Money makes money

Sánchez's government claims to have raised 1.8 billion euros from the 'solidarity' tax last year; but one wonders whether, in doing so, it prompted some HNWIs to move assets and deposits abroad. According to figures released this week by the Spanish tax agency, the number of people in Spain earning over 601,000 euros a year increased by a record 25% in 2022 compared to 2021, from 12,178 to 15,186 - but that was before Sánchez's wealth tax came into effect. Only when the same statistics for 2023 and this year are released will we know if any of Spain's wealthiest residents took capital out of the country as a result of the new measures.

What the latest statistics do indicate, though, is that the gap between the rich and poor in Spain is growing. This means that social inequality, the reduction of which is the Socialist-led government's major concern, is also on the rise. The rich are earning more, and at a faster rate, than any other income group, while the poorest are slipping off the radar entirely.

The expansion of the highest income group in 2022 was driven in part by the stellar performance of the Spanish stock market - that is, by the income that HNWIs receive from investments and dividends. On average in 2022, Spain's wealthiest individuals earned 426,000 euros from sums held in bank accounts and shares: not too far off half a million euros - without moving a muscle. It shows the truth of the dictum that, in order to make money, you have to possess it, and that the more you have, the more you make.

By contrast, the middle and low income groups (members of which typically don't have as much, if any, cash tied up in Ibex 35 companies and considerably smaller bank balances) are growing at much slower rates; and the lowest-income bracket is decreasing, as its members fall off the bottom rung - like Ciudadanos voters in election results. Even if Sánchez can point to a decent one-off revenue from his 'solidarity' levy, the long term effects of his fiscal policies - both in terms of wealth-retention and the societal inequality that his government is so concerned to combat - remain to be seen.