The measures adopted against the Covid reduced the inequality of household income by 38%, according to Fedea

9 Jan. () –

Public intervention in the form of taxes, monetary and in-kind benefits reduced inequality in the income distribution of households residing in Spain by 38% in 2020, the year of the Covid-19 pandemic, according to the seventh report of the Observatory on the distribution of taxes and benefits among Spanish households prepared by Fedea.

According to the report, in 2020 the monetary benefits approved by the Government were responsible for 70% of this reduction, taxes for 8.5%, and benefits in kind for the remaining 21.5%.

The Fedea study, prepared by Julio López Laborda (Universidad de Zaragoza and Fedea), Carmen Marín (Fedea) and Jorge Onrubia (ICEI-UCM and Fedea) shows the redistributive capacity of public intervention in Spain through public benefits, monetary and in-kind (health and education), and the tax system (including Social Security contributions) for the years 2019 and 2020, coinciding with the Covid-19 pandemic.

The authors conclude that the results obtained for 2019 are similar to those of previous years, but those achieved for 2020 show the changes in public intervention as a consequence of the Covid-19 pandemic and its impact on the distribution among households from taxes, benefits and income.

Thus, in the first year of the pandemic, the market income of households as a whole suffered an average reduction of 8.5% compared to 2019, caused, for the most part, by the fall in profits attributed to households. However, the increase in public benefits cushioned this fall “significantly”, given that monetary benefits increased by an average of 13%, mainly due to unemployment benefits, and benefits in kind did so by 8%. , above all, due to the increase in health spending.

In contrast, average tax revenue fell by 4% in the same period. As a consequence, the average household income after the public intervention fell by less than 2% between 2019 and 2020, six and a half points less than before the measures adopted to deal with the pandemic.

The study shows that inequality in the distribution of market income was lower in 2019 than in 2020. However, the redistributive effect of benefits and taxes was higher in 2020, leading to income after retirement public intervention was distributed more equally in the last year.

In summary, public intervention in the form of taxes, monetary and in-kind benefits has reduced inequality in the distribution of market income of households residing in Spain by 38% in 2020, above the 33.5% reached in 2019.

MORE BENEFIT FOR LOWER INCOME

Regarding the impact of the measures based on household income, Fedea concludes that the joint analysis of taxes and benefits shows that households belonging to the first four income quintiles (that is, 80% of resident households with lower gross income) are net beneficiaries of public intervention in 2020, since they receive a net effective subsidy (that is, a positive difference between benefits and taxes).

This net aid is decreasing with gross income, since it represents 96.6% of gross income for the first quintile and only 0.4% for the fourth.

Finally, the top quintile (that is, the 20% of households with the highest gross income) is a net taxpayer, supporting an ever-increasing net effective rate, until reaching 27.6% supported by households belonging to the 1% with the highest income. .