May 13, 2021

The Treasury will eliminate joint taxation in personal income tax that benefits 4.1 million people




The Government will eliminate the possibility of jointly paying personal income tax, which now benefits 4.2 million people and 2.1 million households. This is how he reels it in the
Recovery, Transformation and Resilience Plan
. «It includes the gradual disappearance of the reduction by joint taxation through the establishment of a transitional regime, because it generates a disincentive to the labor participation of the second income earner (mainly women), ”the document states, as El País has advanced.

The discount currently benefits 16.9% of households and 18.5% of taxpayers who file income tax, assuming a loss of 3.3% of income in personal income tax. This is a reduction in the tax base for taxpayers who prefer to pay joint taxes on the income of the family unit. In the case of marriage with minor children, the exempt minimum set by the bonus reaches the 3,400 euros per year. In the absence of marriage or legal separation, it amounts to 2,150 euros. According to the Independent Authority for Fiscal Responsibility (Airef), the bonus represents a loss of revenue of € 2,393 million, although in the General State Budgets of 2021, the Executive calculated that represented 1,070 million less this year.

Transitional and progressive regime

The Executive does not specify when it will approve it, although it will do so by establishing a transitional and progressive regime. In fact, Airef proposed “to accelerate its gradual disappearance through the establishment of a transitional regime”, offsetting the negative effect it would have with “new incentives for women’s labor participation.” The reduction benefits those households in which one of the two spouses has no or very low income from work. In this way, the income from work received by one of the two spouses is taxed less jointly than if it were declared individually.

The Tax Authority, in its assessment of tax benefits last summer, pointed out that «This figure can generate negative incentives on the labor supply of women, who are usually the member of the household with the lowest income level ”. This is actually the case in 84.3% of cases. Airef also highlighted that female labor participation in Spain was lower than in the Eurozone, with 62.8% compared to 67.7% respectively.

The institution also noted that since 2008 – the bonus was introduced in 2007 in current terms, although it has existed in one way or another since 1978 – the impact of the reduction had been diminishing due to the greater incorporation of women into the market labor. After the bursting of the real estate bubble, yes, there was a rebound due to the deterioration in the labor market, to continue reducing its weight from 2013 onwards.

Impact by income level

«By its nature of reduction, cost is more concentrated among high income. In particular, the 10% with the highest income (with income starting at 43,448 euros) generates 19.5% of the total cost of the benefit (466 million euros). The benefit of falling on almost all income levels is neutral from the point of view of inequality »,
collected the Airef in its report
. Beneficiaries are more concentrated among middle-aged and elderly taxpayers. “In particular, those over 55 account for 48% of the total beneficiaries and absorb 51% of the total cost. This is due to the fact that, in these households, female labor participation is lower ”, pointed out Airef.

When the income of the second recipient is higher than 15,369 euros and represents more than 40% of the household income, it begins to cease to be attractive. As the weight in total income decreases and the returns to the second payer, in absolute terms, are higher, the benefit is no longer interesting. «The figure of joint taxation is minority among the main OECD countries, although it is still present in the form of an income division system or because of the differentiated scale in countries such as France, Portugal or Germany ”, pointed out Airef.

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