Public intervention in Spain paints a picture of deep geographical contrasts, where the intensity of the Administration’s actions drastically depends on the autonomous community of residence. The latest Observatory on the distribution of taxes and benefits among Spanish households, published this Monday by Fedea, puts numbers to the enormous territorial gap affecting the intensity of public aid. According to data corresponding to 2023, this safety net operates with radically different strength depending on the community, to the point that a household in the poorest 20% in Extremadura receives net support that almost triples what an equivalent household in the Balearic Islands receives.
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In simple terms, a household is considered a net beneficiary of the system when the sum of everything it receives from the public sector ―whether in cash or in services― exceeds what it pays in taxes. Nationally, according to Fedea’s figures, six out of ten Spanish families are in this advantageous situation, but the intensity of that benefit varies drastically by region. The most striking case is Extremadura, where low-income households enjoy a total net balance of 112.9% of their income. This figure is the result of very specific additions and subtractions. These are households that receive a series of benefits from the Administration that, collectively, are worth more than what the household itself generates in terms of paying taxes and social security contributions.
That 112.9% is made up of very different items. The first, and most visible, component is the cash that arrives in the current account in the form of pensions, unemployment benefits, or social aid. This money alone accounts for 79.4% of the income of this group of Extremaduran households. The second component is invisible or in-kind aid, basically for health, education, or dependency services, which in the case of these families is equivalent to another additional 56.2% of their income. These two components represent a total gross support of 135.6%. However, as these families also pay taxes, mainly VAT and special taxes, the system deducts 22.7% from them. When the calculations are made, the final amount appears. In general terms, although with different intensities, this logic operates in all territories. However, a household in the poorest 20% of the Balearic Islands presents a very different reality, with a final positive balance of barely 40.4%.
With figures close to Extremadura are Castilla-La Mancha (106.2%), Castilla y León (98.7%), or Galicia (94.5%), while wealthy and less aged communities like Madrid (50.3%) or Catalonia (67.2%) are closer to the Balearic archipelago. It is not that the Administration punishes some territories and rewards others, but rather that mathematics and demographic issues play a decisive role, as shown by the data compiled by Julio López Laborda, Carmen Marín González, and Jorge Onrubia, the Fedea researchers who prepare the report each year.
On the one hand, there is the denominator effect, which is clearly perceived when analyzing the two territorial extremes. The 20% of households with the lowest incomes in Extremadura consists of those earning up to 15,000 euros annually, while in the Balearic Islands, the same group includes incomes reaching almost 28,500 euros. Since the poor household in the Balearic Islands has an initial income almost twice as high, any public aid or benefit, even if of the same amount, represents a much smaller percentage of their income.
Demography also plays a crucial role. The social protection system redistributes across life stages, collecting money from taxpayers mainly during their working years to return it when they retire or fall ill. Therefore, communities with older populations like Extremadura or Galicia capture a much larger proportion of public resources in the form of pensions, which are the most powerful instrument for reducing inequality.
If regional differences are abysmal at the base of the pyramid, the picture is equally heterogeneous at the top. The richest 1% acts as a net contributor in all corners of Spain. That is, these families, without exception, always contribute much more to the State than they receive in pensions, health, or education. However, the effort required of them varies drastically depending on the postcode. While in the Balearic Islands and Madrid, the wealthiest show negative balances of 27.9% and 22.1% of their income, respectively, in regions like Melilla or Cantabria, their net contribution falls, again in negative terms, to 5.5% and 10%.
They receive more than they contribute
According to the Fedea report, the joint analysis of taxes and benefits shows that households belonging to the first three income quintiles (the poorest 60%) are, on average, net beneficiaries of public intervention, “as they receive an effective net subsidy, that is, a positive difference between benefits and taxes.” This favorable balance decreases with income: from 81.5% of gross income for the first quintile (the poorest 20%) to 14.9% for the third. Meanwhile, families in the two richest quintiles are net contributors.
These, however, are average figures. For more detail, researchers also provide the number and percentage of households within each income bracket that benefit from a positive balance between benefits and taxes. In the poorest 20%, it is 83.3%. In the next two steps, it reaches 63.6% and 52.8%. From then on, the figure falls below half and reaches 5% in the wealthiest 1%. In total, 50.6% of all Spanish households receive more than they contribute.
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