2. The Personal Income Tax

In 2019, income from personal income tax amounted to 86,892 million, 4.9% above what was collected in 2018.

The evolution of the tax was marked by three elements: the growth of the bases, the regulatory and management changes (especially, the refunds linked to maternity benefits and the reduction of withholdings for the lowest incomes) and the good results of the annual declaration corresponding to the 2018 financial year.

Regarding the first element, the gross income of households grew by 5.3% in 2019 (6% in 2018), with increases in all sources of income, particularly those linked to capital returns. The trend throughout the year was one of progressive moderation in growth, more intense once the upward step caused in the evolution of these incomes by the increases in public salaries and pensions in July 2018 was overcome, after the approval of the Budgets.

Labor income, the most important in all household incomes, grew by 5.1% in 2019, the same as in 2018. Pensions were the income that grew the most, 5.4%. In the first part of the year the increase slightly exceeded 7%, to be reduced in the second part of the year to 5%, reflecting the upward break that the increase in pensions included in the 2018 Budget represented in mid-2018. The growth of the average pension for the year as a whole was 4.1%, slightly above the increase registered in 2018. The figure includes not only public pensions, but also pensions from funds that, although marginal in the total mass of pensions, are irregular and distort the evolution of the whole. Graph 2.1 illustrates the change that occurred in these average pensions after the approval of the 2018 Budgets, which represented a general increase greater than those that had been carried out in previous years, in addition to contemplating larger increases for the lowest pensions. It must be remembered in this sense that the increase in the average pension is produced not only by the revaluation established every year on a general basis (which is that of contributory pensions), but also by the additional increases that some other pensions may have ( This is the case of the last two years and 2011) and, above all, due to the incorporation of new pensioners, generally with higher pensions than those who are within the system. It is important to take this issue into consideration because pensioners who are already receiving a pension do not see their pension increase by the percentage by which, on average, pensions increase, but rather by the percentage that has been established for that year. This means, for example, that a person who was a pensioner with a contributory pension in 2009 saw their pension increase according to the line shown in Graph 2.1 and not according to the percentage indicated by the bars. In figures, this pensioner received a pension in 2019 that was 9.4% higher than in 2009, while general prices in the same period increased by 13%.

Unlike pensions, the growth of the wage bill in 2019 was lower than in 2018 (5.1% and 5.4% respectively). The explanation lies in the moderation shown by the wage bill in the private sector (4.8% compared to the previous 6.1%) as a result of the lower rate of job creation, and despite the increase in wages, particularly for lower, driven by the increase in the interprofessional minimum wage (precisely this greater increase explains why, due to a composition effect, on average the increase in 2019 is lower than that of 2018; Graph 2.2). Quite the opposite happened in the public sector, where overall salary returns grew by 5.7%, almost 2.5 points above the 2018 figure. Compared to the previous year, both employment and the average salary increased, in this case also due to the increases after the entry into force of the Budgets, but also due to the update at the beginning of the year and the adaptation of the salary levels of the bodies. of security.

Household capital income (furniture, rent and capital gains) grew by 7.1% in 2019 (Tables 2.1, 2.4, 2.5 and 2.6). It is less than what they did in 2018 (14.5%). The lower growth was produced, fundamentally, by the bringing forward of some operations to 2018 to avoid the increase in rates for the highest incomes that was announced when presenting the 2019 Budget project. Higher growth than usual was also seen in the last quarter of 2019, possibly for the same reasons, but not with the same intensity as in 2018.

In any case, it is worth highlighting three relevant facts. The first is that income from movable capital grew in 2019 for the second consecutive year, after almost 9 years of continuous declines and despite the fact that interest on bank accounts is now almost negligible and that dividends decreased compared to 2018. Income from fixed income securities occupied the space left by the other two assets. The second notable fact is the volume reached by capital gains, close to the maximums reached during the period before the crisis, although their importance within income is less than then (Graph 2.3). And, finally, we must highlight the growth of property rental income, which closed its third year with increases of around 9% (Graph 2.4). These incomes have been steadily gaining weight since 2005 (in the previous ten years their importance within household income was stable at around 2.5%) as a consequence of both the increase in this type of assets within the assets of families and as a result of greater control over them.

Regarding the income of personal companies, it is estimated that they grew by 5.8%, below the 7.2% in 2018. All variables related to small businesses showed a downward trend in 2019 and returns reflected that slowdown.

In 2019 the effective rate on household gross income increased by 0.7% (Table 2.1). The cause of the increase is the greater growth that is expected to have in income that is not subject to withholding and that is included in the annual declaration. Without the annual fee or family deductions, the rate was slightly lower (-0.2%) than in 2018. There are three main reasons that explain this result. Firstly, in the initial half of the year, the extension of the reduction for work income continued to have an effect, a measure included in the 2018 Budget and, therefore, with effect from July of that year. This reduction in withholdings was aimed at the lowest incomes and, consequently, particularly benefited SME workers and pensioners. The second reason was the greater growth enjoyed by the lowest salaries thanks to the increase in the interprofessional minimum wage. These salaries have zero or almost zero withholdings, which causes downward pressure on the average withholding rate. These first two elements are what justify the fact that the rate of withholding on salaries in the private sector decreased and that the average rate remained almost the same as in 2018 (Table 2.3). Thirdly, there is the growth in the pension rate, of 1.6%, similar to that of 2018 (1.5%), below what is usual for reasons similar to those just seen, the largest increase in the lowest pensions and lower withholding rate. This effect offsets part of the increase in the rate that always occurs when pensioners with higher pensions and rates join.

