Fifty Years of Italian Personal Income Tax

Abstract

This paper examines the evolution of the personal income tax (IRPEF) over fifty years. It describes the evolution of progressivity, initially based on a bracket structure, while the current dominant role is played by decreasing tax credits, creating excessive elasticity for most incomes. Furthermore, over time, many incomes that were initially included in the IRPEF have been progressively excluded. The system requires a thorough overhaul; the proposals presented are based on the dual system, in which income from work and income from capital are classified under two different taxes. The bracket structure is substituted by a continuous function for all tax payers.