Inflation Increases Tax Burden on Middle-Income Households in Spain
Spanish middle-income families face an additional annual tax payment of €1,100 due to rising prices and unchanged income tax brackets.
The impact of inflation on the purchasing power of Spanish citizens has been significant, particularly since the escalation of prices linked to the war in Ukraine.
One consequence of this economic situation is the decision by the Spanish government to refrain from adjusting the Personal Income Tax (IRPF) brackets in accordance with inflation levels over recent years.
This lack of indexation has led to increased tax burdens for middle-income households, with estimates indicating these households are now paying approximately €1,100 more annually in taxes.
Desiderio Romero-Jordán, a professor of Applied Economics at the University of Rey Juan Carlos, highlights this issue in an article published in _Cuadernos de Información Económica_ from Funcas.
His analysis suggests that between 2021 and 2024, middle-income families have been disproportionately affected by the absence of adjustments to the IRPF in relation to price increases.
Romero-Jordán categorizes these middle-income earners as individuals with annual incomes ranging from €12,000 to €21,000 (lower middle-income), €21,000 to €30,000 (middle-income), and €30,000 to €60,000 (upper middle-income).
Together, they represent 59.7% of all income tax declarations and account for 57.8% of IRPF revenue.
Notably, these groups have borne 61.3% of the increase in tax revenue attributed to inflation in recent years.
His simulations reveal that individuals within these income categories are paying an average of €311.3 more for lower middle-income earners, €458 more for middle-income earners, and €622 more for upper middle-income earners, respectively, due to the cumulative effect of not adjusting the IRPF according to inflation.
An additional factor complicating the fiscal landscape is Value Added Tax (IVA), which has also risen due to inflation.
This has further compounded the financial burden on middle-income households.
Romero-Jordán calculates that when the increased costs from both the IRPF and IVA are combined, the total annual tax burden for a middle-income household can reach €1,100.
The total payment requirements increase in correlation with income levels.
It is estimated that Spanish taxpayers collectively pay an additional €9.75 billion annually solely due to the lack of adjustment to the IRPF for inflation.
The article concludes by suggesting that, without fiscal changes and assuming inflation remains close to 2.5%, the tax liability for a typical middle-income household is projected to rise by approximately €200 each year.
One consequence of this economic situation is the decision by the Spanish government to refrain from adjusting the Personal Income Tax (IRPF) brackets in accordance with inflation levels over recent years.
This lack of indexation has led to increased tax burdens for middle-income households, with estimates indicating these households are now paying approximately €1,100 more annually in taxes.
Desiderio Romero-Jordán, a professor of Applied Economics at the University of Rey Juan Carlos, highlights this issue in an article published in _Cuadernos de Información Económica_ from Funcas.
His analysis suggests that between 2021 and 2024, middle-income families have been disproportionately affected by the absence of adjustments to the IRPF in relation to price increases.
Romero-Jordán categorizes these middle-income earners as individuals with annual incomes ranging from €12,000 to €21,000 (lower middle-income), €21,000 to €30,000 (middle-income), and €30,000 to €60,000 (upper middle-income).
Together, they represent 59.7% of all income tax declarations and account for 57.8% of IRPF revenue.
Notably, these groups have borne 61.3% of the increase in tax revenue attributed to inflation in recent years.
His simulations reveal that individuals within these income categories are paying an average of €311.3 more for lower middle-income earners, €458 more for middle-income earners, and €622 more for upper middle-income earners, respectively, due to the cumulative effect of not adjusting the IRPF according to inflation.
An additional factor complicating the fiscal landscape is Value Added Tax (IVA), which has also risen due to inflation.
This has further compounded the financial burden on middle-income households.
Romero-Jordán calculates that when the increased costs from both the IRPF and IVA are combined, the total annual tax burden for a middle-income household can reach €1,100.
The total payment requirements increase in correlation with income levels.
It is estimated that Spanish taxpayers collectively pay an additional €9.75 billion annually solely due to the lack of adjustment to the IRPF for inflation.
The article concludes by suggesting that, without fiscal changes and assuming inflation remains close to 2.5%, the tax liability for a typical middle-income household is projected to rise by approximately €200 each year.
Translation:
Translated by AI
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