The debate on the autonomous financing model is turning out to be rather lamentable. It confirms a pattern of human behavior: fewer arguments, more outbursts; the fewer reasons, the more coarse words.
Thus, it has moved from talking about privileges or inequality to the sophisticated argument of the Andalusian minister: “caviar for the independence movement and for the rest, a daily menu”.
It should not surprise us: whenever the can of autonomous financing is opened, the demons of comparative grievances arise. Perhaps for that reason it causes all governments to feel lazy, even panicked, when starting the debate.
The grievance is an unbeatable argument before which data and arguments always lose. Explaining the presented proposal is not difficult, just a bit of pedagogy and a willingness to understand on the part of the receiver. A condition that does not always occur, because in our fragmented world what tips the debate is not the soundness of the arguments, but the cognitive bubble from which they come.
Despite my skepticism, I would like to share my reading of the presented proposal, beginning by recalling basic aspects about autonomous financing that are often overlooked in debates.
“We should always relate autonomous financing to the tax system, to avoid the Pharisaical defense of a tax-poor State while at the same time demanding more resources for the autonomous communities”
In the case of composite states like Spain, the financing model has two objectives: to determine the amount of resources that the territorial administrations need to exercise their powers and to establish how to obtain them.
The determination of the volume of resources for the CC. AA. depends primarily on the size of the fiscal pie. For that reason we should always relate autonomous financing to the tax system, to avoid the Pharisaical defense of a tax-poor state and at the same time demand more resources for the CC. AA. that govern.
Another objective is to decide the criterion for distributing the fiscal pie between the central State and all the CC. AA. The option chosen will determine the degree of political decentralization and also the vertical equity, a result that depends fundamentally on the so-called “vertical balance funds”.
For political accountability, the mechanism by which the CC. AA. receive resources to fund their competences is very important. If they receive them all via transfers from the State, as happened in Spain until 1993. Or if their revenues come from own taxes or taxes ceded by the State. The margin is wide and determines the degree of autonomy and responsibility that the CC. AA. assume.
A final factor concerns the mechanisms by which the equality (always relative) of the CC. AA. in the resources they receive is guaranteed, based on their population, adjusted to demographic parameters (age) or territorial (density, dispersion).
As the tax capacity of people differs according to their income, wealth or consumption, when these people cluster territorially in a C. A., the difference in their tax capacity is also.
Given that starting inequality, one may opt, as happens in some composite states, for the CC. AA. to have only resources derived from their own tax capacity. In Spain, the choice has ended up being the horizontal leveling mechanisms, among CC. AA., especially the Fondo de Garantía de Servicios Públicos Fundamentales (FGSPF).
“The distribution is done based on the adjusted population of each CC. AA. so that per-capita financing is as equal as possible”
Its resources come partly from the central State and partly from the CC. AA., which allocate to this common basket 75% of their normative tax revenues (i.e., before exercising their fiscal autonomy, by reducing or increasing taxes). Then the distribution is done based on the adjusted population of each CC. AA. so that per-capita financing is as equal as possible. In this sense, the common regime system seeks a balance between equality and shared responsibility.
I have the impression that these basic concepts are ignored in public debates, even by significant opinion-makers. They are not needed to feed the controversy of comparative grievances.
Autonomies without Federal Culture
In Spain the binomial autonomy versus responsibility typical of composite states is not deeply rooted. Perhaps because this idea of autonomies was not part of the collective imagination of our country, until the tactical move by President Suárez of conjuring the State of the Autonomies.
This scant autonomous culture is detected in opinion polls about citizens’ preferences regarding the state model. There is a gulf between Castile and León, where the dominant option is a unitary State, followed by the autonomous State, but with fewer competencies for the CC. AA., and the options preferred by the citizens of Catalonia or the Basque Country.
“The financing model has been shaped by tactical moves, always guided by the need for governability”
This may have contributed to the scarce federal culture and the absence of a project on the part of national parties, except for the push toward centralization, which grew with the rise of Vox and the contagion of the PP. The result: both the degree of political decentralization and the financing model have been shaped by tactical moves, always guided by the need for governability.
That is what could explain why, until 1993, the CC. AA. had transferred substantial expenditure powers but no responsibility for revenues. Even more illustrative: the first step toward tax decentralization occurred through an agreement between the PSOE and CiU to guarantee the investiture of Felipe González.
Since then until today, all agreed models have been the result of initiatives arising from claims born in Catalonia (not only from the nationalists, also from the left) which, after bilateral negotiations with the Spanish Government of the day, have ended up being negotiated with all CC. AA. And after their approval by absolute majority in Congress, they have been applied to all communities of the common regime.
The hyperactive propositional drive of the Catalan political forces and the absence of action by the state forces have generated debates marked by the logic of the comparative grievance, with Catalonia at the center.
“I begin by advising prudence in the use of the data provided by Vice President Montero and the various future projections that have been made”
Entering into an assessment of the presented proposal, I begin by advising prudence in the use of the data provided by Vice President Montero and the various future projections that have been made. Among other things because the Ministry of Finance has pending to recalibrate the update of the normative revenues of each CC. AA., which could affect the size of the FGSPF and its distribution.
In my view, the starting point that should be shared is the unsustainability of the current situation. The current model expired its validity in 2013 and has been extended for twelve years. In addition to the democratic deterioration that implies, this situation causes serious inequities.
