleisi acknowledged previous disagreements, but said that in her new position, her goal was to "add value."

"I can have my criticisms and differing opinions. I think this is normal in a democratic process and in the process we have of forming a government. But in this position at the SRI [Secretariat of Institutional Relations], I'm here to make life easier for the government, the president, and the ministers who implement policies," he said.

At the time, Planning and Budget Minister Simone Tebet even described Haddad as a "true hero" for "facing resistance from within his own party" on fiscal issues. She also eased Gleisi's burden, saying that her critical stance was inherent to her role as president of the Workers' Party (PT).

Gleisi even came out in defense of the Centrão

Before the détente promoted at the meeting this Tuesday (8), Gleisi had already come out in defense of the president of the Chamber, after Congress overturned the presidential decree that increased the tax.

On her social media, the minister stated that "divergence and political dispute" are part of democracy. "But none of this authorizes the personal and unqualified attacks on social media against the Speaker of the House, Congressman @HugoMottaPB, which I repudiate," she said on her X profile.

Despite having opposed tax increases at the beginning of Lula's third term, Gleisi adopted the slogan of "tax justice" in defense of the IOF (Tax on Financial Transactions). Contrary to the conciliatory tone adopted toward Motta, this rhetoric has been repeated by Haddad and other government officials and interpreted as an offensive by the Executive branch in opposition to Congress—emphasizing the " us versus them " rhetoric.

"What is missing in this effort to balance the books is the contribution of the so-called upper class, who do not pay tax on income from financial investments, profits and dividends distributed to shareholders, who enjoy unjustifiable tax exemptions and are the ones who profit from the scandalous interest rate," the minister said recently, on her X profile.

The current convergence between Gleisi and Haddad is still a significant change in the internal dynamics of the Lula government, but it leaves doubts as to whether it will be a real realignment or just a temporary alliance against a common enemy - in this case, Congress.

The episode, however, demonstrates how external pressures have the power to quickly reconfigure political alignments within the Lula government, transforming former enemies into partners, circumstantial or not.