The reduction in the tax wedge is a fact, but the measure approved by the Council of Ministers is numbered. In the sense that it will remain in effect until (inclusive) November. We’ll see. The challenge to the executive, as previously announced by Labor Minister Calderone, is to make it structural. But resources are needed. Obviously it won’t be easy to find. But let’s go in order.
One of the points that the opposition has emphasized a lot, criticizing the government’s regulation, is the very temporary nature of the intervention in the tax cut. For the avoidance of doubt, it should be said that the cuts approved by the Draghi government are also “limited”. It is actually the fourth reduction in labor taxes in just over a year, passed by the incumbent executive. With the 2022 budget law, a contribution exemption of 0.8 percent was already introduced for incomes up to 35,000 euros per year, followed by a further 1.2% with the subsequent Aiuti bis decree, resulting in a total cut of 2%. . A measure approved by the current majority, allowing the tax wedge to be reduced to 3% for incomes of up to 25 thousand euros, with a total expenditure of 4.6 billion euros in the final maneuver.
With the labor decree, the percentage increased further, reaching a total of 6 points for incomes up to 35 thousand euros and 7 points for incomes up to 25 thousand euros. The growth of payrolls is therefore inevitable (estimates here), but the measure will only remain in effect from July to November. Around 11 billion euros will be needed to refinance for 2024 as well. Which is not less. But they want to do more at Palazzo Chigi. “The commitment is to work to create the conditions that will make the intervention in the tax wedge structural,” said Labor Minister Marina Calderone. After all, lowering the tax wedge is one of the interventions that Prime Minister Giorgia Meloni has advocated for the longest time.
However, it is not said that the measure will be renewed as it is. According to media rumors, one of the hypotheses considered is to convert the decrease in the contribution rate into an increase in personal income tax deductions for employees. Technical details of relative interest to workers. The trick is to steadily increase wages, which are doomed to rise as a result of the cut, but only for five months. We’ll talk about that shortly.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
