June 23, 2016 Print

Spain found itself unable to bail out its financial sector in the years following the 2008 world financial crisis, ultimately borrowing more than €40 billion from the European Stability Mechanism. Spain’s government has increased taxes since then in an attempt to boost revenue, but the larger tax burden is taking an increasing toll on the national economy. A recent report by Madrid-based Atlas Network partner Civismo details the extent of taxation in Spain through the lens of Tax Freedom Day (“Día de la Liberación Fiscal”).

Civismo calculates Tax Freedom Day each year as the date when average Spanish taxpayers have earned enough to pay their taxes for the year, and instead begin earning money for themselves. If one’s Tax Freedom Day fell on May 1, for instance, all income earned from January through April would more or less equal that year’s tax burden. To determine the country’s average Tax Freedom Day, Civismo measures how citizens pay in taxes annually, aggregates and averages those figures, then calculates how long it would take for someone to earn that much money. This can serve as a barometer to determine how much of a financial burden the government is placing on its citizens through its tax policies.

Civismo’s report finds that “by groups of age, Tax Freedom Day ranges from June 1 to July 5” (translated from Spanish). The earliest Tax Freedom Day is for citizens in the 16 to 24 age range, while the latest belongs to the 55 and older age range. The average Tax Freedom Day falls on June 29, after a full 180 days of salary — about half of a year’s employment devoted entirely to paying taxes. Such a tremendous drain on resources is not sustainable, Civismo argues.

The report’s English summary points out that “the total tax contribution of the average taxpayer will amount to a whooping sum of 585,226 euros, which equals the entirety of earnings of 27 years of his or her life.” An individual entering the job market at age 16 would therefore have a “Tax Freedom Age” of 43 years old. According to Civismo, “the current public debt ratio exceeds 100% of GDP, which translates into more than 60,000 euros per worker.” This is far too large a burden on citizens.

“It is very important that people be aware of the portion of their income that they deliver to the state, because those taxes go far beyond the number shown on your tax return income every June,” said Francisco Cabrillo, Civismo vice president, in the report (translated from Spanish). “Tax Freedom Day is useful because, among other things, it allows the taxpayer to really understand how long they have to work for state before they can use a single euro on their personal expenditures or on their families.”