The income tax deflation (IRPF) that the Community of Madrid will implement from next year means an annual saving to the full amount of 19 euros for the lowest earners and 110 euros for the highest earners. On average, each taxpayer no longer pays 46 euros in taxes. To all these amounts must be added the corresponding deductions for children, dependents in the ascending line or disability, which are also increased due to inflation.
The region governed by Isabel Díaz Ayuso announced two weeks ago that the deflation originally planned for 2023 would be brought forward to 2022 in order to relieve taxpayers as quickly as possible in view of the general price increases. As indicated in the draft law available to this newspaper, income tax rates will be reduced by 4.1%, “which is a percentage equal to the average percentage of salary increase according to the second quarter 2022 cost statistics of the National Institute of Statistics”.
The aim is that the wage increases achieved to alleviate inflationary pressures do not lead to higher taxes, either through an increase in the tax base or through a jump in the tax scale, which in turn implies a higher average effective rate. It is the well-known increase in cold taxation because it does not require tax reform and is natural.
The tax rate of 4.1%, the text continues, “will be applied to all sections, and in addition the personal and family minimums will be reduced in such a way that the tax-exempt section that every citizen has updated will also not be affected by these wage increases . The taxable minimum is specifically 5,777 euros.
In short, the update promoted by Madrid will change the regional scale as a whole and the vast majority of deductions. Only families with many children are left out, as the minimum for a third descendant (4,400 euros) and for a fourth and further descendants (4,950 euros) is already the statutory maximum.
With these changes, an average single taxpayer in the Community of Madrid with no dependent ancestors and no children with an annual salary of around €28,830 in 2020 will go from a full quota of €2,572 to another of €2,526, according to INE data. The savings achieved amount to 46 euros, a similar figure to the benefit received by Madrid residents earning the middle or more usual salary (fixed at 23,230 euros, also according to statistics).
For his part, a taxpayer with the same characteristics and in the lowest income percentile (€11,402) goes from a quota of €497 to another of €478, almost €20 less; while the one located in the richest areas (almost 53,500 euros according to INE) does not pay 110 euros more.
It is important to remember, however, that when these gross numbers are compared with each full installment, the savings for the lowest earners are 4%, while for the most opulent, it is 1.7%.
According to the Autonomous Community of Madrid in the draft law, deflation will “prevent families from suffering a greater tax burden and help taxpayers withstand a price hike” in a year that major forecasts indicate will end with annual CPI brought forward. will be around 8%.