On Sunday, November 10, voters are called to the polls to express their political preferences. If we previously analyzed the economic proposals of national parties that are located on the left axis, today, we have to analyze the ideological axis of the right.
The economy becomes more important in the current context of deceleration. The advanced data of the INE, show us that, in year-on-year terms, GDP growth is 2%, similar to the second quarter of 2019, relatively low levels that have not been seen since 2014.
We also see it in the data linked to employment. The Third Quarter Active Population Survey (EPA) reflects the creation of 69,400 jobs, the worst figure since 2013, and unemployment is only reduced by 16,200 people.
With these economic “clouds” that we are seeing, we analyze what economic proposals are offered by the Popular Party, Citizens, and Vox. Are there notable differences?
One of the flags of the ideological axis of rights is the lowering of taxes. To a greater or lesser extent, Popular Party, Citizens, and Vox propose lower taxation to the taxpayer. So let’s see what proposals fall on the main taxes.
The Popular Party proposes lowering taxes in its program. But the question that many voters ask is whether it is real or as in 2012, that in the midst of economic difficulties, it was doubted between raising the personal income tax and VAT, ending up both.
Be that as it may, for the next legislature, they affect the approval of a tax reduction of the IRPF that will affect all taxpayers, and the maximum rate will be below 40 %, cico percentage points less than the current IRPF. Also, create a Tax Shield of retirement savings that extends the tax benefits of pension plans to regular housing and savings plans.
On the Corporate Tax, they want the maximum rate to fall 5 points to 20% and expand international agreements to avoid international double taxation.
From Citizens, they also affirm that they want to continue lowering the personal income tax in the following legislature, and, also, do not speak of any section except the maximum that would place it at 44 %, a percentage point below the upper marginal.
But the most striking point in Citizens is the one that refers to the effective type of Corporation Tax. They say the following:
“We will reduce the Corporate Tax to SMEs that reinvest their profits to stimulate their growth, and that can cope with the next slowdown. We will make the Corporate Tax more fair and efficient so that SMEs do not pay effective rates higher than those of large companies and approximate the collection to the average of the eurozone.”
At this point, the classic cash-type trap appears, comparing results before global taxes against the amount of Corporation Tax paid in Spain. Hence, large internationalized companies pay 7%, since it does not take into account the taxes of companies that are paid where their subsidiaries are active.
If you say “that SMEs do not pay effective rates higher than those of large companies,” covertly, there is a rise in the effective type of companies for large companies.
The most revolutionary scheme in fiscal matters is presented by Vox. For the IRPF, the bet is the reduction of the sections of the IRPF to two: up to 60,000 euros with an applicable rate of 22% and from that taxable base, 30%, which implies a decrease of 15 percentage points starting from the Current levels.
For the Corporation Tax, the objective would be a general rate of 22% – levels above the offer of the Popular Party – and add that depending on the budgetary capacity of future years, a general rate of 12.5% will be sought.
And the VAT? It seems that the general rate of 21% on the consumption tax has come to stay. In the Popular Party, nothing is offered. From Citizens, it is proposed that the self-employed and SMEs will never have to advance VAT for invoices that they have not collected. And Vox points out that its objective would be some kind of reclassification as in certain pharmaceutical products and even the elimination of the acquisition of the first home.
And public spending?
Any tax cut must be covered with a cut of the same proportion if the objective is a scenario of budgetary stability that does not prevent, in the long term, refinance debt maturities in a State whose volume weighs 100% of the economy.
This is probably the Achilles heel of the ideological axis of rights since the cuts are tremendously unpopular to express openly.
The last Popular Party Government maintained nefarious management of budgetary stability, making it the country with the highest EU deficit. Against the German model, in Spain, the accounts were not squared at the same time as the term “bactericide” became popular.
The Popular Party seeks to “strengthen the viability of the Welfare State.” This concept may have different interpretations. For example, preservation can be to adjust the budget via CPI, as a specific weight on the global economy – currently, public spending weighs 41.3% of GDP – or simply that the nominal changes are different from the advance of income.
Citizens may be the party within that axis most favorable to public spending and, therefore, the least ambitious in tax cuts.
Among other measures, they propose different measures related to spending such that families with three or more children and single parents with two or more children will have the benefits of large families of special category and will receive 2,400 euros per year. Also a place of Infantile Education of 0 to 3 years free for all the children of Spain.
From Vox, they say, “it’s not about spending more but spending better.” Its offer is based on a reduction in public expenditure of 24,236 million euros. Two thirds would be to reduce the state layer of the State, and the rest would be derived from the autonomous and municipal authorities. If this measure were carried out, we would go to a state weight equivalent to 36% of GDP, levels below the US or English public sector.
Centralized vs. Decentralized Model
One of the great debates that extend beyond the ideological axis is the centralization or decentralization axis. Which administration should take charge of a particular central or regional competence?
From the left axis parties, “federalism” is claimed, and in turn that certain taxes such as inheritance and donations be centralized to avoid fiscal competition between the autonomies that make up the State.
The same happens to the parties of the national right ideological axis, in which there is a dispute over whether the role of autonomy is positive and must be preserved or rather negative and must be overthrown.
On the one hand, we would have the Popular Party and Citizens who, despite the fact that the conflict in Catalonia leads them to speeches of centralization -application of the National Security Law or article 155 of the Constitution-, are parties open to the characteristic decentralization of Spain. That is, the intermediate administration has a significant weight in the management of public revenues and public spending over the total.
On the opposite side, we have Vox. Its commitment is the elimination of the State of autonomy based on two arguments: cost savings, which once the centralized low taxes would benefit the whole citizens.
Recently, we have seen how Brussels has been alerted to the restrictive and fragmented nature of regulation in Spain that puts companies in trouble to take advantage of economies of scale. This means that in certain activities to operate in another autonomy, another license is necessary.
Both Popular Party, Citizens, and Vox, in greater or lesser intensity, defend the concept of Market Unity. It is about that from the central administration. The legislation is opened that establishes harmonizing norms in all the territory. This harmonization involves the centralization of certain regulatory powers, even if it is ultimately for elimination.