Effective marginal and average tax rates in the 2017 Italian tax-benefit system

Abstract

The personal income tax-benefit system influences, through marginal and average tax rates, income redistribution, labour supply, and tax evasion. In this paper we present, for the main taxpayer types and income levels the statutory and implicit marginal tax rates generated by the Italian personal income tax-benefit system components (social contributions, personal income tax, income type deductions, family-related deductions, family allowance, local surtaxes, and the "80 euro monthly bonus") along with the effective marginal tax rates deriving from their interaction. These tax rates are computed both for hypothetical taxpayer types (employee, retiree, self-employed with and without dependent family members) and using a microsimulation model based on a representative sample.The results show that the Italian tax-benefit system generates a broad range of effective marginal tax rates, with positive and negative values, determining, in some cases, also "poverty traps" (that is a marginal tax rates higher than 100 percent). The marginal and average tax rates are also sometimes decreasing with growing taxable income, while at a low level of income we have such high tax rates that a disincentive for labour supply may result. With this evidence, a correction of the Italian tax-benefit system appears desirable both to preserve a more efficient income redistribution as well as labour supply incentives.

Epidemics and macroeconomic outcomes: Social distancing intensity and duration

“…Italian estimates show that and that recovery takes about three weeks ( Remuzzi and Remuzzi, 2020 ), thus we set from which it follows that . The instantaneous rate of time preference is set at ( Barro and Sala-i Martin, 2004 ) and the tax rate at ( Di Nicola et al, 2017 ), the effectiveness of treatment measures is calibrated as in order to ensure that the optimization problem is well defined (i.e., the constraints and are met), the degree of health concerns and the effectiveness of social distancing have been normalized to unity, and for simplicity, while is varied between different levels to show the implications of different initial conditions on the optimal policy. As today, the number of COVID-19 cases at national level (about 300,000) is completely negligible (i.e., considering that Italy is populated by 60,461,826 people, it amounts to a share of infectives of 0.0049) thus we can apply our early epidemic stage model to characterize the national dynamics.…”

Working Horizon and Labour Supply: The Effect of Raising the Full Retirement Age on Middle-Aged Individuals

“…An early retirement scheme is available only for women, but it entails a rather large penalty in terms of pension benefits. On the other hand, while retirement is not mandatory and working after retirement is not prohibited, 13 the implicit tax on continuing to work after having reached eligibility 14 is rather high (Di Nicola et al, 2017). Thus, individuals have strong incentives to stop working as soon as they have reached the full retirement age.…”