The Executive includes the measure in the Recovery, Transformation and Resilience Plan that it sent last Friday to Brussels

The Government proposes eliminating the tax reduction that couples have when they declare personal income tax jointly. This consists of 3,400 euros that raise the minimum income tax exemption, benefits two million households and its cost amounts to around 1,000 million per year according to the latest Budgets.

The Executive launches this initiative as an equality policy to encourage the incorporation of women into the workplace. This is reflected in the Recovery, Transformation and Resilience Plan sent to Brussels: “The gradual disappearance of the reduction for joint taxation is included through the establishment of a transitional regime, because it generates a disincentive to the labor participation of the second recipient of income (mainly women).”

“A modern tax system should not serve exclusively to provide income to finance public spending, but should directly contribute to enhancing the impact of public policies, serving as a catalyst to achieve transformations in areas such as gender equality, attention to disability, environmental conservation or health protection,” reads the document sent to Brussels in an analysis of gender equality aspects. “There is quite a consensus that this measure discourages women from entering the labor market,” argues the Ministry of Finance.

Last year, the Tax Authority (Airef) prepared a report on the tax benefits of the Spanish tax system in which it precisely reviewed the advantages and disadvantages of this reduction in personal income tax. And it estimates that the cost to the public coffers of this initiative amounts to 2,293 million, and the beneficiaries are 4.2 million people, 2.1 million households, 18% of taxpayers and 17% of families. The organization maintains that the tax benefit is distributed homogeneously and does not alter inequality. But it indicates that the collection cost is concentrated in the upper part of the distribution: “The 10% with the highest income generates 19.5% of the total cost of the benefit (466 million),” he points out.

Increases for low incomes

This aid benefits households in which there is only one income recipient or the second earns little. Otherwise, it is not worth paying the tax jointly. The Airef points out that this reduction "does achieve the objective of adapting the tax to the structure of the household's income, especially in those households in which almost all of the income is obtained by one recipient and the household has a low income."

However, the public body also concludes that this benefit “generates a disincentive to the labor participation of second recipients (mainly low-income women), which accentuates the problems of the gender gap.” Women who earn from joint taxation have labor participation 19 points lower than those who do not, the study says.

And it is this factor that the Government uses in its recovery plan. In fact, it is the trend followed in many countries, where it is mandatory to do it individually. Although some, such as Germany or Portugal, average the income of the two spouses so that they pay less than if they were taxed on the total. In France it is a family quotient system: they divide by the number of members and, therefore, lower the payment more for families with more children.

Until 1989, married couples were required to file a joint declaration. However, a Constitutional ruling declared that marriages were penalized. The reason: two unmarried people who pay separately the same amount as a married couple end up paying less personal income tax for the same income. How does this happen?

Suppose that the members of the two couples each earn the same, 25,000 euros. In the case of unmarried couples, each one will pay a 19% for the first 12,450 euros minus the minimums, a 24% for the section between 12,450 euros and 20,200, and a 30% up to 25,000. On the other hand, the married couple is taxed the same as the other couple for the first 25,000 euros. But when settled jointly the other 25,000 are added to the family income and are taxed to 30% up to 35,200 euros, and to 37% up to the 50,000 euros that they declare in total. That is, they pay more.

Hence, the High Court considered joint taxation discriminatory. For a few years a variable deduction was established and then a double rate system. Now the reduction of 3,400 euros that is added to the exempt minimum is in force. There is also another reduction in personal income tax of 2,150 euros for single-parent households, which common-law couples usually take advantage of. But the Executive does not mention this and what it intends to eliminate is the tax aid for joint taxation that affects marriage.

Fiscal experts remember that this reduction does not benefit couples whose spouses earn the same or with little difference. In the opinion of José Félix Sanz, director of tax studies at Funcas, “the elimination represents a hidden tax increase on marriages with a single recipient of income, or with a second recipient but with income significantly lower than that of the main recipient. As these circumstances are more common in less well-off households, the elimination of this deduction will reduce the progressivity and redistributive capacity of personal income tax. Likewise, it will imply a tax penalty for marriage with respect to separation, divorce or widowhood.”

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