Italy's legislative body, the Senate, has officially approved the 2025 Budget Law, confirming its commitment to bolster the economy through various financial measures aimed at families, businesses, and the healthcare system. This year's law emphasizes fiscal responsibility, supporting medium and low-income earners and addressing social welfare needs amid economic challenges.
The Budget Law, totaling around 30 billion euros, focuses primarily on reducing the tax wedge and restructuring personal income tax (IRPEF). While it maintains the existing three-rate income tax structure, the government highlights plans to support job creation and family welfare expenses. Prime Minister Giorgia Meloni described the-approved budget as “a measure of great balance, which supports medium-low incomes and helps families with children” and called increased funding for health services “unprecedented.”
One of the key pillars of this Budget Law is the tax wedge reduction initiative, which, for the first time, extends benefits to employees earning up to €40,000, primarily benefiting those with incomes below €20,000. Specifically, the cut will provide tax-free bonuses to employees earning less than €20,000 and gradually decrease tax relief for those making between €20,000 and €32,000. This structure not only addresses the immediate financial pressures on working individuals but also aims to stimulate consumer spending.
Nonetheless, the law has drawn criticism from various stakeholders, including business owners and professionals, who feel the proposed measures fall short of addressing their needs. Although it was anticipated by many businesses and taxpayers alike to see additional reductions or reforms to taxes, particularly IRPEF, such expectations have largely gone unmet. Expectations for more aggressive steps to alleviate middle-class financial pressures, particularly with respect to tax reforms, were also dashed.
Another notable introduction is the premium IRES (Corporate Income Tax), which will decrease the rate from 24% to 20% for companies reinvesting 80% of their profits, underpinning the government's aim to energize the economy through increased productivity.
The family policies embedded within the Budget Law include the reintroduction of the “baby bonus,” providing €1,000 for every child born or adopted within the year, supporting efforts to combat declining birth rates. These measures reflect the government's commitment to addressing demographic challenges following decades of declining fertility rates.
Beyond families, the 2025 Budget Law allocates resources to improve public infrastructure, including major initiatives like the long-anticipated bridge over the Strait of Messina and enhancements to the national rail system, which are envisioned to improve connectivity and economic integration, particularly for regions historically lagging behind.
Changes to tax deductions reflect the government's emphasis on support for households, with adjustments limiting deductions for higher earners and implementing new thresholds based on family size for claiming child-related tax benefits. Notably, disposable income levels for families with children remain above 75,000 euro, applying new caps on tax deductions based on total income and the number of children.
Economic analysts suggest the measures proposed represent both continuity and change, with the government seeking to stabilize economic policies established under previous administrations. While the measures have triggered debate among politicians and the economy’s advocates, there remains hope among citizens for significant reforms accompanied by tangible outcomes.
The law also includes provisions for public sector employment aimed at increasing the employability of women and combating inequalities, particularly for mothers returning to the workforce. Tax breaks for childcare and after-school activities are anticipated to facilitate the reconciliation between work and family care responsibilities, reflecting the trends of the labor market shifting toward inclusivity.
Despite the government's purposeful initiatives, there are concerns about the long-term viability of funding these measures amid the European Union's strict fiscal rules. The Balancing Act between accountability, economic stimulation, and maximizing public resource efficiency remains at the forefront of political discussions, with critics arguing for bolder steps toward genuine reform of the taxation framework.
The passage of the Budget Law marks the third such budget approved since the current government took office and does so amid the waves of public scrutiny and political challenges evident during the process. Prime Minister Meloni's administration will now face the task of implementing these measures effectively as the nation watches closely, hoping for economic stability, job creation, and improved welfare for all Italians.
