italian budget bill would raise taxes on high incomes
The center-left Italian Government appears headed for a 30 billion Euro budget bill which would extend a supposedly "temporary" 43 percent income tax rate to taxpayers with incomes exceeding 70,000 Euro. (The existing law applies the rate to those over 100,000 Euro only.) The bill would also increase the no tax area (i.e., zero bracket amount) to E8,000 for workers and E7,500 for retirees, and substitute credits for deductions in a manner that would reduce taxes for those with income below 40,000 Euros. Financial incomes, most of which are now taxed at a 12.5 percent rate, would increase to a flat 20 percent. Changes would also be made to reduce the so-called "fiscal wedge" (cuneo fiscale)--essentially, the cost of hiring an additional worker--as repeatedly promised in the election campaign. The bill also includes a penalty tax on SUVs; increased expenditures to counter tax evasion; tax and nontax benefits for the South (a perennial feature of Italian politics); and numerous changes to spending policies, designed--no easy feat--to stimulate the economy and simultaneously reduce Italy's deficit to the acceptable EU range. A proposal to institute a new successions (estate) tax, which had also been an election promise, was left out of the bill, presumably because of higher than expected tax revenues (previously blogged this summer). The measure is currently being refined at the administrative level and is expected to be discussed in Parliament beginning October 16.