The Bank of Italy does the calculation: there are above all two categories that have had an improvement in their income thanks to the cut in the tax wedge and the Irpef reform, both measures in force only in 2024.
The Meloni government invested a good part of the money collected for the last budget law in two measures: the cutting the tax wedge for employees who earn less than 35 thousand euros a year, and the reform of the Irpef with the transition from four to three brackets. In both cases, these are measures that will only be in force for 2024, and the executive will have to find other funds to finance them again next year. In its annual report, the Bank of Italy calculated the effect of the two interventions, together with a third measure, the mothers’ bonus, which is in fact a cut in contributions just like the cut in the tax wedge, but more abundant and only for specific categories.
First, let’s clarify what we are talking about. All employees pay a portion of their salary – 9.19% – in pension contributions. With the wedge cut, the government has ensured that for those who earn up to 25 thousand euros the amount to be paid is 7 percentage points lower (which therefore remains on the pay slip), while between 25 thousand and 35 thousand euros of income they are cut by 6 points. This translates into an increase of approximately 60 to 100 euros more per month.
Then there is the mothers bonus, for which workers with permanent contracts who have at least two children (one of whom is less than ten years old) do not pay contributions at all this year, up to a maximum exemption of 3 thousand euros per year. Lastly, the reform ofIrpef: for incomes between 15 thousand and 28 thousand euros you pay 23% tax, instead of 25%. This gives those who earn between 28 thousand and 50 thousand euros a profit of 260 euros per year, which above 50 thousand euros of income is canceled out by reducing the deductions to which one is entitled.
The IMF’s advice to the Meloni government: raise the retirement age and eliminate the tax wedge cut
The Bank of Italy estimated that all these interventions, on average, led to an increase in 2024 1.5% increase in income available for Italian families. Broadly speaking, we can say that 1% is due to the wedge cut and the mothers’ bonus, while the other 0.5% is due to the Irpef reform.
Of course, this is an average. However, approximately three out of four families had an improvement of more than 1%, but above all two the categories which saw the greatest increase. The first is that of families in which there is only one worker with a medium-low salary, which are among the families in which the disposable income (calculated taking into account how large a family is and how many children there are) is more limited. The second category that has seen more gains with the measures is that of families with two workers, again with a medium-low salary, who have a higher disposable income. In both of these bands, the increase in income approached 2.4% on average.
There is also one last question that the Bank of Italy has analysed. That is, given that these measures lower taxes but have very precise thresholds (for example, the tax wedge cut disappears completely for those who earn more than 35 thousand euros), there are several people who find themselves in a particular situation: if they had with an only slightly higher income, they would have to pay significantly more taxes or contributions. This applies to those who earn just under 25 thousand euros (the first threshold for cutting the wedge), and just under 50 thousand euros (given that above that the benefit of the Irpef deduction disappears). But it is above all those who are at risk who are on the threshold of 35 thousand euros: here, earning a few tens of euros more per month would mean paying such an amount of taxes that, in the end, you would find yourself with less money in your pocket.
