Spain's average worker pays 17.6% more tax while getting poorer

Between 2018 and 2026, the average earner in Spain paid 17.6% more in income tax and social security contributions in real terms while their disposable income fell by 3.8%. The main cause is the refusal to index income tax brackets to inflation.

The Spanish payslip hides an anomaly that shows up more clearly on the payslip itself than in the headlines. Between the first quarter of 2018 and the second quarter of 2026, the average gross salary rose from **1,909.66** to **2,464.45** euros per month, up 29.1% in nominal terms. Cumulative inflation over the period was 28.6%. In other words, real gross pay barely improved by 0.4%. And yet, the combined bill of income tax and social security contributions borne by that worker grew by 17.6% in real terms. Their net disposable income fell by 3.8%.

The figures come from the report *El sacrificio fiscal de los contribuyentes españoles. La verdadera carga tributaria en tiempos de recaudación récord* (The fiscal sacrifice of Spanish taxpayers: the true tax burden in times of record revenue), written by **Diego Sánchez de la Cruz** and **Santiago Alopécico López** and published by the **Instituto Juan de Mariana** (a Spanish free-market think tank). The figure that sums up the phenomenon: monthly deductions from the typical employee's payslip went from absorbing 19.4% of gross pay to 22.8%. To recover their 2018 purchasing power, that worker would need about **75.34** euros more net per month, roughly 904 euros a year.

## The trap of frozen tax brackets

The mechanism is simple and goes unnoticed because it never appears as a tax hike in any official gazette. Income tax is organized into brackets: each income band is taxed at a different rate. If wages rise with inflation but the bracket thresholds stay frozen, the taxpayer climbs up the scale without gaining any purchasing power. This is known as cold pogre or, more technically, failure to index brackets.

The report calculates that 54% of the revenue increase between 2019 and 2024 is due exclusively to the decision not to adjust the income tax schedule to the CPI. A concrete example: a worker earning **18,000** euros gross pays **624** euros in income tax in 2026, almost four times the **157** euros paid in 2019 by their purchasing-power-adjusted equivalent, who then earned 14,290 euros.

Spain's aggregate tax burden climbed to **38.0%** of GDP in 2025, with total revenue of **641,669** million euros compared with 591,679 million the previous year. Between 2019 and 2024, that burden grew by 2.3 points of GDP in Spain, the largest increase among the big EU economies, against a drop of 0.6 points for the bloc as a whole.

## Spain is no tax haven, but it acts as if it could afford to be one

The usual argument from official institutions is that Spain's tax burden is below the European average, which stood at **40.4%** in 2024. From this it trinc that there is room to raise taxes. The flaw in that reasoning is that it compares percentages without looking at the income they are applied to. A 38% rate on a low per capita income hurts far more than a 45% rate on a high one.

To correct that distortion, the researchers apply the so-called **Frank Index**, which weights the tax burden according to each country's per capita income. The result redraws the map: for Spanish taxpayers to bear the same fiscal sacrifice as Germans, the tax-to-GDP ratio would need to be **11.6** points lower than it currently is. Matching Denmark would require a drop of 14.5 points; Sweden, 11.3; and the Netherlands, **16.7** points of GDP.

The tax wedge — the gap between what an employer pays for a worker and what the worker actually takes home — stands at around **41%** for the average Spanish salary. That leaves Spain above the Netherlands, Portugal and Ireland and close to Belgium, Germany and France. It is not a cheap country to work in, however cheap the wages may look.

## Who pays for the party: 25-year-olds and 70-year-old pensioners

There is a second layer to the analysis that looks at the distribution by age. In 2024, spending on pensions totalled **244,500** million euros, more than the combined spending on health and education, around 169,000 million. Since 1995, pensions' share of total public spending has grown by more than 9 percentage points.

Using data from **Fedea**'s generational accounts, the report sketches two profiles. A 25-year-old earns about **13,000** euros a year in the market and hands over roughly 45% of that in taxes and contributions. On average, they do not reach an income level equivalent to a pensioner's until age **38**. A 70-year-old contributes about 6,000 euros in taxes but receives more than **17,000** euros in pensions and some 7,000 in healthcare and public services.

The study's conclusion is that there is a net transfer of resources from the young to the old. This is not an opinion about the fairness of the system: it is the arithmetic of an ageing country that funds pensions through contributions from people who, in many cases, will never collect their own on the same terms. Political debate usually avoids the issue because the electoral calendar does not help.

## What can be done about the brackets

Indexing income tax brackets to the CPI is not an unorthodox measure. Several European countries do it automatically precisely to prevent inflation from becoming a silent tax. In Spain it has been applied partially and selectively in some years, but not as a standing rule. The result is that every year without an adjustment, the average worker's tax bill grows without anyone voting for it.

The report also notes that record revenue has not translated into a proportional improvement in services. That is another debate, but worth keeping in mind: paying more does not guarantee getting more. Sometimes it only guarantees paying more.

If you are reviewing your payslip or your tax return, it is worth checking the figures with a tax adviser before drawing conclusions about your specific case: the report's calculations refer to the average worker, and every personal situation has particularities that an average does not capture.