Spain reintroduces wealth tax to help cut debts

MADRID — Spain’s debt-laden Socialist government voted Friday to reintroduce a wealth tax it had suspended just three years ago, arguing now that it is only fair for richer people to chip in more in times of crisis.

The Cabinet approved the new tax in a decree and it will go to Parliament next week.

The legislature dissolves later this month ahead of Nov. 20 general elections that will be dominated by an economy saddled with a 21 percent jobless rate, anemic growth after nearly two years of recession and debt woes which periodically prompt worries Spain might be the next euro zone country to need a bailout.

The new wealth tax — a levy on a person’s net worth — tweaks the old one so only the wealthiest Spaniards will pay. Critics insist however that Spain’s truly super-wealthy have their fortunes tucked away in special investment funds that are taxed rather gently.

The new wealth tax will be in effect just for 2011 and 2012, and will only tax people’s net worth above (euro) 700,000 ($963,000). That’s about seven times the earlier threshold. The government says only about 160,000 people will be affected.

Emilio Botin, president of Banco Santander and one of Spain’s richest men, said he strongly disapproved of the tax.

“I’ve said it once, and I repeat it now. I think it is a very bad idea to reintroduce it,” Botin said speaking at the unveiling of an art gallery project in his native northern city of Santander.

The average yearly salary in Spain is about (euro) 20,000 ($27,520).

“There are millions of Spaniards who would be delighted to have to pay this tax,” government spokesman Jose Blanco said after Friday’s Cabinet meeting. “This is a decisive moment for many Spaniards. Lots of people are looking for work. Lots of families are struggling.”

He added: “It is only fair to spread the burden of the crisis.”

Opposition parties have criticized the idea of reinstating the tax, arguing among other things it is a desperate bid by the government to appease leftist voters angry over austerity measures such as cuts in civil servant salaries, an extension of the retirement age and business-friendly labor market reforms.

Soraya Saenz de Santamaria, spokeswoman for the opposition center-right Popular Party, which is heavily favored to win the election, said Prime Minister Jose Luis Rodriguez Zapatero and his party are engaging in “political improvisation to keep their people happy.”

Zapatero suspended the wealth tax in 2008 on grounds it hurt the middle-class disproportionately and in effect penalized people who saved their money, just as the global economic crisis was starting to bite deep in Spain.

Now the argument is to spread the pain of the crisis to the wealthier classes and bring in an extra (euro) 1.1 billion a year in badly needed revenue.