Taxation in Italy is too progressive (and penalizes families)
In Italy, progressiveness goes out of control when the taxpayer, with his income, must maintain not only himself but also other members of his family. The post by Enrico Zanetti, tax expert and former Deputy Minister of Finance
Corriere della Sera today relaunches our comparative study France-Germany-Italy on the weight of the “family factor” in income taxation.
That the "family factor" has less weight in Italy in the calculation of income taxes than it does in countries structurally similar to ours, such as France and Germany, is well known to all.
However, how wide this “valuation gap” is, especially with regard to medium and medium-high incomes, is less known.
This is demonstrated by the fact that, if it were sufficiently known, no hypothesis of reform of the IRPEF levy in Italy could ignore starting from this issue which, instead, is systematically left on the sidelines of a discussion entirely centered on rates.
Those who support the virtues of the single rate for all (flat tax) reserve the marginal role of deducting 3,000 euros from the taxable amount for family burdens (which, with a rate of 15%, translate into a "differential value" , compared to those who have none, equal to the misery of 450 euros).
Those who look at the German model with fascination do so by talking about the “continuous progressive rate” mechanism provided therein (purely formal aspect) instead of the overwhelming centrality given in that context to the “family factor” (true substantial aspect).
The comparison with France and Germany, on the basis of the data that the OECD processes every year for the "decomposition of the tax wedge", clearly states that Italy undoubtedly has a problem of progressiveness of the levy on income taxes, but not because it is not a progressive enough country, but because it is too progressive: low incomes (up to 15,000 euros) pay in Italy as in France and Germany or even less; medium-low incomes (15,000-25,000 euros) pay more, but with a growth tempered by the "80 euro bonus" (which obviously leaves taxpayers other than employees totally exposed to the elements); the incomes of the middle class (25,000-60,000 euros) and medium-high incomes (60,000-100,000 euros) pay much more; the high and very high incomes gradually see the taxation levels of the three countries converge.
However, this problem of progressivity goes totally out of control when the taxpayer, with his income, has to maintain not only himself but also other members of his family unit (children, but, in single-income households, also the spouse).
In France and Germany, the "family factor" has a significant weight for all taxpayers, as it should be, because the correct objective is precisely to differentiate the level of taxation between taxpayers with equal incomes, but different families who that income keeps.
In Italy, the “family factor” has a lower weight, but in any case not devoid of its consistency, for low and medium-low incomes; it becomes more and more marginal for the incomes of the middle class, to the point of assuming an unsustainable “fiscal” lightness for medium-high incomes.
To explain it better, let's take some numbers that are reported in the tables taken from Corriere della Sera .
An employee without family charges and € 40,000 of taxable income pays 21.02% in France, 23.42% in Germany and 30.72% in Italy.
Already like this, the massacre of the Italian middle class is evident, but if that worker has a spouse and two dependent children, his levy in France is halved to 10.75%, in Germany it is practically zero to 0.79%, in Italy is reduced by just 5 points to 25.98%.
And so on.
This happens because, in Italy, the "tax enhancement" of the "family factor" is entrusted to deductions whose amount decreases, up to zero, as income increases, the daughter of a demented philosophy according to which those with a higher income more allow yourself a lower value for your family burdens than those with a lower income, while, as already mentioned, the purpose of the " family factor " is to discriminate in a "horizontal" sense individuals with equal incomes and different families to maintain with that income (not in the "vertical" sense subjects with different incomes and the same families).
Where do we want to go, as a country, if, a single-income family with two dependent children and an available income of 60,000 euros gross, paid taxes on that income, they have 50,862 euros left in France, 53,274 euros in Germany and 39,840 euros in Italy?
This is an interesting question that deserves some reasoning, not whether a flat tax in Hungarian or a continuous rate in German is better.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/il-fisco-in-italia-e-troppo-progressivo-e-penalizza-le-famiglie/ on Sun, 30 Aug 2020 08:00:27 +0000.