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Earlier this year, Donald Trump announced that he would like the Americans to have more babies and had the means to help this. These include expanding access to invitro fertilization and increased spending in areas with higher marriage and birth rates.
But above the Atlantic, Victor Orban, the Prime Minister of Hungary, presented a new bold idea. He wants to introduce an exemption from lifetime income tax for all women who have two or more babies.
Orban said on X: “2025 is the year of the breakthrough! We are launching the largest tax reduction program in Europe. We present a complete exemption from income tax for mothers with two and three children. There is nothing like this worldwide!”
“The cost of living in Hungary is high, the government must therefore subsidize families,” said Ben Habib, president of the great British political action committee and former chief of co-deputies of the United Kingdom reform. “This allows mothers to stay at home more easily.”
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Orban’s proposal seems to be more than catching votes. On the contrary, the objective seems to be a means of repairing the drop in the population of the country, which fell to 9.9 million this year, against 10.7 million in 1980, according to data from Macro Trends. The drop is mainly due to the collapse of the birth rate of Hungary. To maintain the level of the population, the birth rate must be at least two births per woman, according to experts. But this has not happened since 1979, according to the World Bank data. The birth rate for 2023 was 1.5 children per woman.
A decrease in the population is natural development because countries are enriched, explains Win Thin Thin, the global market strategy in the financial company Brown Brown Brothers Harriman. “As savings increase and more mature, birth rates decrease,” he said.
Hungarian president Viktor Orban speaks during a press conference at the top of the European political community in Puskas Arena on November 7, 2024, in Budapest, Hungary. (Janos Kummer / Getty Images / Getty Images)
And this is where Orban’s ideas come into play, because giving money can help increase the birth rate. “If there is no biological cause of the birth rate, you can reverse it, but you must have incentives,” said Robert Wright, professor of economics at the Central Michigan University.
Hungary has already put in terms of subsidies to families with children. For example, two -parent families with a child receive 12,200 Hungarian forsints ($ 32) per month for this child, while couples with three or more children receive 16,000 ($ 41.60) for children per child per month, according to the Hungarian government. Single parents and those who have disabled children or long -term diseases receive more money. There are other advantages, including uninteresting loans for younger women.
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Elderly customers are lining up in a food counter in a large market in Budapest, Hungary, Wednesday, December 21, 2022. (Akos Stiller / Bloomberg via Getty Images / Getty Images)
It may seem strange to have a sliding scale of advantages, but there is a certain logic. As a family increases, spending can increase further, explains Pete Earle, director of the economy and economic freedom at the American Institute for Economic Research. “When a couple will have three children, they will need a house, not just an apartment,” he said. You can also see the need for the biggest cars to carry children at school and from the school.
Orban’s new proposal to eliminate income tax for mothers from two or more children could be even more generous than current subsidies. “What he offers is even greater, especially for high income people,” said Wright.
However, the decline in the population is not the only challenge in Hungary. The country has recently undergone economic problems that will make people subsidized to have larger families even more difficult. These include slow growth, high inflation and lack of foreign investment.
GDP contracted by 0.9% in 2023 and increased by a modest 0.5% last year, according to trading Economics. The government also recorded a deficit of 6.7% of GDP in 2023, followed by around 5%, which will probably be similar this year. Meanwhile, the country’s inflation increases. It was 5.5% in January, compared to 3% in September.
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A newborn baby yawns as he sits with his mother. (Photo by Jessica Rinaldi / The Boston Globe via Getty Images / Getty Images)
“Hungary has extremely important budgetary deficits, so I don’t know how they make themselves the new orban proposal,” explains Earle.
Nevertheless, Orban’s proposal, although different from that of Trump, will probably help to establish a closer relationship between the United States and Hungary. “Orban is one of the winners of the US elections,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
