Protesters came to the streets of the capital Madrid on Friday and the rally stretched into the early hours of Saturday.
The demonstrators gathered outside the headquarters of the Popular Party of Spanish Prime Minister Mariano Rajoy and shouted "resign, resign!" and "they are lining their pockets!"
"With these cuts, they are ruining us," said protester Pedro Lopez.
A witness said he saw one demonstrator received a "horrifying beating" from the riot police.
With an unemployment rate of near 25 percent, Spain is under pressure to get its public finances on track amid concerns in the markets over the state of the country's banks and the wider economy.
The aim of the latest package of measures is to cut 65 billion euro (USD 79 billion) off the budget deficit through 2015.
Although the increase in sales taxes will take effect September 1, other reforms will be left for later in the year, including a plan to speed up the gradual raising of the retirement age from to 65 to 67.