Lorraine Williamson
Households in Spain are contributing more in taxes each year, but their purchasing power has yet to recover from the 2008 financial crisis. A recent report highlights how rising taxes in Spain are directly impacting household spending, leaving many families with less disposable income despite economic growth.
The report by economist Desiderio Romero-Jordán, published by the Spanish think tank Fundación de las Cajas de Ahorros (Funcas), shows the growing disparity between earnings and the actual value of household income.
This widening gap between taxation and real wages continues to strain everyday budgets.
Disposable income remains below 2008 levels
Although wages have risen in nominal terms, inflation-adjusted disposable income for Spanish families remains lower than it was over 15 years ago. Many earn more on paper, but this does not translate into greater buying power. Daily essentials, utilities, and other costs continue to climb faster than income.
Income tax brackets fail to reflect inflation
One of the main contributors to this disparity is the structure of income tax. Tax bands have not kept pace with inflation, causing earners to move into higher brackets without a meaningful increase in real income. The result is that people pay more tax but see little or no improvement in their take-home pay.
Government revenue hits record high
According to the Funcas report, the Spanish state collected over €21 billion more in tax revenue in 2024 compared to the previous year. Nearly half of this increase came from personal income tax, followed by corporate tax, VAT, and excise duties on products such as fuel and alcohol.
VAT increases erode household budgets
VAT (IVA) has had a significant impact on consumer spending. While there were temporary reductions on essentials like electricity, gas, and food between 2021 and 2024, households still ended up paying more each year. In 2022 alone, the average VAT bill per household rose by €200. On average, VAT costs have increased by €75 annually per household since 2021.
Rising wealth, shrinking purchasing power
Despite the overall growth in Spain’s economy and a record high in household net assets, many citizens feel no benefit. Romero-Jordán notes that the disconnect between national wealth and individual purchasing power persists. Without a shift in fiscal policy or real wage growth, households are unlikely to see any meaningful improvement in living standards.