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Bailed-out Portugal Adopts Stiff Tax Hikes

The government predicts an economic contraction of 1 percent in 2013, though the Paris-based Organization for Economic Cooperation and Development estimated Tuesday it will be 1.8 percent. The government forecasts that the jobless rate, currently at 15.7 percent, will climb to a record 16.4 percent next year.

The country's main opposition parties, the second-largest trade union confederation and private sector association initially gave their blessing to the bailout agreement. But that consensus has evaporated amid rising unemployment and hardship, leaving the coalition government isolated.

Antonio Jose Seguro, leader of the main opposition Socialist Party, said the government is leading Portugal to ruin and should ask its creditors for more time to pay its debts as well as lower interest rates. "More austerity doesn't solve our problems, it worsens them," he said.

He said almost 6,000 companies filed for bankruptcy in the first nine months of this year â¿¿ a 31 percent increase on the same period in 2011 â¿¿ as austerity choked consumption.

Outside Parliament, protesters jeered and whistled and chanted "Thieves!" Portugal has witnessed two general strikes this year and almost daily street protests, though there has been little violence.

The tax increases are especially hard on Portugal's middle class. Due to the changes, someone earning ⿬41,000 a year, for example, will pay 45 percent income tax from Jan. 1 compared with 35.5 percent now.

Most workers fall into the ⿬7,000-⿬20,000 annual income bracket. Those people will pay 28.5 percent income tax, up from 24.5 percent.

Previously, the top rate of tax of 46.5 percent was for workers or married couples who together earned over ⿬153,300 a year. That top rate will be lowered to cover single or joint earnings above ⿬80,000, which will be taxed at a rate of 48 percent. That income will also be subject to a special "social solidarity" tax of 2.5 percent. Also, there will be a 3.5 percent surcharge tax on everyone's earnings in 2013.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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