Impact of the 2026 manoeuvre on households: detailed analysis from Isee to Irpef

The via Nazionale institute estimates that overall the income support measures included in the manoeuvre 'do not entail significant changes in the inequality of the distribution of equivalent disposable income among households,' the Bank of Italy stressed at a hearing in Parliament on the budget bill. "The reduction in the Irpef rate," it clarified, "favours households in the top two-fifths of the distribution, with a modest percentage change in disposable income.

The Irpef cut contained in the manoeuvre will generate benefits for medium and high incomes. According to the estimates made by the Upb, and illustrated at the hearing, the two-point rate reduction will affect just over 30% of taxpayers (about 13 million, those over the 28,000 euro income threshold), leading to a reduction in IRPEF revenue of approximately 2.7 billion, a figure slightly lower than the figure reported in the manoeuvre's technical report. About 50 per cent of the tax saving goes to taxpayers with incomes above 48 thousand euro, who account for 8 per cent of the total. The effects of the reform vary considerably among taxpayers depending on their prevailing income. Within employees, the average benefit is 408 euro for executives, 123 for office workers and 23 euro for manual workers; for the self-employed it is 124 euro and for pensioners 55 euro. In terms of average tax rate, the reduction is between 0.1 percentage points for blue-collar workers and 0.4 for white-collar workers and the self-employed in ordinary taxation.

The UBP also recalled that the various interventions on the Irpef in the last six years (on the structure of the rates, income brackets, deductions for income from work and those for expenses of taxpayers with higher incomes), including the transfer into the Irpef of the income support measures for employees introduced to cope with the inflationary crisis in 2022-23, have increased the progressiveness of the levy and the differences in treatment between categories of taxpayers, as well as making the system particularly complex for employees. The measure envisaged in the manoeuvre under consideration by the Senate mainly benefits the middle and upper middle classes. Therefore, for employees, the reform operates in a complementary manner by reducing the gap in the brackets where previous interventions had produced smaller effects. For pensioners and self-employed workers, on the other hand, the draft budget bill overlaps with the previous ones, determining a further increase in benefits in the same bands.

ISEE

The manoeuvre introduces some changes to the calculation parameters of the Indicator on the Equivalent Economic Situation (Isee). In particular, the threshold for excluding the value of a house from the calculation of real estate assets is raised to 91,500 euro. This threshold is further increased by EUR 2,500 for each child after the first (in the current legislature the threshold is set at EUR 52,500 increased by EUR 2,500 for each child after the second). In addition, the system for calculating the equivalence scale is changed by increasing the surcharges for households with at least three children and introducing a new surcharge for households with two children as well. The value of the Isee obtained in this way is to be taken into account only when determining eligibility for five social transfers: the inclusion allowance and work training support, the universal single allowance, the day-care centre bonus, and the newborn bonus. The changes to the calculation entail a reduction in the indicator value for households living in a house owned and/or with more than one dependent child. This reduction, Istat further notes, may lead to a higher amount in social transfers or access to the transfers themselves, depending on how the Isee enters into the definition of the parameters of the measure. Overall, the changes to the calculation of the Isee result in an average annual benefit of 145 euro for about 2.3 million households (8.6 per cent of resident households). From a distributional point of view, the average benefit is higher for the poorest households (263 euro, resulting in an average change in household income of 2.2%). The statistical agency points out that these households represent a very small share of the households benefiting from the rule because they generally already met the access requirements and received relatively higher transfer amounts for the five measures considered. Almost 70% of the households benefiting from the changes are in the middle fifths (third and fourth) of the distribution of equivalised household income.

For the purposes of access to some important transfers (universal single allowance, inclusion allowance, support for training and work, nursery school bonus and newborn bonus), Bankitalia recalled in the hearing, the calculation of the Indicator of the Equivalent Economic Situation is modified by raising the threshold of exclusion of the first home owned (from €52,500 to €91,500) and by revising some parameters of the equivalence scale with the aim of reducing the index for families with at least two children. According to official assessments, the higher expenditure would amount to just under 0.5 billion per year in the three-year period 2026-28. According to the micro-simulation model of the Institute of Via Nazionale, for the families that would have a lower ISEE as a result of the change and would be entitled to the above-mentioned transfers, the indicator would be reduced on average by EUR 2,350. It can be estimated that for this same group of families the share of first homes completely excluded from the calculation of the Isee would more than double, rising to almost forty per cent.

In general, Bankitalia observed that 'the effects of the main interventions on social assistance are concentrated on the first two-fifths of households and are also modest. The changes to the Isee calculation, if applied also in the case of benefits subject to rationing, such as the attendance of nursery schools and school canteens, would change the order of the families potentially interested in benefiting from such services, favouring the more numerous ones and those who own their homes. According to our estimates," concludes the institute of Via Nazionale, "the families potentially disadvantaged would include the younger ones and those with foreign citizenship.