Taxes account for over 53% of labour costs in Spain, study finds

In 2025, Spain's Finance Ministry argued that its tax cuts for middle-income earners had delivered €38 billion in savings

More than half of the total cost of employing an average worker in Spain goes to public authorities, according to the Juan de Mariana Institute, a liberal think tank highly critical of the government.

The institute estimates the tax burden at €53.60 for every €100 in labour costs. The figure comes from a report the think tank describes as an "economic autopsy" of Prime Minister Pedro Sánchez's time in office, as reported by The Objective.

The report, written by the institute's head of research, Diego Sánchez de la Cruz, estimates that €21,144 of the average employee's €39,481 annual labour cost goes towards taxes and social security contributions — equivalent to a tax burden of €53.60 for every €100 in labour costs.

The think tank describes the report as an "economic autopsy" of Prime Minister Pedro Sánchez's time in office, according to The Objective.

The calculation includes social security contributions, income tax, VAT and other taxes, using the employer's total labour cost rather than gross salary as its basis.

The institute previously documented 141 tax increases between 2018 and 2026.

It also estimates that the average taxpayer pays €460,600 in taxes over their lifetime, equivalent to almost 30 years of Spain's most common salary, or 16.4 years based on the average salary.

Higher tax revenues, spending and debt

According to the report, revenue from taxes and social security contributions has risen by 39.7% since 2018, an increase of around €168.17 billion. The figure is nominal, meaning it also reflects inflation and employment growth. The tax-to-GDP ratio has increased from 34.9% to 37.1%.

The report acknowledges that healthcare spending has risen by 43% and education spending by 40%. However, it argues that public services have deteriorated, citing a 28% increase in surgical waiting lists to 853,509 patients, an average wait of 102 days to see a specialist, and the results of the 2025 PISA report.

Public debt stands at €1.763 trillion, around €600 billion more than eight years ago. The report also notes that one in every four euros spent on pensions is funded through government contributions.

Housing and wages

According to the study, median rent (€1,080) now exceeds the median salary of a young worker (€1,048), while only 15.2% of young people live independently, the lowest figure since 2006.

The author attributes this to a housing shortage, noting that 1.16 million new households have been formed since 2021, compared with just 465,000 completed homes on the open market.

The report also blames rent caps introduced under Spain's housing law, linking them to a 43% drop in new rental contracts in Barcelona, 44% in Navarre and 51% in A Coruña.

On employment, the report acknowledges a 66% increase in the minimum wage but describes it as leading to "unprecedented wage compression". It also claims unemployment figures are distorted by inactive workers on permanent seasonal contracts.

The institute describes the period as "devastating" and criticises the state's response to crises including Covid-19, the DANA floods and the crisis in Ceuta as "non-existent".

The report comes shortly after Sanchez called an early general election following the defeat of his government's decrees.