Taxation has not only become the star element in electoral debates on economic issues, but also transcends becoming the central axis of the regional campaign. The right-wing formations, with PP at the helm, are announcing a general tax cut in the Community of Valencia, against a left that puts this issue on the sidelines. and a greater focus on energy self-sufficiency and a commitment to foster a change in the production model based on new technologies. But what benefits and disadvantages can these tax cuts bring? Experts disagree: Some believe it could provide an incentive to stimulate economic activity, while others believe it could lead to disruptions in services. and a new cause that exacerbates the serious debt problem.
The regional election campaign reveals more than possible the differences that separate the right and left formations in the economic field. In an inflation context like the current one, the promise of tax cuts is the flag that the predecessors have hoisted to the point of turning it into their main electoral trump card.. Logically, it begins with the PP, which carried out a full-fledged tax revolution, starting with personal income tax in its program. Particularly popular are proposing a change in this tax scale to benefit all incomes, especially low income earners, confirming that it would have the second lowest rate in Spain at 8.75%. They also announce bonuses for people over 65, self-employed, extended families or people with disabilities, among other groups. Likewise, they undertake to abolish the Inheritance and Donation Tax up to the legal limit of 99% and to reduce the current rate of Real Estate Transfer Tax by 10% depending on the purchase price of the properties.
Ciudadanos follows the same path by proposing marriage savings of up to €1,500 for families in the regional income bracket, plus an inheritance tax bonus and a two-year tax exemption for self-employed people who do not reach the inter-professional minimum wage in the first two years of operation. Vox also operates on similar parameters, promising “hard” discounts on the same taxes, in addition to that of Property Transfers.
on his behalf Left formations integrated into the Botànic Government do not include financial changes in their respective programsand in their own leaders’ statements they did not go beyond suggesting specific adjustments to implement progress and help the most needy groups. For this reason, The election promises are mostly in the area of transformation of the Valencia Community economy. and in actions to promote employment.
When it comes to PSPV, his bet, which is in line with the gigafactory launching in Sagunto, is, Strengthening new business initiatives on energy storage to advance the positioning of the Community as a reference pole in Europewith. It also includes initiatives to strengthen the digitization of SMEs through the application of Big Data, artificial intelligence or remote work, or the launch of a chip manufacturing project in collaboration with industries and universities.
Compromís, for its part, advocates Transforming Valencia Institute of Finance (IVF) into a public bank helping the self-employed, SMEs and social organizationsit also promises an investment of 800 million euros to strengthen the reindustrialization of Alicante regions, influencing innovation and paying special attention to sectors such as toys, textiles or footwear.
Unides Podem also proposes a commitment to change the production model in which it proclaims the ecological return of the economy through a productive activity planning based on environmental criteria. It also recommends a law against the relocation of publicly funded companies, and soft loans promoting cooperatives and a new regulation on Vocational Education to meet the needs of the productive fabric of the Community and various actions to promote youth employment.
less money
Putting the cards on the table means finding out what the experts think, especially on the tax proposals that are at the forefront of the debate. Carmen Herrero, Emeritus Professor of Economic Theory at the University of Alicante (UA), member of the Valencian Institute for Economic Research (IVIE) and winner of the Jaume I Prize in Economics, points straight to this: «lowering taxes means lower tax collection, which means less money for utilities». For the academic, when talking about promoting mobility through tax cuts, it is meant to mobilize consumption. “This can be done on the grounds that families get more income through linear taxes, such as reductions in VAT on certain products or reductions in personal income tax.” But he emphasizes that this only applies to high-income families, but not to low-income families. «Public services such as health, education or addiction represent a very important part of the indirect income of families. If the state does not give it, it has to buy it from the market. And the possible tax cuts are not enough to get these assets from the low-income,” he says. In this sense, the blacksmith more redistribution commitments, i.e. lower taxes for low income earners and higher taxes for high income earnersmaintain or increase the size of the welfare state.
Paloma Taltavull, professor of Applied Economic Analysis at the UA, is similarly expressive, noting that the tax cut “means less funds for public spending and more borrowing.” From here, we should ask ourselves who will pay for health or educationand therefore common sense must be invoked, for in the end the welfare state must be maintained ». Taltavull also pointed out that the European Union loosened the budget deficit restrictions during the pandemic period and emphasized, “But now it is returning to fiscal consistency, so this is an element that should be taken into account when considering fiscal policies.” .
Ignacio Jiménez Raneda, emeritus professor of Fundamentals of Economic Analysis and former president of the UA, points out that tax cuts “always have been a closely linked option with the right, but posed challenges to the provision of services.” This practice, he emphasizes, is based on the Laffer curve theory, where more is collected with less tax due to increased activity. However, Jiménez Raneda does not share this thesis, “because it only happens if the reduction is 200%, but we are talking about very low rates after all.”
“After all, he says, there are two different policies. On the right, on the left, who pledge to have more money in their pockets or advocate for public services, so that citizens can meet their own needs.. Accordingly, it is the citizen who has to make a choice.
Nor is it clear on the tax cut of Alfredo Masó, professor of Fundamentals of Economic Analysis at UA. In his own words, “stimulating consumption at certain times and stimulating investment with the theory of greater mobility is possible, but its effect is questionable because it reduces the revenue of the public coffers and increases debt”. And he adds that in a context where the Valencian Community is one of the most indebted communities, and moreover, the funding is at the bottom. «What is needed now is to demand that this region be better financed, and this does not quite match the fact that taxes are also lowered.‘ he concludes.
sunken economy
But Elche José María Gómez Gras, professor of Business Organization at Miguel Hernández University (UMH), offers nuances. According to him, the theories defended by both the right and the left are controversial. In any case, he thinks that relaxation of taxation “can support activity. In a time like now, marked by rising costs of all kinds, our taxes cannot be high.». He adds that another positive element of tax cuts can be passed through by reducing the sunken economy and eventually enabling consumption, which “has a positive impact on activity at all levels.”
Álvaro Antón, professor of Finance and Tax Law at CEU Cardenal Herrera University, advocates solving the problem of lack of funding, arguing that it is “responsible for increased tax pressure”. Also thinks about: Fiscal policy must be harmonized in different communities to correct inequality.S.
On the other hand, all experts support the proposal of left groups, who are facing challenges such as digitalization, artificial intelligence, climate change and energy crisis, to promote new technologies. While they warn of some risks, Carmen Herrero in particular emphasizes that education should be encouraged on the basis that only 20% of companies train their employees in digital skills. Ignacio Jiménez Raneda points out: This necessary commitment can reduce the volume of employment at certain timesalthough it can be compensated by new activities connected with the technological field.