Social security contributions are not taxes

Many people think that the social security system operates in the same way as the tax system.

Taxes are used for the functioning of the State and the implementation of social policies, while contributions is money that belongs to insured persons. This is why there is a key difference between contributions and taxes. 

Both are calculated as a percentage of income, but tax rates are graduated meaning that they increase depending on income. This ensures the redistributive function of taxation: Those with higher income pay proportionately more in taxes (larger part of their income) to finance the social state which returns to the vulnerable more than they contributed. This ensures the redistribution of wealth through the taxation of income.

On the contrary, social security contributions are applied horizontally. All citizens that have salaried occupation pay the same contributions for their main pension regardless of their income.  The same applies to the return of these contributions to insured persons. The main and auxiliary pension benefit does not depend on the person’s needs but on the contributions paid.