Salvini’s VAT cut does not hold and damages the center right

The proposal to cut 20,000 million VAT, advanced in recent days by the Matteo Salvini League, has the bitter aftertaste of improvisational carelessness and the weakening of the credibility of those who, within the center-right, have been fighting for years for a Tax collector. fairer and for months for specific aid and not rain. Whether you look at it from the side of temporary aid in the face of the current situation, or if you look at it from the side of the proposed tax relief regime, Salvini’s is a proposal that does not hold up and damages the battles of the entire center-right. .

If the proposal is functional to transitional aid, it is quite clear that the rate cuts do not distinguish between those that need and those that do not. The ineffectiveness of investing 20 billion of valuable financial resources in this way is so obvious that it needs no further comment. If the proposal is, on the other hand, functional to a total reduction of the tax burden, with a view to lubricating the restart, it is equally evident, at least for those who have always believed in the seriousness of the center-right proposals, that it betrays a In a truly sensational way, what has always been the priority for us: reducing income tax, starting with the middle class.

Of course, cutting taxes is always an economic policy to evaluate positively. However, it is clear that such an operation cannot be done lightly, regardless of the economic context in which it occurs, the balances of public finances that must be taken into account and the type of taxes that are to be cut.

Let’s start with a trivial consideration. Taxes, however badly borne, are necessary to finance state expenditures. And if these, the taxes, are not enough to cover all the expenses, the State must borrow, as the Italian State has always done in recent decades. Complicit in a pandemic crisis, Italian public finances reached a new historical record for public debt, accompanied by the return of the double-digit deficit in the exact historical context in which, with difficulty, Italy was heading towards a balanced budget. Therefore, the excess deficit this year and the next must be considered transitory and it is not possible to foresee unlimited expansionary policies in the coming decades. After this crisis, hopefully soon, like it or not, we will have to rethink the sustainability of our public finances. Therefore, if you want to reduce taxes, it is necessary to select carefully and wisely which taxes to cut, knowing that you cannot cut everything.

The help, from this point of view, comes from the economic theory of taxation and empirical evidence, which unequivocally shows that direct taxation (income from work and business) is more damaging to the economy than it is. indirect taxation (consumption), because it causes greater distorting effects on the supply of labor and capital and, consequently, on GDP and the welfare of society. In other words, IRPEF and IRES are more distorting taxes for the economy than taxes like VAT. Not in vain, this empirical evidence has been endorsed by the European Commission, which has been, in its country of Recommendations, inviting the Italian Government to lower income taxation in exchange for an increase in consumption taxation. A tax change that Brussels considers convenient for our country. A suggestion, however, that has always been neglected, despite the fact that, recently, former Minister of Economy Giovanni Tria had moved to implement such a policy.

Even in a huge crisis situation like the current one, resources can fail, but the economic principles on which decisions must be made must not fail. Therefore, if there is the possibility of cutting taxes in the next budget law, it is necessary to think about cutting taxes on income, not consumption. Lowering VAT may seem like an attractive proposition, but it is not the best the government can do. To increase consumption, it is not necessary to cut rates, but it is necessary to lower taxes on household income, so that the net salary increases and consequently the purchasing power, which can be used to increase demand. But with the additional benefit of reducing the cost of labor, promoting supply and employment. From any point of view, the IRPEF cut is higher than that of VAT and, therefore, it is what should be supported.

What credibility can our single rate proposal have, if instead of steadfastly pushing it forward, we continually move the shot by jumping from pole to branch, depending on how we woke up that morning? We have always been aware of the great difficulty in quickly reaching a uniform income tax for all, but we also know that it constitutes a useful political beacon to guide all efforts to gradually move in the right direction. Reaching the middle of that road, in a legislature, would be a great success for all those taxpayers who today pay 38% already from 28,000 euros. Here is a serious reformism goal that could unite the majority and the opposition, outside any ideological scheme and any unnecessary opposition.