By exceeding the income threshold of 35 thousand euros by just one euro, you lose 1,100 euros a year. If the decontribution were to become permanent it would induce a strong disincentive to work and make it more complex to reach contractual renewal agreements
2′ reading
The cut in the tax wedge planned for 2024 presents a “trap”: by exceeding the income threshold of 35 thousand euros by just one euro, 1,100 euros per year are lost. The alarm comes from the PBO, during the hearing before the Senate and House Budget Committees on the measure.
A phenomenon which, warns President Livia Cavallari, “would take on substantial importance if the decontribution were to be transformed from a temporary to a permanent intervention” because “on the one hand it would induce a strong disincentive to work and, on the other, it would make reaching agreements more complex of contract renewal, an issue that takes on particular importance following the erosion of purchasing power produced by inflation”.
The increase in gross salary, Cavallari predicts, «should in fact be such as to also compensate for the loss of the contributory benefit, also discounting the already high marginal rates on the tax side. Corresponding to the second threshold, in the current situation, the necessary increase would be around 2,000 euros”.
The cut by bands
How is it possible? The wedge is cut in bands: the reduction of 7 percentage points is applied monthly to workers whose reference salary (taxable social security amount determined monthly and including the thirteenth salary installment) does not exceed 1,923 euros, or approximately 25,000 euros per year considering thirteen monthly payments; the discount drops to 6 percent on the entire salary when it exceeds the threshold and up to the amount of 2,692 euros, approximately 35,000 euros per year.
The paradox
The relief reaches a maximum of approximately 1,600 euros at the upper limit of the first band and of just over 1,900 euros at the upper limit of the second band. But the application of the discount by bands and not by brackets means that while exceeding the first one by just one euro leads to a reduction in the discount (and therefore a reduction in disposable income) of around 150 euros, the reduction in disposable income is instead much greater (around 1,100 euros) if the gross salary exceeds the threshold of 35,000 euros.
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2023-11-15 07:52:30
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