Analysis
ISTAT and Bank of Italy say the government’s budget rewards the richest
ISTAT and the Bank of Italy have provided the tools to understand that the government’s touted “support for the middle class” is actually a lever to increase inequality.
Since the budget is actually written by Brussels, in anticipation of the monstrous increase in military spending promised to NATO and Trump (5% of GDP within ten years), according to Economy Minister Giorgetti, you have to “play defense.” Italy is not a “dream team” and doesn't have the means to “turn the world upside down.”
Although he’s a known fan of the perennial underdog UK soccer team Southampton, Giorgetti’s metaphor of choice here was basketball, a sport in which Italy is “not a great power” like the United States, which can dictate terms to its faithful allies (or rather subjects). This applies both on the court and on tariffs, weapons and gas. One can do nothing but obey and accept “reality.”
With this sporting metaphor to illustrate his capitalist realism, Giorgetti tried on Thursday to shrug off the storm of criticism that has come down on the government from Italian national statistics bureau ISTAT, the Bank of Italy, the Court of Auditors and the Parliamentary Budget Office (UPB). Resentful of the critiques from those he dismissed as “professors” (in a clear echo of Matteo Renzi), he launched a populist attack on the independent authorities that had dared to tear “his” budget law to pieces.
The Meloni government’s most “sporty” minister thus closed the exhausting cycle of 80 hearings on the most mediocre budget law of recent years. It isn't mediocre for lack of ingenuity. It is mediocre because the executive signed the EU “stability pact” and is now squeezed until 2029 by the medium-term structural budget plan dictated by the EU Commission. In force since 2024, the Pact imposes an average annual net spending growth limit of 1.6% on Italy. This constraint has forced a “zero impact” budget that fails to address any of the structural problems of an economy already on the ropes and is full of regressive measures instead. For example, the cut in the second personal income tax (IRPEF) bracket from 35% to 33% gives a handout to those with incomes of €48,000 and up, while penalizing the low-income earners under €28,000 it was supposedly aimed at.
The president of the UPB, Lilia Cavallari, explained that the two-point cut will primarily benefit only 8% of the 13 million employees it covers. This 8% will receive almost half of the €2.7 billion allocated. According to the UPB, managers will see an average benefit of €408 per year (€34/month); white-collar workers will get €123 (€10/month); and blue-collar workers just €23 (€1.91/month). Those with the least income will get the least. This masterpiece of inequity was deemed necessary to compensate for incomes penalized by the “tax wedge cut” in previous years, but the UPB notes the effect is like a too-short blanket: when you pull it one way, it always leaves another part uncovered.
This is why the UPB stressed the need to “think about non-emergency interventions, outside the tax system,” to increase wages. This is an issue the government is ignoring as it continues to make the income tax system worse. This has caused another problem: the 5% “flat tax” on new contract pay raises for incomes up to €28,000, which will actually increase the marginal tax rate by 30% on modest incomes. The government had to cobble together an ad hoc remedy. According to the UPB, this crisis cannot be solved with “temporary remedies” that create “problems of horizontal equity,” especially with 40% of private employees having already renewed their contracts before 2025 and thus not standing to benefit from the provision.
ISTAT and the Bank of Italy have provided the tools to understand that the government’s touted “support for the middle class” is actually a lever to increase inequality. Francesco Maria Chelli, president of ISTAT, confirmed that over 85% of the resources would go to “households in the richest 20% of the income distribution.” The lack of positive impact of the government’s plans was also noted by Fabrizio Balassone of the Bank of Italy, who stated there will be no significant changes in income inequality. The government’s measure on lowering the tax on pay raises will have a “limited” impact on contract renewals and its implementation is “uncertain,” as is the extent to which workers will be able to access it in sectors such as tourism and trade, the most affected by income erosion. And many contracts are outside the window to which the tax exemption on increases applies.
The “scrapping” of old tax bills (amnesty), a flagship measure for the Lega, saw a lot of criticism. It is “a tool that has not increased the effectiveness of revenue collection in the past,” the Bank of Italy argued. Mauro Orefice of the Court of Auditors warned that the Treasury may end up “financing tax-delinquent taxpayers,” highlighting a loss of €1.5 billion and the fact that the state will not collect anywhere near the figures promised by the government.
Regarding the new bank and insurance taxes, another pillar of the budget, the Court of Auditors noted that the composite package of “taxes” is mostly just an advance on future taxes. From 2029, this will result in lower revenues, creating a hole in the budget for years to come. The UPB raised the same issue, pointing out that the funding sources are unstable.
The hearing cycle was a disaster for the government, which is plowing ahead regardless, under the banner of the rules of austerity. This much was clear when Giorgetti again took credit for “keeping the books in order” and warned Parliament to observe full contrition when submitting amendments. Everything is already set in stone. Rearmament will be discussed again in the spring, once the deficit is back under 3% of GDP. Then it’s time for the arms race to begin. Giorgetti has promised that healthcare will not be touched – it will simply continue to be underfunded relative to its needs. No promises on everything else. The cuts to ministries and local authorities are just a foretaste of what’s coming.
Originally published at https://ilmanifesto.it/la-chiamavano-iniquita-irpef-ai-dirigenti-17-volte-il-beneficio-degli-operai on 2025-11-07