This week there have been a new controversy of the Government. His plan presented to Brussels indicated the forthcoming elimination of joint tax reduction, from which 2.77 million families benefit for an annual amount of 2,390 million euros.
Shortly after the news was known, the Government has rectified, indicating that it is under study since it was a recommendation of AIReF in its report Spending Review on the tax benefits that exist in Spain. But for now to eliminate this reduction, nothing at all. And the truth is that this reduction in personal income tax can be, on the one hand, a disincentive to inequality between men and women and also a way to save taxes on the lowest incomes, so any modification could be affecting both aspects.
Joint taxation and equality
In Spain, when the personal income tax declaration is made, you can choose individual or joint taxation. In the latter case, the married couple would present a single income statement, adding the income of each one. As the sections are the same and to compensate for it, there is a reduction of the tax in the event that this modality is chosen.
In practice, it is only worth making the joint return if the difference in income between the members of the couple is high. In fact, it is a modality that mainly affects those couples in which only one of the members works (and normally the one who does not work is the woman).
AIReF indicated in its Spending Review study that this type of taxation generates a disincentive to the participation of women in the labor market, since if they do not work and start to do so they would lose the 3,400 euros per year in taxes that they currently receive.
More taxes on lower incomes
The problem with eliminating joint taxation is that currently most of the families that make this declaration have family incomes below 30,000 euros (2.77 million declarations of the 3.67 million that are presented in this modality). And furthermore, since these incomes are relatively low, the tax impact of eliminating a reduction of 3,400 euros is, in many cases, multiply by almost two the personal income tax they pay.
Therefore we are facing a complicated dilemma: To benefit the greater participation of women in the labor market, the taxes paid by families in which women do not work or work very few hours must be significantly raised.
How to make a reform in conditions?
Therefore, eliminating joint taxation at once does not make much sense. AIReF proposes a transitional regime so that families can plan their incorporation into the labor market in advance. Another option could be completely change personal income tax taking This is taken into account, with lower rates that compensate these lower-income families, since they would have to be taxed individually, but without creating incentives not to work.
However, before any reform there are going to be losers. There will always be couples in which one cannot work (family care where it is more efficient both emotionally and financially for one to dedicate himself to caring and another to work) and Whether or not there are tax incentives, the situation will not change.
Of course, to minimize these cases, the best thing is a comprehensive income tax reform. In other words, if we believe it is convenient to remove this type of tax disincentive, it must be done by reforming it from scratch and not thinking that the State will collect an additional 2,390 million euros. Otherwise all we are doing is fight for equality by raising taxes on lower-income families.