Lower taxes | Economy

“Lower taxes” has been the popular slogan of the right and, inexplicably, sometimes of the left, to gain supporters. However, the last major crises, the financial crisis of 2008 and the covid pandemic, have been faced by most governments with more public spending. Now the slogan has been assumed as the main strategy of the new opposition leader, Alberto Núñez Feijóo. More public resources require more public revenue that can be obtained through higher tax collection, more indebtedness or the sale of public property. More debt is inadvisable when it already exceeds 118% of GDP and selling the small shares of public companies that remain after the massive privatizations of yesteryear does not seem like a great solution either.

The alternative goes through greater tax collection that does not imply increasing taxes. It means that everyone “contributes to the maintenance of expenses according to their economic capacity”, as established by the Constitution. Talking about raising or lowering taxes is an oversimplification. In Spain there is a real fiscal gap because those who earn the most do not pay properly, which translates into more tax burden for many workers, self-employed and most entrepreneurs.

A sector far from the constitutional mandate in fiscal matters is that of banking. Last year was a fantastic year for financial institutions. Credit institutions achieved profits before taxes of 15,617 million euros, according to the Statistical Bulletin of the Bank of Spain (table 4.41). This is the fourth best result in its history. The year was also especially portentous for the banks because they only paid 993 million euros in corporate tax. That is, approximately 6.3% of your earnings.

Taxes are at the center of the political debate in democratic countries. Citizens know that better public services mean more tax revenue. You can’t seriously talk about one thing without the other.

Seeing only the drawbacks of taxes does not bring us closer to social reality. Andrew J. Oswald, Professor of Economics and Behavioral Sciences at the University of Warwick, has shown in Financial Times, the close correlation between countries that pay high taxes and happiness. The professor indicates that in the 2022 World Happiness Report (The 2022 World Happiness Report) are among the first positions Finland, Denmark, the Netherlands and Sweden, which are also the countries with a greater weight of taxes in relation to their economy, between 40% and 45% of GDP, according to the OECD. According to Oswald, taxes allow the provision of effective health services, social safety nets, environmental and financial regulation, and defense systems against aggressors, all exceptionally important for human beings.

In Spain, the weight of taxes rose to 36.6% in 2020, according to the OECD. To improve the welfare of all, the authorities should focus their efforts on ensuring that the wealthiest comply with the Constitution.