Budget concerns: "Personal income tax rewards the rich." Giorgetti: "We're protecting middle-income earners."

The personal income tax cut, intended to help the middle class, actually benefits the highest incomes. The latest round of hearings reveals the flaw in one of the budget's most significant measures. The Bank of Italy is clear: little is being done about income inequality. These findings are concurring with the Court of Auditors, ISTAT, and the UPB.

But Economy Minister Giancarlo Giorgetti dismisses the criticism and, while assuring the "protection of average incomes," advocates austerity to ensure responsible budget management.

The analyses presented by the institutions before the Budget Committees of the Chamber of Deputies and the Senate are in agreement: the two-point cut in the second IRPEF tax bracket on incomes between 28,000 and 50,000 euros affects approximately 30% of taxpayers (over 13 million people) and results in an average annual benefit of approximately 230 euros, but the greatest effects are in fact felt by the highest income brackets.

"Over 85% of the resources" are earmarked "for families in the richest fifths of the income distribution," ISTAT highlights. "In actual implementation, the maximum effect" is seen for "taxpayers with incomes equal to or greater than €50,000 up to €200,000," adds the Court of Auditors. The UPB quantifies the average benefit: €408 for managers, €123 for white-collar workers, €23 for blue-collar workers, €124 for the self-employed, and €55 for pensioners.

The Bank of Italy broadens its perspective and warns: the measures to support household income in the budget do not lead to "significant changes in inequality in the distribution of equivalized disposable income among families." This is all in a situation where "from 2019 to 2023, there was a significant loss of purchasing power of 10%, which has since recovered by only 3 points."

But the Minister of Economy and Finance defends the measure. "It protects taxpayers with average incomes," Giorgetti counters, revealing some disappointment at the criticism. "I have great respect for those who have been heard before me. I have the disadvantage of making decisions and not just being a professor," he says.

The invitation is therefore to also examine what has been achieved over the past three years. "There is a balanced intervention that takes into account the overall measures," emphasizes the minister, who also makes a correction regarding fiscal drag: "For the lowest incomes, up to 35,000 euros has been amply covered."

The defense is all-out. The budget is part of an "uncertain" framework, and the priority is to continue with the "responsible budget policy," which, from ratings to the spread, is bearing fruit, he explains, assuring that a "huge effort" has been made in healthcare and that spending efficiency improvements will not jeopardize interventions. Therefore, if this is the proposal "shared" by the Cabinet, Parliament will be able to amend it, but taking into account the constraints imposed by the "new European parameters," warns Giorgetti, assuring (after the attacks against the Treasury in recent weeks) "the full cooperation of the technical structures" of the Ministry of Economy and Finance.

And while a solution is already being worked on regarding dividends, Giorgetti is open to changes regarding rents, while remaining cautious regarding the League's demands for increased bank contributions ("let's look at the amendments") and the expansion of the debt relief program ("I want to see the coverage"). The minister, who will meet with his party representatives later that evening to review the situation, claims the intervention is for those "who can't cope" but assures that it will be the last. After more than 80 hearings, four rapporteurs were immediately appointed, one from each majority party.

Work in the Senate will get underway next week, with amendments expected by the 14th. The opposition is already on a war footing. "It's a hostile and visionless maneuver," says Democratic Party leader Elly Schlein, who held a three-hour meeting with Confindustria president Emanuele Orsini. With Meloni, the country is in reverse, adds Five Star Movement leader Giuseppe Conte. Meanwhile, the CGIL (Italian General Confederation of Labour) is warming up: tomorrow it will convene its delegates' assembly in Florence, which will also discuss the general strike.

Bank of Italy: "The budget does little to address income inequality among families."

"The difference in tax regimes could have a negative impact by encouraging undeclared short-term rentals," said Mauro Orefice, chair of the coordination committee of the Joint Sections of the Court of Auditors' oversight committee, during a hearing on the budget, commenting on the budget law's measures regarding short-term rentals, which raise the flat-rate tax rate from 21 to 26 percent.

Regarding the scrapping of taxes , Orefice said, "the introduced regulation partially diverges from previous legislative interventions because it limits the possibility of resorting to the simplified settlement only to cases in which the taxpayer has omitted to pay income and value added taxes, which are still subject to a declaration, and to formal and paper-based assessments on the declarations." However, "even if the scope is limited," the intervention "still suffers from the critical issues, repeatedly highlighted by the Court, and, in particular, the possibility that the measure could reduce tax compliance, the risk that the Treasury could become a 'financier' of delinquent taxpayers, incentivizing non-payment as a form of liquidity, and the uncertainty about the effects on public finances."

Bank of Italy: "Tax evasion is damaging; debt relief doesn't boost recovery."

"Tax evasion, as is well known, harms growth and creates inequity, putting honest businesses and citizens at a disadvantage. The budget opens the way to a new "scrapping": a tool that in the past has not increased the effectiveness of revenue recovery." This was stated by Fabrizio Balassone, Deputy Head of the Economics and Statistics Department of the Bank of Italy, during a hearing on the budget before the joint Budget Committees of the Chamber of Deputies and the Senate.

The new simplified settlement will result in "a revenue loss of €1.5 billion in 2026 and an average of €0.5 billion over the following two years," Balassone said. "According to data provided by the Revenue Agency, as of March this year, payments made are approximately half of what would have been due under the various simplified settlements. Similar collection problems could arise with the procedure envisaged by the new simplified settlement," he warned.

Overall, it can be estimated that the measures included in the budget to support household income "do not lead to significant changes in inequality in the distribution of equivalized disposable income among families," Balassone said. The reduction in the personal income tax rate for the second income bracket favors households in the top two-fifths of the income bracket, but with a modest percentage change in disposable income. The effects of the main social assistance measures, however, are concentrated on the top two-fifths of families and are also modest, he explained.

Istat: "Most of the income tax cuts will go to the upper income brackets."

The IRPEF cut envisaged in the budget "would affect just over 14 million taxpayers, with an average annual benefit of approximately €230. The beneficiary families would be approximately 11 million (44% of resident families) and the average benefit would be approximately €276 (each family can have more than one taxpayer)," emphasized ISTAT President Francesco Maria Chelli in his hearing before the Senate and Chamber of Deputies Budget Committees.

"By sorting families by equivalent disposable income and dividing them into five groups of equal size," he continued, "it emerges that over 85% of the resources are allocated to families in the richest fifths of the income distribution: in fact, over 90% of families in the richest fifth and over two-thirds of those in the second-to-last fifth are affected by the measure. The average income ranges from €102 for families in the top fifth to €411 for families in the bottom fifth. For all income brackets, the benefit results in a change in family income of less than 1%.