One in five Spaniards lives with the equivalent of 400 euros in the account

Almost 10 million citizens in Spain live with assets of less than 400 euros.

Thomas Osborne
Thomas Osborne
28 October 2022 Friday 03:40
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One in five Spaniards lives with the equivalent of 400 euros in the account

Almost 10 million citizens in Spain live with assets of less than 400 euros. A scarce economic pillow for a country where the average monthly rent amounts to more than 650 euros. The comparison between the two figures speaks for itself: that 20% of Spaniards live with the equivalent of less than 400 euros in their current account means that a very important part of the population is at risk of not being able to pay the rent compared to any mishap.

The reality of this poorest 20% is far from the average wealth per person, which is around 73,000 euros. And it contrasts even more with the circumstances of the richest 1% of the population, who accumulate possessions of more than 1.5 million and as a whole gather a quarter of the wealth of all Spanish households.

Thus, having more than 73,000 euros means belonging to the richest half of society and having less means being among the poorest half. This threshold takes into account both real estate and financial assets—bonds, pension funds, and other investments—to which potential debts are deducted.

The distribution of wealth fluctuates little over time and is a much more stable indicator than family income, which goes up and down in periods of economic recession or boom. In Spain, the distribution is unequal and has remained practically unchanged since 2014, when the second wave of the crisis hit households.

Since then, the poorest 50% of the population does not accumulate even 7% of the wealth, while the richest 10% captures half of the assets of all households, according to information from the World Inequality Database (WID). This set of data is the basis of the World Inequality Report, the most comprehensive annual report on inequality produced by a group of international researchers whose most visible face is the French economist Thomas Piketty.

In a context of economic instability, knowing the distribution of wealth and income makes it possible to design recovery policies that cushion the blow to the most vulnerable groups. The issue dominated the media agenda at the beginning of October when the coalition government presented a package of temporary fiscal measures as a proposal to deal with the energy crisis, including a rise in taxes for large estates.

The tax will be charged on fortunes of more than three million and, in exchange, with the intention of entering 3,000 million euros in the two years for which its validity has been established. In parallel, the Government has also articulated measures to reduce the tax burden on taxpayers with less income.

In Spain, this would imply that the new tax would fall on less than 0.4% of the population, which is the proportion of the population that has more than three million assets. Only 0.01% of Spaniards have wealth of more than five million.

The tax also seeks to counteract the tax competition between autonomies led by the Community of Madrid, where no wealth tax is paid, a strategy to which Andalusia has joined, causing a trickle of tax announcements by the regional governments on the way to the elections next May. The initiative of the Ministry of Finance would mean that a taxpayer who has three million would pay the same whether he resided in Madrid, Seville or in Barcelona.

The levels of inequality that Spain presents are similar to the rest of the European continent, which is the one with the best equity indices. The gap is larger in Spain than in France or Italy but smaller than in Germany or Portugal. And still much less when compared to the United States, where the richest 1% concentrates more than 34% of the private wealth of the entire country.

On the planet as a whole, inequalities are exacerbated: the richest 10% control between 60 and 80% of world capital. In their latest report published last December 2021, the authors pointed out that income on capital plays a key role in perpetuating inequalities that can only be addressed in a system that is capable of redistributing wealth through taxes and transfers. .