The Italian government has recently passed its 2025 budget, which will introduce significant tax reforms and economic measures aimed at alleviating the fiscal burden on families and workers. The approval of the budget came with notable support from the Senate, where it secured 108 votes for and 63 against on December 28, 2024. Prime Minister Giorgia Meloni expressed satisfaction with the outcome, emphasizing the budget's role as balancing, supportive to middle and low-income individuals, and providing unprecedented support for health care.
This budget is characterized by two main features: cuts to the tax wedge and the revision of the income tax brackets, or Irpef. The cuts to the tax wedge aim at reducing the cost of labor, thereby allowing workers to take home more of their earnings. "It is a maneuver of great balance, supporting middle and low-income earners and aiding families with children," Meloni stated.
The budget includes specific adjustments to the personal income tax system. It formalizes three tax brackets, simplifying the previous structure from four. Under the new rules, individuals earning up to €28,000 per year will pay 23% tax, those making between €28,001 and €50,000 will incur a 35% rate, and individuals earning over €50,000 will face the highest tax bracket at 43%. This restructuring is expected to primarily benefit low and medium-income earners, boosting their net income due to higher deductions and reduced taxes.
Alongside these changes, the budget introduces various incentives for families. A bonus of €1,000 will be provided for every child born or adopted starting January 2025 for families earning below €40,000 annually. There will also be enhancements to existing childcare grants, raising benefits significantly for families within the same income threshold.
Critically, the budget has faced scrutiny from the opposition, led by the Democratic Party’s Elly Schlein, who claimed the maneuver limits parliamentary discussion and diminishes public services. She pointed out the minimal increase to the minimum pension, arguing it starkly contrasts with the significant reimbursements allocated to government ministers.
The opposition also criticized the government’s focus on large infrastructural projects rather than meeting the immediate needs of public health and social welfare. The projected allocation for the national healthcare service will increase to €141.3 billion by 2027, but critics argue the budget still slashes existing health funds.
Another major point of contention within the budget relates to pensions. While minimum pensions will increase by 2.2% for 2025, opportunities for early retirement have been maintained. New regulations will allow workers to retire at 64 years under specific conditions, combining mandatory and supplementary pension funds.
The budget sets aside significant funding for tax breaks intended to spur job creation. Special tax deductions on new hires will continue, with the government offering remarkable incentives for hiring vulnerable workers.
While the measures receiving applause focus on supporting low-income workers, critics fear the budget could inadvertently raise taxes for certain middle-income groups, particularly those earning between €32,000 and €40,000. According to projections, deductions will cease for this income bracket, raising effective tax burdens due to reduced aids.
Despite these concerns, Meloni's administration emphasizes the intent to reshape economic support for families and businesses. New initiatives include allowances for families with three or more children, which will relieve financial pressures on larger households. A special fund, the 'Family Dote Fund', will also be launched to support extra-curricular activities for children from families earning less than €15,000 annually.
For businesses, the budget promises to rejuvenate investments by reducing the corporate tax rate for those companies willing to reinvest significant portions of their profits. This is expected to incentivize business growth and improve employment rates within the country.
Meanwhile, strict cutbacks on tax deductions are included as well, targeting wealthy individuals. New caps will limit deductions for those earning above €75,000, counterbalancing increased incentives for lower income brackets.
Overall, the 2025 budget reflects the Meloni administration's agenda to stimulate economic growth through tax relief, with hopes of decreasing unemployment rates and increasing family welfare. The government maintains this approach is necessary to bolster economic recovery post-pandemic, yet the colors of contention over fiscal equity and social responsibility loom large as the new regulations come to play.
The debate continues as the budget provisions are expected to impact both the daily lives of citizens and the broader economic framework of Italy. The government and opposition will monitor the effects of these changes as they take shape throughout 2025, determining whether these reforms succeed or fall short of their ambitious goals.
