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

A new report from the Juan de Mariana Institute reveals that taxes and social security contributions account for more than half of total labour costs for the average Spanish worker. According to the study, for every €100 an employer spends on labour, €53.60 goes to the state. The institute, a liberal think tank critical of the government, describes the analysis as an ‘economic autopsy’ of Prime Minister Pedro Sánchez’s time in office.

The report, authored by Diego Sánchez de la Cruz, head of research at the institute, calculates that the average employee costs €39,481 per year, of which €21,144 is paid in taxes and social security contributions. This figure includes not only income tax and social security but also VAT and other indirect taxes, based on the employer’s total labour cost rather than gross salary. The institute says it has documented 141 tax increases between 2018 and 2026.

Rising tax burden and public services

Over a lifetime, the average taxpayer will pay €460,600 in taxes, according to the report. That is equivalent to almost 30 years of Spain’s most common salary, or 16.4 years of the average salary. Tax and social security revenue has grown by 39.7% since 2018, an increase of €168.17 billion in nominal terms, though the report acknowledges this partly reflects inflation and employment growth. The tax-to-GDP ratio has risen from 34.9% to 37.1%.

Despite higher spending on healthcare and education—up 43% and 40% respectively—the report argues that public services have deteriorated. Surgical waiting lists have grown by 28% to 853,509 patients, with an average wait of 102 days to see a specialist. The report also cites 2025 PISA results as evidence of decline. Public debt now stands at €1.763 trillion, about €600 billion more than eight years ago, and one in four euros spent on pensions is funded through government contributions.

The report also highlights housing and employment challenges. Median rent of €1,080 exceeds the median salary of a young worker at €1,048, and only 15.2% of young people live independently—the lowest since 2006. The author attributes this to a housing shortage, noting that 1.16 million new households have formed since 2021 while only 465,000 homes have been completed on the open market. Rent caps under Spain’s housing law are blamed for a 43% drop in new rental contracts in Barcelona, 44% in Navarre, and 51% in A Coruña. The minimum wage has risen by 66%, which the report says has led to ‘unprecedented wage compression’. The institute describes the period as ‘devastating’ and criticises the state’s response to Covid-19, the DANA floods, and the Ceuta crisis as ‘non-existent’. The report comes after Sánchez called an early general election following the defeat of the government’s decrees.