World, Europe

Spain’s budget eyes tax hikes for wealthy

Progressive government wants to fund record spending on social programs, infrastructure

Alyssa McMurtry   | 27.10.2020
Spain’s budget eyes tax hikes for wealthy

OVIEDO, Spain

The Spanish government presented its 2021 budget Tuesday, which includes tax hikes for the country’s wealthiest to help fund historic spending.

“Today we are inaugurating a new era that leaves the neoliberal path behind,” said Pablo Iglesias, Spain’s deputy vice prime minister and leader of coalition partner, Podemos, who presented the budget alongside Prime Minister Pedro Sanchez.

The budget intends to increase taxes on those earning more than €300,000 ($354,000) annually and residents worth more than €10 million ($11.8 million).

The El Pais newspaper said only 0.5% of the population earns more than €100,000 per year, so taxes would only affect a very small minority.

Some large corporations could also have to pay more, while capital gains taxes above €200,000 ($236,000) are set increase.

The money generated, plus a large sum from the European Union, would help fund a record spending increase, said Sanchez.

If the budget passes, the government will invest €239 billion ($282 billion) in education, infrastructure, health care, social programs, scientific research, green energy, elderly care and social programs.

Iglesias said the country wants to move more toward a Nordic model of elderly care, which favors in-home living rather than nursing homes.

Public health workers and pensioners would also see their incomes rise 0.9% and major changes could be in store for the real estate sector.

“Spain will have a housing law with the largest degree of public intervention in the rental market in Europe,” said Iglesias.

The budget, however, is a draft and the progressive minority coalition may have to negotiate to secure support of opposition parties to pass it in parliament.

Due to years of political instability, the last budget was passed in 2018 and its last full-year budget was passed in 2016.

Spain’s economy is reeling more than most from the pandemic. The IMF predicts its GDP will contract 12.8% -- the steepest drop in Europe.

Only Lebanon, Venezuela, Libya, Peru, Suriname, Macao and some island nations are expected to see more acute economic declines.

“The main objective of the budget is to reconstruct what the crisis surrounding the pandemic has taken from us. The second is to modernize our productive model. The third is to strengthen our welfare state,” said Sanchez. 

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