The Spanish government, comprising the Socialist Workers' Party (PSOE) and the smaller coalition partner Sumar, is nearing an agreement to address the taxation crisis affecting minimum wage workers.

Vice President and Minister of Treasury, María Jesús Montero, confirmed ongoing negotiations aimed at compensating workers earning the interprofessional minimum wage (SMI), who will be subject to income tax (IRPF) for the first time due to recent wage increases.

Sumar leader Yolanda Díaz has opposed these tax obligations, emphasizing that minimum wage earners should be exempt from taxation.

The conflict intensified in February, coinciding with the approval of a minimum wage increase to €1,184.

The Ministry of Treasury announced that SMI recipients would be taxed, prompting Sumar to swiftly propose a legislative change to retract the decision.

Opposition parties, including the Popular Party (PP) and Podemos, also registered initiatives to reverse the tax obligation.

Although the government holds veto power over the proposal, the Congress can lift this veto, which could enable the proposal to proceed if Sumar and PP secure enough votes.

Montero stated that only about 20% of SMI recipients, primarily those without family dependents, would be liable for taxation under the new rules.

Those impacted represent a small portion of SMI earners, prompting the discussion of targeted compensation measures rather than a broad income tax exemption.

Possible measures may include specific deductions for the affected workers, with an estimated financial impact of around €150 million.

Montero reiterated the government’s stance that the relationship between SMI adjustments and income tax exemption constitutes two separate debates.

While the continued increase in the SMI since 2018—from €735 to the current €1,184—helps improve salaries, Montero emphasized the necessity for consistent state income to support public welfare.

In Brussels, Díaz expressed optimism about reaching a resolution, indicating ongoing discussions with Montero and her teams.

Emphasizing the importance of improving life conditions for workers, Díaz maintained that minimum wage incomes should remain tax-exempt.

In parallel, the government faces growing pressure over its failure to present the 2025 state budget without firm parliamentary support.

Various government representatives acknowledged that it would be unfruitful to prepare a budget that lacks sufficient backing, particularly noting the absence of support from ERC, which has opted to postpone budget discussions until 2026. The Constitutional mandate requires the government to submit the budget three months before the expiration of the previous year’s budget, but the government is prioritizing political feasibility over legal obligations, citing past instances of rejected budget proposals leading to early elections.

Decisions made by the government indicate an intention to avoid political defeats related to budget presentations.

The spokesperson for the government described presenting a budget without alliances as an impractical use of parliamentary time.

The ongoing discussions about the budget framework occur amidst increased tensions regarding military expenditure commitments from Brussels and the legislative landscape.

On another front, the Constitutional Commission of Congress has advanced legislation to dissolve associations that promote Francoist sentiments, with approval reflecting support from PSOE, Sumar, and other left-leaning parties, and facing opposition from Vox.

The proposal aims to amend existing association laws to classify promoting Francoism as grounds for dissolution, contingent upon judicial review.

The government is concurrently working towards challenging modifications made by the Madrid government that obstruct the recognition of sites associated with historical memory from the Franco era, reflecting the ongoing efforts to reshape Spain's historical narrative and facilitate reparations for historical injustices.