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Eduardo Martínez Abascal, Professor, IESE, University of Navarra

The State is paid by the worker

Wed, 27 Jan 2010 09:42:18 +0000 Published in Expansion

It is very frequent in our country to hear the expression: "The State should help, subsidize, etc." In the face of any problem, the State should give a few euritos to the supposedly needy. This can be a business (for example RTVE), an economic sector (cinema, coal, etc.), a collective, etc. This conviction comes from the error of thinking that the State is a hyper-rich entity, with a lot of money, which it must use for the benefit of any supposedly needy person.

Well, this is not the case at all. Most of the State's money comes from the pockets of each of its citizens. Here are a few figures. The budget of the State in 2009 was 380 billion (billions of euros). The taxes that come out of the average Spaniard's pocket are: Personal Income Tax (77 billion), Social Security contributions (112), contributions to self-employed organizations (27), VAT and special taxes (77). In total, workers pay almost 300 billion in taxes. That is to say, almost 80% of the state budget is paid by the average worker in the country. It is not paid by rich companies, nor by hyper-wealthy individuals...

And how wealthy is the average Spanish citizen to afford the largesse of subsidies? According to the INE, and in big numbers, the average cost of a worker is about 2,350 euros per month (for 12 payments). Of these, some 680 euros go to Social Security and another 260 euros to Personal Income Tax. The worker receives, clean, 1,400 euros per month. This is the average, but 50% of the workers receive, clean, less than 1,200 euros per month. In addition, they spend another 200 euros in VAT and excise taxes. The conclusion is clear: the average Spaniard does not get rich... not at all, he takes to his pocket, clean, 1,200 euros. The average Spaniard is a worker, not a top executive. And, in addition, he contributes to the State a whopping 1,140 euros per month.

If this is so (and it is), it would be necessary to think a lot about how the State spends the money contributed by that worker: does it make sense for a person who earns 1,200 euros a month to subsidize a film producer? Or a miner of Hunosa, who earns twice as much? Or the workers of TVE, who also earn more than he does?...and the list could go on, since there are many subsidies and aids.

I believe that the Government (in all its formats, state, autonomous, etc.) should keep in mind, before deciding on a expense, that this expense comes out of the pocket of a person earning 1,200 euros per month. Perhaps this consideration would help them to be more efficient and prudent in their spending.