Tax equality takes a hit

Rajoy announced yesterday that the tax surpluses generated in less than a year will go toward the marginal personal income tax rate,

This will be one of the first novelties of Spain's 2013 budget. The worst consequence of the measure is that it changes equality of taxes on savings products.

In other words, taxpayers are once again going to make decisions based on the rates of products in which they deposit and save their money. The new short-tern surplus tax will have a negative impact on the market and will push people to put their assets into areas that offer better real returns. The comparison between various tax savings vehicles that were put into place in 2007 fulfilled many long-standing aspirations of taxpayers and savers. Now the government is undoing its prior work in order to avoid people speculating.

Starting in 2013, selling real estate or stock shares within one year of the purchase will carry a tax of between 21% and 27%. The measure increases uncertainty at a turbulent time for the Spanish economy.

Also, the measure will not help increase tax revenues, because the majority of share purchases will be made by companies that don't pay personal income taxes. Mariano Rajoy is correct in saying that it is not a priority to meet the budget deficit, but we shouldn't confuse this statement with the ultimate goal of the measure. Current tax efforts are responding more to the state's urgent need to increase tax revenues and spend less in order to maintain ongoing government operations.