Personal Income Tax, Reform and New Rates: How They Will Change and Who Benefit From Them, Examples to Understand

Irpef, new rates: more generous salaries?

More generous salaries? It can only be seen through Irpef Reform Project Which are supposed to arrive in March for examination by the Cabinet in which Vice Minister Maurizio Leo is called to serve. After the amendments made to the 2022 Budget Law to the 2022 Budget Law and the intermediate interventions in the 2023 Budget Law, in fact, the construction site of the tax reform that was halted in the last legislative body must be restarted.

There are many hypotheses in circulation, but one thing is certain: the Irpef cut must be accompanied by a revision of the tax cuts, otherwise the benefit can only relate to income above 34,000 euros. Among the proposals in circulation, in fact, it is envisaged to revise tax rates and brackets for those with low and medium incomes in which the majority of employees fall, however it is necessary to take into account the calculation mechanism of Irpef which can identify unpleasant surprises.
Click here to see the hypotheses being studied about the new rates and brackets: simulations and effects on taxes to be paid.

Also read: Tax reform: Irpef will have only 3 rates, flat tax also for employees and pensioners

the premise

The idea is to look at the middle class and therefore income between 15 and 50 thousand euros. There are two most prevalent hypotheses. The first envisages the unification of the second and third tranches of income with the application of a higher rate than is currently envisaged. However, the second one will reduce the brackets to three but it will affect all income groups.
Click here to see the hypotheses being studied about the new rates and brackets: simulations and effects on taxes to be paid.

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The first premise

The first hypothesis envisages three rates and envisages leaving the first income bracket to which the 23% rate is applied unchanged at €15,000, while the second category would rise to €50,000 compared to the current €28,000, an increase of three points from the applied rate, i.e. 28% compared to 25% that you are currently paying. No changes for the last income bracket, thus 43% above €50,000.

The second hypothesis

On the other hand, the second hypothesis still states three income thresholds and three tax rates but redraws both the first and second brackets. The first income tranche will rise to 28,000€, without prejudice to the rate of 23%, while the second tranche will always apply up to €50,000 as in the first hypothesis but the rate will be 33%. No change for the third tranche, which will remain at 43% for entries over €50,000.


 «When some projections are made, what emerges is that in the case of Hypothesis 2, the savings will affect all taxpayers, while in Hypothesis 1, incomes amounting to about €34,000 will see the total tax payable increase; Total tax because our tax system provides for corrections through the mechanism of deductions according to the type of income – Comments Giuseppe Buscema, Fondazione Studi Consultanti del Lavoro expert -. Therefore, it will also be necessary to intervene in tax cuts for work otherwise the risk is that the Irpef reform translates into an increase in the tax already payable ».

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In Hypothesis 1, a worker with an income of €20,000 per year would receive a tax increase of €150 per year, 2% more than today; With an income of €50,000, he would save €1,150, which is about 8% of what he is currently paying. In hypothesis 2, on the other hand, both taxpayers would have an advantage but with significant differences: with €20,000 of income there would be a reduction of €100, or just over 1%; With €50,000, on the other hand, the reduction would be €700, just under 4%.
Click here to see the hypotheses being studied about the new rates and brackets: simulations and effects on taxes to be paid.

Thelma Binder

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