The Spanish government unveiled a new tax plan aimed at large fortunes and adjustments to the IRPF to help middle and low earners. The reform increases the wealth tax allowance to 21,000 euros, a change that will benefit about half of taxpayers who currently pay on incomes up to roughly 18,000 euros. These steps form the core of the tax package the central government announced, just days after a political clash in Valencia signaled by regional leaders. Regional president Ximo Puig, now pushing a tax cut agenda in a PP-led coalition, signaled a shift in Valencia as he prepared to shape the tax debate before the Valencian Generalitat. The timing suggested a divergence between Madrid and Valencia as the debate unfolded, with Puig’s allies Compromís and Podem pressing for lower personal income tax thresholds for some earners. The central government, however, framed the package as a measured approach to public services and fair taxation, while acknowledging regional nuances. The exchange intensified during the second day of the general policy debate in the Valencian Parliament, as critics argued Puig’s plan would alter the balance between tax relief and service funding.
Until midweek, government representatives consistently voiced opposition to Puig’s approach. Nadia Calviño, the first vice president, along with the Minister for Economic Affairs and Digital Transformation and Maria Jesus Montero, underscored concerns about a potential race to the bottom in taxation. They emphasized the need for consistency with policies being implemented by autonomous communities and called for greater national resources. In response, the PP seized the moment to challenge the central administration, while Puig urged the government to follow a similar path in the regional context. The messages carried on into Thursday as Montero outlined tax reform fundamentals, warning against sweeping cuts that could erode public services. She argued for responsible use of fiscal authority, while noting that some powers would remain with the autonomous communities. The message was clear: the aim is to safeguard workers while maintaining essential services. The minister highlighted a net tax revenue impact of about 3.144 billion euros over two years and framed the reform as a step toward a fairer society.
As Montero defended the new measures, the Valencian Parliament’s debate grew heated. PSPV members argued that Puig’s reform aligns with national and international trends toward reducing hardship for lower-income groups, while insisting that revenue collection should not be compromised. Botànic partners contended that the proposal remained open and would require further negotiation within the Consell to sustain the welfare state. Compromís stressed that the reform should be developed in concert with Botànic and warned that the plan was not yet finalized. Opposition parties accused Puig of unveiling an incomplete proposal and criticized the timing and scope of the measures. The PSPV Economy spokesperson, José Muñoz, rejected the reform as incomplete and noted that the government’s approach prioritizes social protection while maintaining fiscal stability. He stressed that Europe’s stance emphasizes protecting lower earners while sustaining the Welfare State.
The discussion moved to the implications of Puig’s approach and the potential impact on regional finances. Muñoz noted that the proposed changes would benefit a broad portion of Valencians, while higher incomes would see limited changes. He argued that the fiscal plan should support citizens during the current crisis and warned of adverse effects if the proposal were to reduce revenue too much. Puig’s allies insisted the reform would be implemented gradually and that the policy would be designed to protect households most in need. They argued that Botànic has already enacted two progressive tax reforms that improved revenue while staying true to social goals, a track record they described as a foundation for future policy.
Another Ximo moment
In contrast, PP voices described Puig’s reform as an empty gesture, criticizing the timing and lack of concrete details. They argued that lowering taxes should not come at the expense of public services and accused Puig of presenting a plan without a solid plan for its implementation. The Cs party echoed concerns that the reform would deliver little real savings for families, characterizing it as a patch rather than a structural solution. Critics warned that any changes would not take effect until an announced future date, complicating immediate planning for households.
Public discussions highlighted the broader political context. Verde notes suggested by some observers that the reform reflects ongoing political maneuvering rather than a well-structured policy. Yet, supporters insist that the plan would translate into tangible savings for many Valencians, with a broader impact on private sector workers and self-employed individuals who could benefit from changes in deductions and tax bases. The debate underscored the tension between regional autonomy and national strategy, and the parties emphasized that any reform must protect essential services while distributing fiscal relief where it is most needed.
In broader terms, Valencian leaders stressed that tax policy should be evaluated by whom it helps most. Under review are measures that could affect a small share of high earners while delivering meaningful relief to a large portion of the population. Supporters argued that the reform would be measured and targeted, limiting revenue loss while expanding relief for middle and low earners. Opponents warned of revenue gaps and potential strain on social programs, urging a careful balance that preserves the welfare framework while providing relief to families.
Officials also pointed out that the final version would be shaped in Consell discussions, with a focus on ensuring that lower-income households see real benefits. The plan is expected to consider regional inequality and aim for more progressive taxation that strengthens public services and the social safety net. Proponents argue that Botànic’s approach already demonstrates a commitment to fairness, progressivity, and fiscal responsibility, while opponents cast doubt on the immediacy and sufficiency of these promises. The debate remains open as stakeholders prepare for the next steps, with families watching closely to see how the reform might affect their tax bills and social programs in the years ahead.
Tax package overview and projected effects
Specifically, during a briefing, Montero outlined the 2023 to 2024 rollout of the new tax, structured in three brackets: for net worth between 3 and 5 million, the rate is 1.7 percent; between 5 and 10 million, 2.1 percent; and above 10 million, 3.5 percent. The plan targets approximately 23,000 taxpayers, a small minority, and the government anticipates around 1.5 billion euros in additional revenue. The wealth tax will avoid double taxation by allowing a deduction for the wealth tax paid against the new levy.
Concurrently, the capital income tax rate in personal income tax will rise by one percentage point to 27 percent for earnings over 200,000 euros, and capital gains over 300,000 euros will see a two-point increase to 28 percent. This change is expected to raise roughly 204 million euros and affect around 17,800 taxpayers. On the other hand, the personal income tax package includes measures that direct relief to middle and low-income families, increasing the existing benefit for incomes up to 18,000 euros to 21,000 euros. This adjustment is projected to save roughly 1.881 billion euros and benefit half of all taxpayers. Additionally, work income above 15,000 euros will be exempt from personal income tax. Self-employed workers will see an increased net allowance of 5 percent, and the deduction for hard-to-justify expenses will rise from 5 percent to 7 percent for those under simplified direct estimation. This part of the reform is expected to benefit more than 577,000 self-employed individuals and save about 184 million euros.
The package also includes changes to Corporate Tax. The nominal rate would drop from 25 percent to 23 percent for small companies with annual revenues under 1 million euros. The economic impact of this reduction is estimated at 292 million euros, with more than 400,000 companies set to benefit. The reform would limit the ability to offset losses in consolidated groups to 50 percent, affecting around 3,609 large companies and acting as a temporary measure. Treasury estimates suggest this move could bring in about 2.439 billion euros between 2023 and 2024. The VAT rate on feminine hygiene products would be reduced from 10 percent to 4 percent. With all these measures, the government aims to secure an additional 3.144 billion euros in revenue.