In a recent study carried out with Pau Jovell, from UPF ( Autonomous financing: assessment of the current system and calculation of a system based on fiscal capacity ), we wanted to quantify two aspects that surround a good part of the Madrid taxationOften debated but never sufficiently objectified. On the one hand, the inflation of tax bases linked to the capital of Madrid, both with respect to employment, especially civil servants, and due to its effect of locating tax bases for the sake of the capital. It is a question of seeing if under normal conditions, and in view of the GDP per capita and the sectoral structure, in the event that the GDP is translated into fiscal bases normal (those of the means of similar composition), what would be the expected tax collection in income tax. More public employment, more civil servants in the service sector, less possibility of avoiding taxes … we know it implies more ordinary collection; more business location due to its proximity to the central core of the State means higher tax revenues. All this being endogenous, the result of political decisions, none of them coming from free markets.
On the other hand, with these bases inflated, what would be the collection legislation If these bases were taxed at the normal average rate, of the State, both by average tranches and in view of their composition? In other words, if they applied the average State tax, what would the Madrid tax collection have to be?
These are the results. 1 / The excess of bases due to its effect, location of capital, Madrid-Espanya identification, can mean between 3,900 and 6,100 million euros, that is, between 603 and 924 additional euros per capita for the Madrid community, which is equivalent to one global collection of between 406 and 622 million euros. 2 / The regulatory taxation effect: if all the bases available to the community were taxed as the average of the rest of the autonomous regions, the income tax collection would be an additional 604 million euros (3,372 euros per capita instead of the current figure of 3,280 ). We only quantify personal income tax; To this should be added the tax on consumption (VAT and specials), which also have to reflect higher figures for those higher bases, as well as income from property transfers and the taxation of other corporate operations. We also emphasize against the fallacy that circulates: the bases are higher not so that the lower taxation attracts them, but that the taxation is low because it has inflated tax bases that allow it. It is not the chicken and the egg, it is the pig and the suckling pig.
It is bizarre for a ‘liberal’ government to see as its own merits what it achieves at the disadvantage of others
Likewise, it should not be said that from the spending needs of the community, the coincidence of province-community and greater Madrid means that the central administration covers a good part of the expenses that the autonomous community has to cover in the rest of the communities. On the contrary, to compensate for deficiencies, Catalonia has established 13 own taxes (only three in Madrid) for which it collects about 80 euros per capita (5 in Madrid), Madrid totally reduces the inheritance and donation tax, unlike Catalonia; In property transfer of property, which is the important part, the rate is between 10 and 11% in Catalonia and 6% in Madrid; and with regard to personal income tax, the maximum marginal rate is 25.5% in Catalonia (21% Madrid), and the minimum is 12% (9% in Madrid); Additionally, Madrid allows 13 deductions on the income tax quota, for only nine in Catalonia, with a clearly higher personal and family exemption limit in Madrid. That means an additional 46 euros paid per capita in Catalonia, and 92 in negative, condoned , in Madrid as personal income tax. As a whole, however, practically the larger bases that Madrid absorbs from the rest of the communities allow it not to lose total collection, despite the lower rates. IVIE calculates that for the set of taxes for which the communities have regulatory power, 2017 Madrid forgave 632 euros per capita / year, with clearly regressive income brackets, and equivalent to a loss in revenue of 4,111 million income, while Catalonia saw how its citizens contributed an additional 615 million euros, 81 euros per capita / year . Regarding the efficiency of all this spending, we do not have or expect any evaluation.
It is bizarre that a government liberal look as your own merits what is achieved with the disadvantage of others (who have to pressure their own, fiscally, not to lose footing). More or less, we could say the same of a Basque Country that is proud of its successes when its governments have 70% more funding than the rest of the communities ordinary . It would only be necessary that these figures did not give better results! And so the creature cries. The Valencian Government. And others reaffirm that this supposedly so decentralized state needs a reform of territorial financing if the autonomous communities do not want to be swallowed by the great hole of central Madrid.