The PP extends its tax reductions in full debate on regional financing

When Juanma Moreno was in opposition, he launched a very aggressive campaign against the inheritance and gift tax. The popular mantra consisted of accusing the (then) all-powerful PSOE of having turned Andalusia into a “fiscal hell”. Signature collection booths lined the street with a stop sign, and related media reported on families ruined by having to pay too much for a remote inheritance.. With that effort, it makes sense that the first decision he made upon arriving in San Telmo was to approve the 99% bonus of the controversial tribute..

This is how it appeared in the agreement it reached with Ciudadanos, and since then the PP has deployed this same policy wherever it governs. The regional map was stained almost entirely blue in the elections on May 28, which has led to these tax cuts spreading over almost the entire map. The popular ones have already launched the necessary reforms to subsidize the tax in the Balearic Islands and in the Valencian Community. And the recently signed agreement in Aragon – with the striking absence of Jorge Azcón – between PP and Vox includes that 99% discount between parents, children, grandparents and spouses. And the promise to advance further reductions for other degrees of kinship, such as cousins or uncles and nephews.

It is not the only tax reduction promoted by popular governments in recent years. And they all have in common that they are an imitation of the fiscal policy that the PP began to implement decades ago in its laboratory in the Community of Madrid.. After successions and donations, it was the turn of patrimony, also subsidized in the capital. Juanma Moreno did not want to be less and, in the early stages of his second term, also discounted this tribute to great fortunes to 99%. The objective was none other than to compete with Madrid. But deep down there is a conviction: reducing taxes on capital generates more economic activity and, therefore, greater collection via personal income tax.. The Laffer curve, which has one of its main apostles in Juan Bravo. It is not uncommon for Alberto Núñez Feijóo to sign the former Andalusian Minister of Finance, who applied these tax cuts, as Genoa's economic manager when he became president of the PP.

Carlos Mazón and Marga Prohens are the outstanding students of Moreno. The first two barons to reach an agreement with Vox to form a government. The Balearic Islands announced it on July 19, 13 days after being elected president of the island Executive. And its reduction affects parents and children, according to the decree by which it was approved and which also included a reduction in property transfers. Crossing the Mediterranean, Mazón made a similar announcement just two days later, at the first meeting of the Council shared by PP and Vox in the Valencian Community.. In this case, there was already a 50% bonus, but it will grow to 99% once the norm is approved in the Cortes. It is true that, in the Valencian case, the application is retroactive despite the fact that it will be processed as a reform of the current tax law and not a decree.

Gonzalo Capellán from La Rioja did the same in the same investiture plenary session, still in the month of June. And María Guardiola will not have to do it because the PSOE of Guillermo Fernández Vara already applied reductions to this tribute in 2020. He is not the only socialist baron who applied measures in this regard. It must be remembered that Andalusia, before the arrival of the PP, extended the minimum tax exemption for inheritances thanks to an agreement between the Socialists and Ciudadanos. The head of the Treasury in the Government of Susana Díaz who approved this measure was none other than the current minister of the branch, María Jesús Montero.

The last to get on this bandwagon is the aforementioned Jorge Azcón, who has left Fernando López Miras as the only popular baron without having achieved the investiture in the absence of an agreement with Vox. But the Murcian president had among his plans to extend the bonuses to uncles and nephews to 99%, something that, according to what he said on ABC, does not happen anywhere else in Spain.. It will have to wait, although the countdown to the repetition of the elections continues inexorably.

How much does the ISD contribute?

According to data from the Ministry of Finance and Public Function, the autonomous communities collected 3,240 million euros in 2021 from inheritance and donation tax settlements. Catalonia, with 864 million, is the territory with the highest income, followed by Madrid, with 681. The community chaired by Isabel Díaz Ayuso has a 99% tax subsidy, but takes advantage of the capital effect to enter an amount that is relevant compared to the rest. Further behind are Valencia (334 million), Andalusia (257) and Castilla y León (244).. In the set of tax revenues of the autonomous communities in 2021, this tax accounted for 4% of the total.

The Andalusian case serves as an example of the drop in collection of this tax since the first reductions, approved in 2016. In that year, income in the most populous community in the country was 340.8 million. In 2018, the last year before the arrival of Juanma Moreno in San Telmo, the collection was 299 million euros. Throughout this period, the fall in percentage terms has been 24%. During the first years, the decision responded to the PSOE's need to win the votes of Ciudadanos in order to govern Andalusia after this tax was considered, in a certain way, unfair.. Under the governments of PP and Cs, as is the case now in the rest of the country, the reductions are based on the conviction that the lower tax pressure is beneficial for public coffers.

But it is still striking that these measures coincide with the return to the board of the reform of regional financing. Carlos Mazón is a good example, despite the fact that, when he announced the tax cut, he assured that there would be no reduction in the provision of services because there was enough “fat” to cut spending. It must be taken into account that the idea of reforming regional financing that María Jesús Montero has is related to the harmonization of this type of tax (inheritance and heritage) to avoid competition between communities. This was established in the document that the Minister of Finance directed when she was an Andalusian councilor as a proposal to renew regional financing.