Wealth tax in Spain shows lessons for policy

Madrid’s approach to taxing wealth offers lessons for policymakers facing pressure to tax the ultra rich.

Spain Tests Wealth Taxes Without Chasing Away Billionaires

Spain keeps a wealth tax dating back to 1978 and reintroduced after the financial crisis. The plan is collected by regional governments but is tied to a central solidarity levy. In 2023, the system raised about €1.88bn, with the regions taking most of the revenue and the central government receiving the rest. In 2024, regions kept more of the income, and the total intake rose. The tax applies to worldwide assets, with a starting point at 1.7% for net wealth above €3m and up to 3.5% for fortunes over €10m. There are exemptions, including the first €700,000 and a €300,000 main residence, plus a cap so the total tax cannot exceed 60% of income. The goal is to finance public services while limiting impact on those with cash constraints.

The article highlights Amancio Ortega, founder of Inditex, and his Pontegadea family office, which has expanded its real estate and business holdings across Europe and the United States. He is poised to receive a record dividend of €3.1bn this year from Inditex, a windfall that could have triggered wealth tax. The family office says it reinvests all dividends to grow wealth across generations. Madrid’s wealth tax has been described as light touch, with the rules potentially adjustable to raise more revenue if needed. A major exemption for family-owned companies means much wealth remains outside the tax base, limiting overall yield.

Spain’s approach shows how tax policy can be designed to share wealth without spurring a mass exodus of the ultra rich. The system uses regional collection to tailor local needs, while a central framework preserves consistency. Yet the design also reveals hard political choices. The family company exemption shields much wealth from tax, and that constraint will likely fuel debate in other countries about closing loopholes to boost revenue. The result is a policy that feels fair to many citizens but faces limits in revenue potential if exemptions are kept intact.

Beyond numbers, the policy tests trust. When people believe the tax is fair and well managed, support grows even if the levy is modest. The evidence so far suggests the feared billionaire flight has not materialized in Spain, a sign that credibility and predictability matter more than size alone. For other nations, the lesson is clear: tax design matters as much as the amount collected, and political will to reform exemptions matters even more.

Highlights

Policy choices will shape how wealth taxes are perceived and whether they endure as a tool for fairness.