Brussels debunks the narrative: low incomes face the fastest tax rises
A European Commission study shows Spain has the EU's third-largest increase in taxes on low incomes, with a rise of 13 percentage points since 2015.
English · Original discussion in Spanish · Published
The European Commission confirms it: taxes on low incomes in Spain have soared above the European average
A report by the European Commission dismantles the Government's narrative of fiscal pogre. According to the study, Spain has raised effective marginal tax rates for the lowest incomes by 13 percentage points since 2015. That is the third-largest increase in the entire European Union, only surpassed by Romania and Germany. For lower-middle incomes (second and third quintiles), the increases range from 8 to 15 points depending on the bracket. This means that every time a low-wage worker gets a raise, the tax authorities keep a much larger share than a decade ago.
Nordic-level tax burden with southern European wages
The paradox is that Spain already reaches levels of pressure on low incomes similar to those of Germany, France or Italy, but with noticeably lower earnings. While Norway, whose per capita income is three times Spain's, has a tax burden of 44.4%, Spain is not far behind: 38.3%. The Netherlands is close to 39%, but with wages that are double Spain's. The direct comparison, without adjusting for income, distorts reality: here people pay almost the same for far lower wages.
2028: nearly half of all workers on or near the minimum wage
The projections offer little cause for optimism. It is estimated that by 2028 around 40% of workers will be in a range very close to the minimum wage (up to 30% above it). The rising cost of labour at the lower brackets acts as a disincentive to raise pay: giving a worker a raise ends up fattening the tax office's coffers more than the employee's pocket. The old refrain that "the rich will pay for it" clashes with the reality that the bill is being picked up by those who have the least.
The underlying issue is that Spain applies a tax burden on low incomes comparable to that of the Nordic countries, but without their level of public services or redistribution. The debate over whether the problem is that too many taxes are paid or that revenue is badly spent falls flat when the data show that those who suffer the heaviest tax burden are precisely those who have the least.
A report by the European Commission dismantles the Government's narrative of fiscal pogre. According to the study, Spain has raised effective marginal tax rates for the lowest incomes by 13 percentage points since 2015. That is the third-largest increase in the entire European Union, only surpassed by Romania and Germany. For lower-middle incomes (second and third quintiles), the increases range from 8 to 15 points depending on the bracket. This means that every time a low-wage worker gets a raise, the tax authorities keep a much larger share than a decade ago.
Nordic-level tax burden with southern European wages
The paradox is that Spain already reaches levels of pressure on low incomes similar to those of Germany, France or Italy, but with noticeably lower earnings. While Norway, whose per capita income is three times Spain's, has a tax burden of 44.4%, Spain is not far behind: 38.3%. The Netherlands is close to 39%, but with wages that are double Spain's. The direct comparison, without adjusting for income, distorts reality: here people pay almost the same for far lower wages.
2028: nearly half of all workers on or near the minimum wage
The projections offer little cause for optimism. It is estimated that by 2028 around 40% of workers will be in a range very close to the minimum wage (up to 30% above it). The rising cost of labour at the lower brackets acts as a disincentive to raise pay: giving a worker a raise ends up fattening the tax office's coffers more than the employee's pocket. The old refrain that "the rich will pay for it" clashes with the reality that the bill is being picked up by those who have the least.
The underlying issue is that Spain applies a tax burden on low incomes comparable to that of the Nordic countries, but without their level of public services or redistribution. The debate over whether the problem is that too many taxes are paid or that revenue is badly spent falls flat when the data show that those who suffer the heaviest tax burden are precisely those who have the least.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (11 replies).
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