Tax yes to horizontal equity: what changes for workers and retirees?

Tax reform identifies the increase in economic growth and birth rate by reducing the tax burden, increasing the efficiency of the tax structure and determining supportive tax mechanisms, among the main objectives of a general nature. to families, workers and businesses”. This is what we read in Palazzo Chigi’s press release after the cabinet passed the tax bill. The executive has outlined the directives that should inspire the new reform, but these are yet to be written in detail. In other words, not the actual measures , we only know the general principles.

The government will be given a period of twenty-four months from the date of entry into force of the law to “issue one or more statutory decrees for an organic and comprehensive revision of the tax system”. Deputy Economy Minister Maurizio Leo predicted that “a reform module” will come into effect “from January 2024” and assured that “we will find the necessary resources and scope”. We have set our priorities and we will stick to them,” he said. In particular, the three personal income tax rates will come into effect “from next year”, but “I will be cautious about the figures because the authorizing law does not dictate the exact figures, the implementing decrees will then define them as: as well as resources without over budgeting”.

Tax reform and horizontal equality

What should workers and retirees expect? Leaving aside the review of Irap, Ires and VAT for now, let’s focus instead on Irpef, a personal income tax that then has a direct impact on the amount of social security payments and other income, as well as payrolls. The reform we quote from the Palazzo Chigi document envisions a review of the entire mechanism for taxation of personal income, in order to gradually achieve the goal of “horizontal equality.” This is a central point of the system envisioned by the FdI and other majority forces and needs to be further explored.

The phrase “horizontal equality” in the tax field refers to the principle that those with the same ability to pay should be taxed equally. Regardless of the nature of their income.

As the text puts it, first of all, “an aim to be achieved through the determination of a single tax-exempt band and the same tax burden, which particularly promotes the equivalence between employment income and retirement income, regardless of the different categories of income generated”. In fact, today employees, retirees and self-employed can count on a significant advantage over employees, this consists, first of all, of Renzi’s legacy of 80 euros, which later became 100 with Conte. This means that those with a secondary employment contract for the same income pay less tax. This means that the old Renzi bonus will be withheld In fact, it seems unlikely that the executive will approve a reform that is humiliating for a significant group of taxpayers: from a political and consensus point of view, that would be a great goal in itself (unless it is decided to provide other reparations).

The majority can then decide to reduce the tax differentials between workers and retirees by providing tax benefits to retirees without penalties to retirees. But in this case, we need to understand how many resources will be needed and where to find them. As readers will understand, we can only make assumptions at the moment: we know almost only the inspiring principles of reform, not the actual measures.

Set-off of contributions and work-related expenses

Another means of ensuring horizontal justice, which is the pole star of the executive, is “the possibility of all taxpayers to make compulsory social security contributions when determining the income category and, in case of inadequacy, to deduct the ‘excess’ total income”. numbers) and there is a passage on increased flat tax that provides a reduced Irpef rate in a taxable base proportional to the increase in income during the tax period compared to the highest period income among those for the three previous tax periods”.

Another prominent point of the reform is that “expenditures for the production of employee and similar incomes can be deducted from tax, albeit at a flat rate”. The latter would be a clear advantage for employed workers who could deduct expenses related to their job, such as transportation, from taxable income. On the other hand, as we explained above, considering that employees already have tax advantages, it is a measure that partially contradicts the goal of achieving “horizontal equality” among all taxpayers.

Then it will be necessary to understand what the majority means by “revision of tax expenditures” and what concessions will be made between the 600 and broken items that are pushing the budget, which is a detail that is unknown at the moment, but certainly not irrelevant. Finally, as Mef points out, another goal is to equalize the tax-free area of ​​employees and retirees, or the income threshold below which personal income tax is not paid. Today, the first is set at 8,174 euros, and the second at 8,500 euros.

What is changing with the new reform and unknown income tax?

In general, the will of the majority is to reduce taxes. What is certain is that the insistence on the horizontal equity principle may suggest that beneficiaries of this deduction may be, above all, today’s most disadvantaged taxpayers, retirees and self-employed people, negative workers (but who will receive the deductible). working expenses). However, we reiterate that the measures must also be defined concretely. It is legitimate to assume that for reform to take definite shape, the government must find a team within itself. However, the focus of the new system remains on the revision of personal income tax brackets, which will increase from four to three. The majority should decide which income groups are to be preferred. And an important part of consent is played out in that decision.