How Milei’s Tax Cuts Are Driving the Left’s Hardliners to Despair

 by Thomas Kolbe

As he enters the final year of his current term, Argentina’s President Javier Milei can look back on a strong record of reform. Deregulation, tax cuts, and the rollback of the state apparatus have revived the domestic economy. Yet Milei’s reelection hangs in the balance -- and a return to socialism remains possible.

Much has been written about Javier Milei, Argentina’s libertarian president. A media professional, blunt and loud, whose trademark chainsaw became an emblem in the fight against bureaucracy and socialism. The economist, entrepreneur, and jack-of-all-trades, born in Buenos Aires, has now been in office for three years. A coalition of libertarian and conservative parties backs his policies, and his record is difficult to ignore.

When Milei assumed the Argentine presidency in December 2023, the enthusiasm surrounding his radical promises propelled him into office. The state was to shrink, taxes were to fall dramatically, and the market was once again to direct investment. Milei also declared war on inflation, the consequence of government debt and the recurring crises of the national currency, the peso.

It did not take long for him to achieve something remarkable: In 2024, the government budget posted a surplus for the first time in 14 years. Even after deducting interest payments, which accounted for around 7.3 percent of government expenditure, a small financing surplus remained. Milei has since cut spending and dismissed around 34,000 government employees. Such a policy does not make you many friends, as the Argentine is now painfully discovering in light of his poor polling numbers. A genuine reform process needs to be carefully calibrated in order not to lose large parts of the electorate along the way and, ultimately, play into the hands of political opponents.

Milei also declared war on chronic price inflation, the legacy of socialist profligacy. The inflation rate fell from 211.4 percent in December 2023 to an annual rate of just 33.5 percent in August of this year -- a remarkable achievement given how persistent monetary debasement had become through decades of conditioning the population. The reality is simple: The state uses its money printer to prop up its own system of favoritism, a phenomenon we have increasingly observed for years in the EU and in Germany as well.

The cancer of socialism metastasizes into every area of society -- the chemotherapy requires more time than a single presidency.

The president, who most recently caused a stir with his plan to freeze politicians’ salaries in the event of a budget deficit, had above all committed himself to relieving households and businesses.

Milei abolished the so-called Impuesto País, a levy on private foreign-exchange purchases and overseas payments, at the end of 2024 -- an overpriced racket imposed on the private sector. This tax was part of a tax-cutting program that, according to the Institute for Fiscal Analysis (IARAF), reduced the tax burden by around 3 percent of gross domestic product over the first three years of the Milei administration.

Export duties, particularly on agricultural exports, were also reduced; the wealth tax was cut -- from 1.50 to 1.25 percent at the top rate -- and the value-added tax was reduced in certain areas. Milei angered parts of the population when, contrary to his promise, he nevertheless partially increased income taxes and raised fuel levies in order to cushion the initial shock of his reform policies on the budget.

Important from a social-policy perspective: The tax-free thresholds for income tax were raised significantly. Milei’s goal is for 90 percent of the various taxes and levies to eventually disappear altogether.

To put the tax reform in perspective: Relative to the German economy, the three-percent overall tax reduction corresponds to permanently relieving German taxpayers of 137 billion euros -- an astonishing figure that, given the German government’s tax-increase orgy, sounds like a fairy tale from another universe.

Milei’s tax cuts initially looked like a revenue shock: In April 2026, real tax revenues fell by around four percent year-on-year for the ninth consecutive month; the revenue ratio fell to 19.7 percent of GDP in 2025, from 20.2 percent the previous year. The government compensated for this through radical spending discipline, which produced a primary surplus of 1.8 percent of GDP in 2024 and another 1.4 percent in 2025. Now the trend is turning: In September 2026, government revenues rose by 3.7 percent in real terms and reached 21.36 trillion pesos in nominal terms -- driven above all by income and profit taxes, export duties, and a noticeably strengthening private sector that has been given enormous room to breathe by the reduction of the state’s share of the economy from 42 to just 35 percent.

The International Monetary Fund’s growth forecast for the current year stands at 3.5 percent. Above all, export-oriented sectors such as mining and agriculture are showing a noticeable increase in tax revenues as their boom gathers pace.

One can also put it this way: Arthur Laffer is smiling. Lower tax rates are causing revenues to rise -- who would have thought? Whether this is partly a statistical effect caused by an internal reclassification is not entirely clear. In any case, nominal tax revenues have long since more than offset the effect of mass layoffs in the state apparatus -- the result of a strengthening economy, of a strengthening private sector. More than 15,000 regulations and provisions have been eliminated in Argentina in recent years -- the country is moving in the opposite direction from the EU, where thousands of new regulations and individual provisions suffocate the economy every year.

In the fall of next year, Javier Milei is expected to seek reelection together with his party, La Libertad Avanza. Current polling by the AtlasIntel institute puts the president in a difficult position: Only 38 percent support his hard reform course, while 58 percent oppose it.

Lower-income groups in particular, coming from socially disadvantaged backgrounds, are suffering especially in the short term from cuts to social programs, deregulation and the state’s general withdrawal from the economy. The fact that they could later become the winners once the economic engine begins generating prosperity is turned into a legend by the relentless propaganda of the collectivists.

On the other hand, Javier Milei celebrated a success in the October 2025 parliamentary elections together with his coalition partners from the PRO party: His libertarian movement won around 41 percent of the vote and significantly expanded its presence in Congress. Although the governing coalition does not hold an absolute majority, it secured a decisive blocking minority of one-third of the lower house -- giving it veto power that protects the reform course. Perhaps, in Argentina as well, electoral reality is capable of putting the often-incomprehensible polling numbers into proper perspective.

For those who favor a free civil society, a continuation of Javier Milei’s course -- the systematic dismantling of the state economy -- would be an important signal, especially at a time like this. It would confirm that reforms are possible, that the population is capable of exercising patience, and that voters do not immediately fall for the snake-oil salesmen of the statist camp when something new needs time to take effect.

It remains to be seen whether Argentina will become a South American engine of reform or whether the country will soon once again join the phalanx of the collectivists.

https://www.americanthinker.com/articles/2026/10/how-milei-s-tax-cuts-are-driving-the-left-s-hardliners-to-despair/