Ayuso warns that the PP's tax reduction policy in Madrid is running out: “Our margins are becoming more complicated”

The president of the Community of Madrid, Isabel Díaz Ayuso.Borja Sánchez Trillo (EFE)

The president of the Community of Madrid, Isabel Díaz Ayuso, recognized this Tuesday that the tax reduction policy of the successive PP governments is gradually being exhausted.

“Our margins are getting more complicated,” said the conservative leader, who still plans to reduce personal income tax by half a point in all sections during the current legislature;

attract foreign assets with bonuses;

and redistribute the 500 million in revenue obtained from the Wealth Tax that the regional Government has assumed after a ruling by the Constitutional Court that endorsed the legality of this tax designed by the State for fortunes of more than 3 million euros.

Since 2004, conservative governments have refused to pay more than 65 billion euros via tax reduction, although their spokespersons defend that this is not equivalent to a loss of revenue, but to fiscal savings, since the revitalization of the economy has resulted in greater income for public coffers.

"To what extent is it possible to continue reducing taxes?" Díaz Ayuso was asked at an informative breakfast organized by the Association for the Progress of Management (APD) under the title

―It is true that we have been reducing taxes consecutively for many years, and that therefore our margins are becoming more complicated, Díaz Ayuso answered.

This year we are still going to benefit from the deflation of personal income tax, we will do so every time inflation is greater than 2%.

Throughout the legislature we have to reduce personal income tax by half a point, and we have a flood of tax deductions that will be mainly focused on the purchase of a home, conciliation, living together with the elderly at home, for studies ...we are still going to have a margin in that sense.

The PP defends that its successive tax cuts have meant an average saving of 18,000 euros per taxpayer, 7,000 of which are due to decisions made by Díaz Ayuso.

However, the effect of these measures is not linear, nor comparable between citizens, since it depends on the assets and salaries of each one and generally benefits those who have the most the most.

This is the case, for example, of the first major tax reduction of the Ayuso governments, applied to personal income tax, valued at 300 million euros and which made Madrid the region with the lowest minimum income tax bracket in all of Spain. (8.5%), and in relative terms, savings were concentrated in the lowest incomes (5.6%, compared to 2.8% for the highest).

However, in absolute terms the opposite has happened.

Thus, in the lowest bracket, taxpayers of up to 12,450 euros are left with 4.42 euros more in their account than before, according to the calculations of the Treasury Department... but, in comparison, taxpayers from 53,407.21 euros onwards save from 507.76 euros and up.

Due to the progressive nature of personal income tax, the same has happened with its deflation, carried out to combat inflation.

In this way, it represents 44 euros of savings for low incomes and 189 for high incomes.

That Madrid has so far subsidized the wealth tax at 100% and inheritance and donation taxes at 99% has aroused criticism from other regions, mainly those governed by the PSOE, which accuse the Community of unfair competition and

, since Its tax offer attracts large fortunes to the capital.

Everything is based on the controversial Laffer curve, which was born on a napkin and theorizes that a lower tax burden translates into higher revenue.

A proposal so controversial that the Díaz Ayuso Executive spent 20,000 euros on a study by the Rey Juan Carlos University (URJC) aimed at validating the thesis, since it started from the premise that a “moderate taxation” like that promoted by the PP explains that the region is the economic locomotive of Spain.

However, this strategy, which has included eliminating all the region's own taxes, cannot be maintained forever.

This is what the regional president announced this Tuesday.

The margins are narrowing, and after two decades of tax cuts, the end of that policy seems to be approaching, at least in its most powerful magnitudes.

Subscribe here