The Working Middle Class Already Loses 20% Of Its Net Income

I have looked in detail at the Budgets in search of aid to the middle and working classes that the President of the Government preaches and I have not found any. On the contrary, it is very damaged.

The Treasury plans to enter 113,123 million for personal income tax next year, of which 60% comes from these middle classes. The figure represents an increase of more than 8,000 million compared to this year ( +7.7% ). The improvement is not due to job creation (the unemployment rate will hardly be reduced by half a point, in the most optimistic forecasts), but to inflation and the increase in social contributions to pay pensions. In other words, the increase in collection will come mainly from the revaluation of the wages of these workers.

The problem is that inflation is a crusher of middle and low incomes . Those with the lowest incomes are the most affected, because they allocate a higher percentage of their income to the consumption of food and basic necessities. The average loss of purchasing power estimated for this exercise is around 12% on average.

The working class, whom the Government wants to protect, will be doubly harmed because, to the loss of purchasing power, we must add that they will pay more taxes, because the Treasury refuses to update the IRPF rates.

In 2022 and 2023, the middle classes will contribute 12% more to public coffers for this reason. There is no tax relief anywhere. Between one thing and another, inflation and taxes will take away more than 20% of the disposable income of the working class, an outrage.

Sánchez says one thing and then does another. The beneficiaries of his policy are not the middle class, but large groups such as pensioners, civil servants, recipients of basic income or users of public transport. The Treasury includes the items destined for these groups within the social spending chapter, which grows at double digits, 10.5% (to exceed 266,000 million).

According to the document distributed by the Treasury, there are 17.7 million people , not including mothers with children under three years of age, who will benefit from some type of gift or official aid from the Government , which is equivalent to 46% of the census electoral. One in two voters will be favored on the eve of a year in which regional and local elections will be held and, finally, general elections.

And the electoral raffle is not yet closed, because the delivery of the checks for the purchase of parliamentary support from the coalition partners, such as ERC, Bildu or the PNV, is still pending.

The State, instead of helping to contain consumer prices, will thus become one of its promoters thanks to its expansionary policy. In times of crisis like the one that is coming, the role of the Government should be to lend a hand like any citizen and cut current spending. This time the opposite is done. The spending ceiling reaches the third consecutive absolute record, with an increase of 1.9% (173,065 million), without counting the Next Generation funds .

The Treasury puts at risk with this policy the income pact defended by the first vice president, Nadia Calviño, by agreeing to a 9.5% increase for civil servants for the next three years, well above the 2.5% annual rate recommended for the rest of the active population. Although the increase that most blushes is that of retirees (8.5%), because it is not an occasional rise, but rather it remains in the structure of the cost of pensions for life. Other countries such as Portugal approved extraordinary payments to deal with this extraordinary situation.

All this spending exuberance would not be worrying if we had healthy accounts and a stable economic situation. Treasury presumes that the public deficit will be reduced by 3.9% in 2023 and 3% in 2024. It is already known that the paper holds everything, but once again the accounts are not clear.

The total of the financial income of the State will increase 6% next year , up to 307,446 million. The items that grew the most were Personal Income Tax and Companies, with increases of 7.7%. In the case of Income Tax, the Government has had to pull an increase in social contributions, without even consulting the social agents, to balance the accounts.

The maximum contributions will rise by more than half a point (8.6%) to pay for pensions. In this way, labor costs become more expensive at a time when companies already suffer high costs due to inflation or energy. I do not believe that the unemployment rate is going to drop six tenths (from 12.8% to 12.2%) as Montero predicts, the logical thing is that it will increase.

Montero assures that the accounts are conservative, because in tax revenues he has not accounted for the 3,500 million for the extraordinary taxes on banks and energy companies, nor the 1,500 million for the solidarity tax of the rich.

Some 5,000 million are saved , which together with the extra tax income of almost 17,422 million, would create a cushion of about 22,500 million for unforeseen events. The problem is that with the exception of the subsidized transport bonus, the Budget does not include any package measure to contain energy costs, such as the gasoline subsidy or the VAT reductions on gas and electricity, which will cost some 15,000 million this year. Are you going to suppress them in an election year and with Putin threatening to permanently close the gas tap this winter? The mattress will remain as a mat after deducting the cost of the new measures.

But it is even worse, because there is no guarantee that the economy will grow 2.1% in 2023. The official estimate is seven or eight tenths higher than that of the Bank of Spain or the Fiscal Authority (AIReF).

The minutes of the last meeting of the ECB, in which it agreed to raise interest rates by 75 basis points , make the hair stand on end. A good part of the members of his council, it must be remembered that most of them are central bank governors, warned of a deep recession with high inflation rates, the worst possible scenario.

The growth of the Spanish economy next year has very weak foundations, it totally depends on the funds that will arrive from Europe. Calviño estimates its impact at 2.8% of GDP , seven tenths more than the official growth forecast. And what will happen to consumption and other investments when the ECB raises interest rates to 3% or 4%, more than triple the current level?

The macroeconomic scenario is seized with pins, the Budgets are based on an increase in taxes for the working middle classes and the rich and on a forecast of tax revenues that are the milkmaid’s account, they can be shattered in a few months.

P.S. -One of the operations that arouses the most interest is the shareholder reorganization of Naturgy. The head of the CVC fund, Javier de Jaime, owner of 20% of the Hispanic gas company, assured on Thursday that he does not have a deadline for his departure. His statements, far from reassuring, cause more concern, because CVC could become the ally of the future buyer of the other 20% of Naturgy, in the hands of the US fund GIP. The market points to Total Energies, the French oil company that has already set foot in our country with the acquisition of EDP assets.

The possible shareholder movements, together with the delay in the Gemini project, launched by its president, Francisco Reynés, to divide the multinational in two, complicate the entry into play of the only Spanish candidate who could be interested in the acquisition of the non-regulated business: Repsol .

The oil company chaired by Antonio Brufau has an enviable treasury of some 11,000 million, after the sale of 25% of its crude oil production assets for almost 5,000 million (3,500 discounted the debt). But an operation on the total of Naturgy, valued at around 22,000 million, would require significant leverage at a time when indebtedness is highly penalized in the financial markets.

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