Il Meloni government recently announced a series of fiscal measures, including cutting the wedge and Irpef. The measures are, however, temporary and will have valid only for 2024.
Italy will thus be left with a fiscal unknown and a15 billion mortgage of euros per year, a problem for the future of the Meloni government and for the next executives. If the two measures are not refinanced, it will lead to a reduction in wages for millions of workers and taxpayers starting from the following year.
The danger is that of falling back into safeguard clauses, as has been the case for a decade, including the Berlusconi government in 2011, when these clauses led to VAT increases and, consequently, an increase in taxes.
The mortgage and government obstacles
The 15 billion euro per year mortgage is the result of two main obstacles: the difficulty in finding stable financial coverage and the need to keep deficit and debt levels low starting from 2025. Here are the measures financed temporarily. The government has obtained authorization of Parliament for a deficit of 15,7 billion euros for the following year but is urgently seeking additional coverage of at least 7-10 billion euros to balance the maneuver.
the government is struggling to find permanent financial coverage due to the strong unpopularity of cutting public spending. Also the objective of reducing tax bonuses by one billion, as announced by the Deputy Minister of Economy Maurice Leo, appears to have been a failure.
Even the vague commitment to achieve privatizations for one point of GDP in three years is the subject of considerable skepticism on the part of institutions such as Bank of Italy, the Court of Auditors and the Parliamentary Budget Office.
The nature of the mortgage
Measurements will not be able to guarantee structural financial resources, necessary to permanently stabilize the decontribution a benefiting 13,8 million workers both public and private and to expand the former IRPEF bracket of 23% from 15.000 to 23.000 euros of income, to the benefit of all taxpayers, including self-employed and pensioners.
The Minister of Economy, Giancarlo Giorgetti, confirmed and supported the nature of this "mortgage" during a parliamentary hearing on the Nadef, the fundamental document for public finance planning: "I am proud to have put a mortgage in favor of workers, so all governments will have to find resources to put something in the pockets of low income earners affected by the loss of purchasing power”. The Minister, however, was talking about the wedge cut (the one covered by public money) and not the Irpef cut. However, something has changed in the last few days.
Giorgetti: “Irpef first step towards Flat Tax”
During a meeting with unions and businesses at Palazzo Chigi on Friday evening, Giorgetti described the Irpef operation as the “first step towards a flat tax for everyone”, a concept also reiterated by Deputy Minister Leo. A way to explain and guarantee the 4 billion euro cut in personal income tax for next year. But the future remains uncertain. Uncertainty similar to what happens for the 11 billion wedge cut, which will be extended for a further year.
The two measures together provide a maximum average benefit of 117 euros per month, and removing them from the beginning of 2025 would be not only unpopular but also harmful.
The warning from Bank of Italy
During a hearing on Nadef, Bankitalia, Has urged to exercise maximum caution in budgetary policy otherwise "uncertainties could worsen". “When faced with new charges of a permanent nature or that are difficult to remove, it is always advisable to identify certain coverage, of an adequate amount and of an equally permanent nature”. Recommendations that seem to have been ignored by Palazzo Chigi, also making the Irpef cut annual.
