Lorraine Williamson
How does a country celebrate a historic tax windfall when so many families say they’re struggling to keep up? That is the tension sitting at the heart of Spain’s latest fiscal forecasts, which point to unprecedented revenue levels in 2025 and beyond.
Spain is expected to collect around €325 billion in taxes next year—its highest total on record. According to the Ministry of Finance, strong VAT and income tax receipts are doing most of the heavy lifting. Officials say the surge will help to stabilise public finances and protect essential services such as pensions, healthcare, and education. Yet the figures have landed in a country already grappling with rising costs, prompting questions that go well beyond accounting.
A booming treasury, but for whom?
By 2026, tax revenues are projected to climb even further, reaching €350 billion. On paper, this places Spain comfortably in the European mid-range. But the comparison ends there. Average incomes remain below those of France or Germany, deepening the debate about whether the system is working for ordinary households.
Much of the controversy lies in what the government has not done: adjust tax brackets. With inflation pushing wages up, taxpayers drift automatically into higher bands—a phenomenon economists refer to as “bracket creep”. The state benefits; citizens feel it.
Why ‘progressive and free’ fuels frustration
The Ministry defends the system as progressive and free—meaning the rules stay still while revenues rise naturally as wages increase. Critics argue the phrasing masks a hard truth: many people are paying more tax without ever feeling richer.
This effect lands most heavily on middle-income workers. Their wages rise just enough to tip them into higher tax brackets but not enough to cushion the impact. The result is shrinking disposable income for families who already face escalating food, fuel, and rent costs.
Cost of living in Spain
The squeeze on middle-income Spain
The pressure is most visible in households that sit squarely in the middle of the earnings scale. These are the families that anchor the consumer economy—yet they report having less room to save, spend, or plan.
Economists warn that sustained pressure on this group weakens long-term growth. Politically, it also fuels resentment: the sense that those who contribute the most are gaining the least.
Balancing the books or shifting the weight?
Spain’s fiscal strategy has clear benefits. Stronger revenue shores up public accounts and offers reassurance at a time when many European countries face rising deficits. Extra funding supports large-scale commitments such as pensions, education, and healthcare—cornerstones of the welfare state.
But fairness remains the sticking point. Supporters argue that maintaining high revenue is essential for social protection. Opponents counter that the burden falls too heavily on a group that cannot absorb it.
As Spain enters a new year with a swelling treasury, the central question lingers: can the country sustain record revenue without losing the confidence of the very people funding it?
Source: El Confidencial