Among them, that the improvement of tax revenues is benefiting the central administration, breaking the necessary vertical equity. It also produces a very wide differential in per-capita financing between CC. AA. With the 2023 settlement data (the latest available), the gap ranges from 126.3% in Cantabria to 94.2% in Murcia and the Valencian Community.
With another distorting factor, there are CC. AA. that, due to their tax base, contribute above the average and end up receiving per-capita financing below one hundred. This happens not only with the rich (Madrid, Balearic Islands and Catalonia) but also with communities whose tax base is below the average and which, after horizontal leveling, end up with even lower resources.
Thus, the starting point of any quality public discussion should be the costs of doing nothing. Fewer resources for the CC. AA., which negatively affect the public services under their remit, and a distribution marked by great inequity.
“The key elements of the proposal presented have been sufficiently explained, but I do not know if they have been sufficiently understood”
The key elements of the presented proposal have been sufficiently explained, but I do not know if they have been sufficiently understood. At bottom, the structure of the 2009 model is retained, though there are significant changes. They increase by €21,000 million the vertical leveling funds that the State transfers to the CC. AA. New indicators are established for calculating the adjusted population, a factor that will surely influence (we do not yet know in which direction and to what extent) the final result. Also, elements of diversity are incorporated, always subject to the voluntariness of the CC. AA., in a direction that we could call federal, though very incipient and uncertain in their results.
On the other hand, the participation of the CC. AA. in the collection of IRPF and VAT increases. Regarding VAT, a significant change is introduced by allowing CC. AA. to voluntarily adopt a model of participation in the VAT collection of the SMEs in their territory. The interpretation of this change is ambivalent. On one hand, it promotes the fiscal co-responsibility of the CC. AA. and would foster their greater involvement in VAT control and the frauds that occur. On the other, critics argue that it would mainly benefit Catalonia, due to its economic structure. In my view, both things are true.
An distortive factor is that, to square numbers so that some CC. AA. gain with the new model without others losing, the 2009 funds disappear (sufficiency, competitiveness, and cooperation), but others are created, such as the climate fund, which could also provoke undesired effects.
The issue of the adjustment funds is a burden that none of the existing models has managed to overcome. With the logic of comparative grievance, it is impossible to satisfy all CC. AA. and the bargaining efforts launched to try end up generating distortions that become the source of new grievances.
La gestión tributaria, el gran debate que viene
There is a matter of great future significance: tax administration. A networked management of the State Tax Agency with the involvement of the CC. AA. is proposed. A bet that could culminate in the Creation of Tax Consortia in those CC. AA. that want to take on more responsibility in management.
“The summary of all proposed measures would be that they significantly increase the resources available to all CC. AA. to implement public policies”
This option seems to me a much better option than having a separate Tax Agency (proposed in the initial PSC-ERC agreement) and differentiated from the state one. The resources and efforts required to set up a separate agency are immense, not viable in the short term and do not guarantee better management. Moreover, these agencies could promote autarky, especially in data management and transparency. A problem that is already suffered today with the Basque and Navarre tax administrations.
The summary of all proposed measures would be that they significantly increase the resources available to all CC. AA. to implement public policies. That greatly reduces the differential between them in terms of per-capita resources. Under the current system, based on the 2023 settlement, the gap ranges from 94.2% to 126.3% (above the Spanish average of one hundred). With the presented proposal, this difference would narrow to between 96.1% (the lowest) and 111.1% (the highest).
To assess whether the proposed model guarantees equality and solidarity it is enough to compare it with the scenario without a solidarity fund. The gap would range from 62.9% (above the 100% average) to 134.6%.
Despite these significant improvements, critics of the proposal, who disqualify it for one thing and its opposite at the same time, have fixed their gaze on the principle of ordinality and on the supposed privileges for Catalonia that it entails.
El debate tramposo sobre la ordinalidad
A deceitful debate has arisen about ordinality by which it is identified with inequality and privileges (of course for Catalonia, though it affects everyone). This is a notion that is applied in other federal states and that reached Spain following a 1999 ruling by the German Supreme Court that established limits to the solidary redistribution of resources among Länder.
“Some important aspects are left out of the proposal, such as the harmonization of autonomous legislations to avoid ‘dumping’ in particular taxes”
In short, it means that territories with a higher tax base transfer resources to the less endowed, but that at the end of the solidarity flows the contributor should not fall below in per-capita resources than the recipient. Which is what happens today in Spain, with the current model. I do not think that can be described as unsolidary or privileged. In fact, it is the opposite. Ordinality presupposes solidarity-based redistribution, but with limits and rules. It is curious that those who in other debates are staunch defenders of efficiency in the use of public resources, sometimes with Darwinian arguments, are the ones who oppose ordinality the most.
There are still important aspects not addressed in the proposal. Perhaps the most important is the essential harmonization mechanisms of autonomous legislation to avoid fiscal dumping in certain taxes, without nullifying the tax autonomy of the CC. AA.
Honestly, I doubt the proposal will ever see the light. For that, reform of important laws is required, including the Organic Law on Autonomous Financing, which requires an absolute majority.
There are too many cross-vetos that have nothing to do with the content of the proposal and indeed with the climate of tension and political fragmentation in which we live. Not only in Spain. That the reform of the current expired model is not approved would be a disastrous end to a lamentable debate. The reform is not a whim nor a tactical political maneuver, as claimed. It is a necessity we have as a society.