As a consequence of the growth of the bases and the rate, the personal income tax accrued grew by 6.1%, one and a half points less than in 2018 (Table 2.1). As has been said, part of the growth is produced by the forecast of the annual tax payment (which will be known provisionally at the end of June). Without this fee and family deductions, the growth of the tax accrued was 5.1% (6.5% in 2018).

Withholdings on labor income, which are the income that weighs the most within the tax as a whole, grew by 5.4% compared to 6.6% the previous year. The increase was greater in pensions than in salaries (7% and 5.1% respectively; Table 2.3). In both cases, as happened in 2018, the evolution throughout the year had two parts. In the first semester, growth was high due to increases in public salaries and pensions and despite the progressive moderation of the private salary mass and the slight drop in the rate in these companies. In the second part, once the step that these increases gave rise to since July 2018 ended, the growth of withholdings contracted even below the rates prior to the step, despite the fact that rates in the public sector maintained the growth and those of pensions returned to increases of around 3%.

Capital withholdings grew by 3.1%. The growth is less than that recorded in income because it must be remembered that only around 40% of these incomes are subject to withholding. In 2019 specifically, the difference is produced by the greater dynamism that is presumed for the set of real estate capital income compared to those that are subject to withholding (basically local). In other cases (movable capital and profits in investment funds) the growth of the whole and of the subject returns is the same or very approximate. The change in sign of withholdings on profits by investment funds stood out, with a sharp drop in 2018 (-11.8%) and a large increase in 2019 (9.9%).

In the rest of the concepts, payments on account of individual companies also saw their growth moderate (4.4% versus 6.7% in 2018), both in the aspect of fractional payments and in that of withholdings on economic activities. , and the income accrued from the tax on lottery prizes decreased again (-10.3%), the third consecutive year of decreases. Also in 2019 it was subject to changes given that the raising of the threshold that marks the exempt amount was done progressively, culminating on January 1, 2020. In 2019, this limit was 20,000 euros, increasing the 10,000 in 2018, although its impact on the tax remained marginal.

personal income tax income grew by 4.9% in 2019, although without the differential quota or family deductions, the growth was 5.2%, similar to the tax accrued also without those components. In addition to the differences that usually occur between accrual and cash due to the annual declaration (settled the year following its accrual), in 2019 the extraordinary refunds derived from the ruling on maternity benefits were added. These two elements, the good results of the 2018 annual declaration and the extraordinary returns, were the ones that marked, together with the evolution of the bases, the cash receipts for the year 2019.

Income from withholdings on income from work and economic activities grew by 5.4% in 2019, 6.5% if the impact of regulatory changes is eliminated. In general, the trend was towards moderation (until the middle of the year the accumulated growth was 5.9%), but with different phases and with different intensity in the private and public sectors.

In the private sector, income increased by 5%, less than in 2018 for, as has been seen, three causes: the reduction in withholdings for the lowest incomes that limited income growth throughout the first part of the year; the slowdown in job creation that extended throughout the year; and the decrease in the average effective rate due to the increase in the lowest salaries above the rest of the salary increases.

The trend towards moderation in withholdings was accentuated by the peculiar evolution that income from withholdings in the AA.PP had in the last two years. in response to the effect of the salary and pension increases that occurred after the approval of the Budgets in July 2018. As noted, the consequence was that in 2019 high growth rates were recorded in the first half of the year (8.1% until July) and a downward step in the second (increases of around 6% if some atypicalities are corrected). In 2019 as a whole, the increase was finally 6.5%. The profile was also observed in salaries and pensions.

Regarding the results of the annual declaration (corresponding to the 2018 financial year settled in 2019), income grew by 14.1%, despite the fact that some of the measures (extension of family deductions and return of withholdings applied to maternity benefits in 2018) acted negatively (without them the growth of these incomes would have risen above 18%). The causes of these good results are found in the increase in income not subject to withholding and, especially, capital gains. Part of these good results were a consequence of the advance in the generation of these profits to the last months of 2018 due to the announcement of the rate increase that was included in the Budget project for 2019, an effect that was also appreciated in other income (such as those of movable capital).

Regarding the returns of the annual declaration, it must be taken into account that they were affected by those derived from maternity benefits for the years 2014-2017 (Table 1.5). In the returns that refer exclusively to the 2018 campaign, the growth was relatively high (above 8%), also partly due to the effect of the new family deductions and the adjustment of withholdings in the 2018 maternity benefit . These returns were made at a slightly higher rate than the previous year.

In the rest of the concepts, four elements stand out: the growth of installment payments at a rate similar to that recorded in the previous two years (7%); the increase, for the second consecutive year, in withholdings for capital gains (4.2%); the stabilization of income from withholdings on capital gains from investment funds after the sharp decline last year; and the reduction in income in the Lottery Tax (-15.2%), most of which, as mentioned, was not justified by the elevation of the tax threshold.