The lack of deflation of the income tax since 2018 has raised the effective rate from 11.6% to 15% for an average employee, according to an analysis. A typical family pays €2,141 more per year and loses 4.4% of disposable income.
The income tax scale has remained unchanged since 2015. The brackets and the personal minimum are still in nominal euros, without being updated for inflation. This practice, known as “cold progression”, increases the tax burden even though the taxpayer does not earn more in real terms. According to the analysis published by euribor.com.es, the Government expects to collect over €2.2 billion annually until 2028 due to this effect.
The impact is measured on a typical family: two earners with two children. In 2018, each adult earned an average gross salary of €24,009 per year. If their salary has risen in line with prices, a 27.3% increase since then, they now earn €30,561. In real terms, they have not gained anything, but their tax bill has skyrocketed.
The income tax for each adult rises from €2,772 in 2018 to €4,599 in 2026, a 66% increase, while salaries only rise by 27%. The average effective rate jumps from 11.6% to 15%. If the rate had been updated with the CPI, each person would pay around €3,528. The extra cost is €1,071 per adult and €2,141 per household each year.
In purchasing power, the net amount from 2018 would today be equivalent to €25,092, but the family earns €23,975 per head. The real loss is €1,116 per adult and about €2,230 per year per household, a 4.4% decrease in disposable income. The accumulated bill over eight years is around €7,000-8,000.
The Bank of Spain calculated that indexing the income tax to the CPI between 2019 and 2023 would have reduced revenue by €11 billion. A study by Balladares and García-Miralles estimates the extra amount at €16.7 billion. Funcas, in a study by Desiderio Romero, concludes that average incomes bear an additional burden of €458 between 2021 and 2024.
“A salary of €14,000 that did not pay tax in 2018 would now need more than €17,600 to maintain the same purchasing power, and at that level, it would already pay around €745 in income tax.”
The accumulated inflation since June 2018 is 27.3%, according to the INE. The preliminary CPI for September 2026 points to an annual rate of 4.9%. Without changes to the scale, the effect of cold progression will continue to increase the tax burden on employees.
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