Cutting the tax wedge with the new three-rate Irpef: benefits of up to 120 euros per month. Here’s who for


By John

The combination of the wedge cut with the new Irpef hypothesized in view of the maneuver, i.e. with the lowering of the Irpef rate from 25 to 23% for the second income bracket (from 15 thousand to 28 thousand euros), produces an improving effect on the envelope monthly pay which varies from 67 euros for incomes of 15 thousand euros to 120 euros for incomes of 35 thousand and then reduced to approximately 22 euros per month for incomes above 35 thousand euros which do not benefit from the tax wedge cut.

This is what emerges from the simulations formulated by the National Accountants Foundation. The calculations are made assuming a re-proposal of the wedge cut currently in force (7 points for incomes up to 25 thousand euros and 6 for those up to 35 thousand euros), which expires at the end of December, but which the government has already said it wants to confirm also for 2024.

The new Irpef with three brackets could be associated with this measure, merging the first two (the one up to 15 thousand euros with a 23% rate and the one from 15 to 28 thousand euros with a 25% rate) with the same 23% rate.

From the estimates of the accountants it appears that if in the first bracket (the one up to 15 thousand euros) the benefit of the wedge cut, equal to 67 euros, would remain unchanged with the introduction of the new Irpef, things change for those who earn 20 thousand euros: the 77 euros of benefit deriving from the wedge cut, would rise to 84 euros per month with the addition of the new Irpef. In the 25 thousand euro income range, the benefit of 96 euros deriving from the wedge cut rises to 112 euros with the new Irpef. It also reaches the same level for those who earn 30 thousand euros, but in this case with an increase of 22 euros compared to the 90 euros of benefit brought by the wedge cut alone. For those who earn 35 thousand euros, the combined wedge + Irpef would bring the benefit from 99 euros to 120. Above 35 thousand euros, however, cutting the wedge alone would not give any benefit, while adding the new Irpef would bring 22 euros per month.

Below is the table with the monthly increase in the employee’s paycheck spread over 12 months:

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15,000 | 67 | 67
20,000 | 77 | 84
25,000 | 96 | 112
30,000 | 90 | 112
35,000 | 99 | 120
+35,000 | 0 | 22