Treasury has only adjusted income tax to inflation in two of the last 20 years

BarcelonaOnly in two of the last twenty years – in 2008, under the government of José Luis Rodríguez Zapatero (PSOE), and in 2015, under Mariano Rajoy (PP), which was actually a tax reform –, the Treasury has deflated the income tax (IRPF) rate, which means adjusting it to inflation to prevent paying more tax despite having the same or lower real income. And the last two times similar measures were taken was before the call for general elections, in March 2008, in which Zapatero was re-elected for a second term, and in December 2015, when Rajoy repeated in office. Between doing it and not doing it, there is an essential difference: from 2019 to 2024, it has meant additional revenue for the State of between 9,700 and 16,700 million, according to various studies. From the left-wing space, led by the PSOE, it is considered that this type of adjustment advocated by the PP and which applies to all incomes, especially benefits the highest ones. And, therefore, they advocate for more selective and direct measures for low or middle-income families, such as reductions and rebates on public transport and others.

Adapting the IRPF, which accounts for more than 40% of total revenue, to the rise in prices is a demand that gains weight as the general price level increases, as is currently happening with the war in the Middle East and since 2022 with the Russian invasion of Ukraine. In March, the first month of the conflict's impact, the consumer price index (CPI) went from 2.3% to 3.3% compared to the previous month, according to this advanced indicator from the National Statistics Institute (INE). This means that with the same money, you can buy less. And the State, in 2025, experienced a record revenue, with 325,000 million euros, practically the equivalent of all the wealth generated in a year in Catalonia (GDP). And part of it was due to the rise in prices, which erodes incomes.

Pedro Sánchez's executive attributes only 1.3 points of last year's 10.4% increase to rising prices and the bulk of the rise to increased economic activity. Economist and tax inspector and former Ciutadans deputy, Francisco de la Torre, calculates, on the other hand, that the additional collection in IRPF due to inflation was at least around 3,600 million of the more than 30,000 million total increase in revenue from all taxes compared to 2024. On the part corresponding to IRPF, this translates into a greater tax burden for the taxpayer despite earning the same or less. The issue is that if salaries, which are the bulk of IRPF, rise to compensate for inflation, but the IRPF brackets do not, a higher marginal rate is taxed. And this translates into a higher average effective rate (the portion of income paid). If ten years ago this variable was around 12%, last year it exceeded 15%.

A study by the Bank of Spain calculated that between 2019 and 2023, the Treasury would have collected an additional 11 billion euros for not deflating personal income tax. This is due to the so-called "cold progressivity" when neither the tax brackets nor the tax benefits of personal income tax are adapted to inflation. Since it is a progressive tax, as more money is earned, whether nominally (with inflation) or really (after deducting inflation), more income must be allocated to pay personal income tax. And according to an analysis by the foundation of the former savings banks (Funcas), focused on the period 2021-2024, the additional collection due to inflation was around 9.7 billion euros, although another study by Balladares and García-Miralles calculates that between 2019 and 2023, the extra collection was 16.7 billion euros (9.7 billion euros for not correcting tax benefits and 7 billion euros for not doing so with tax brackets). The Fiscal Authority (Airef), for its part, states that after the pandemic, in 2021 and 2022, the main factor for the growth of personal income tax was the rise in employment and, in 2023, 2024, and 2025, it would be salary and pension increases.

The study by Desiderio Romero Jordán, from the Rey Juan Carlos University, carried out for Funcas, states that the impact of not correcting inflation in personal income tax is "especially notable in middle incomes, which have borne an average extra burden of 458 euros between 2021 and 2024. And if specified further, this amount is 311 euros for low middle incomes; 458 for middle incomes; and 622 for high middle incomes. If the effect of VAT is also added, "the accumulated fiscal cost per household is on average around 1,100 euros," states the author.

The PP, which has persistently called on the Spanish government to adjust personal income tax to inflation, did so in communities it governed from the Russian invasion of Ukraine between 2022 and 2025. Specifically, they applied it in different ways to the regional tax bracket, the Community of Madrid, Andalusia, Aragon, and the Valencian Community, partially. Pedro Sánchez's executive, in addition to defending public revenue for social spending, also advocates for more selective measures targeted at low and middle incomes.

De la Torre assures: "We are paying more and more for inflation and for not adapting our main tax, IRPF, to an inflation that, moreover, has recently risen again. It has been the main tax increase and, of course, it is not the fairest." The Council for the Defense of the Taxpayer has proposed on more than one occasion the adaptation of the tax to inflation.