Vox's proposed income tax reform: two brackets and deductions per child

Vox has recalled its flagship proposal for IRPF tax reform, standing out for its simplicity and focus on tax reduction. As Joan Garriga recently explained, the proposal centers on creating a system with two tax brackets: one at 15% for those earning up to €70,000 ($70,000) per year, and another at 25% for those exceeding that amount. In addition, those with incomes below €22,000 ($22,000) would be exempt from the tax.

One of the most notable features of Vox's proposal is the inclusion of deductions in the IRPF. Each dependent child in the family unit would allow a reduction of four points in the percentage of tax to be paid. For example, if a family has four children, they could benefit from a substantial reduction in their taxation, even reaching the point of not paying IRPF. This way, Vox aims to encourage birth rates and ease the tax burden on families with children:

Ambition and fiscal consequences

This reform would cause a significant drop in IRPF revenue. It is estimated that the reduction in revenue could range between €12 billion ($12 billion) and €18 billion ($18 billion). Vox justifies this decrease in state income with the need to reduce public spending, specifically by eliminating subsidies and cutting unproductive expenses. However, the details of this cut have not yet been clearly specified.

This is what some tax analysts point out: certain aspects of the measure still need to be specified. For example, Vox will have to clarify whether the first €22,000 ($22,000) exempt from taxation should be considered uniformly or whether a progressive distribution of the IRPF will be applied.

It is also questioned whether the deduction per child is the best way to encourage birth rates, since some experts suggest that this measure could distort the tax system. In this regard, it is possible that a direct subsidy-based approach for families would be preferable.

What is certain is that IRPF and household income have been decoupled for at least ten years. This is mainly suffered by native working-class groups, as well as young people. One of the most concerning effects of this situation is that it stifles the saving capacity of the most vulnerable.