As the Budget Law 2026 approaches, the topic of tax cuts for the middle class is back on the agenda. Although the intention is laudable, the reform hypotheses on the table have a very different impact.

The current numbers of our IRPEF system show an anomaly that is unique in Europe: a disproportionate tax burden on the very income bracket that, in fact, bears the bulk of the revenue. Let us analyse why.

The Italian anomaly: who really pays IRPEF?

The official data from the MEF and the Agenzia delle Entrate are clear and, for some, disconcerting:

1. Load concentration: In 2024, 76.87% of the entire IRPEF is paid by only 11.6 million taxpayers (about a quarter of the taxpayers). The remaining 31 million declarants cover only 23.13% of the total.
2. Theweight of the ‘middle class’: The group that contributes the most is the income bracket of between 55,000 and 200,000 euros: although they only make up 5.8% of the taxpayers, they generate almost 30% of the total revenue. It is they, together with higher incomes, who are the country’s tax engine.

The thin red line at 50,000 Euro

Basically, in Italy you start paying the maximum tax rate of 43% (which, added to local surtaxes, can easily reach 45% and more) on every euro earned above 50,000 euro gross. This income corresponds to a net monthly salary of around 2,500 euro.

In other European countries (Germany, France, Great Britain) such a high tax rate is only triggered at income levels 3 or 4 times higher. This group of workers, which in Italy is fiscally considered ‘rich’, is instead the backbone of the country, but is deprived of ISEE deductions and benefits.

The two options for the tax cut: Coffee vs.

The government is considering two main hypotheses for reshaping the tax brackets. The difference between the two options is crucial and profoundly affects the real benefit for families.

Option 1: Minimum cut (The ‘Coffee a day’ )

• Proposal: Raise the tax rate for incomes between €28,000 and €50,000 from 35% to 33%.
• Impact: A cut of just two percentage points on the affected portion of income (€22,000).
• Result: The maximum tax rebate would amount to about EUR 440 per year (EUR 22,000 ×2%). An almost imperceptible benefit in the monthly paycheck.

Option 2: the structural breakthrough (the sonsistent discount)

• Proposal: Extend the reduced rate (e.g. 33%) up to EUR 60,000 annual income.
• Impact: This is a real manoeuvre on the middle class, because it reduces the marginal tax rate on the most affected income bracket (50,000 € – 60,000 €) by as much as 10 percentage points.
• Result: For those with an income of €60,000 or more, the tax discount on this specific bracket (€10,000) would generate €1,000 less tax per year, on top of which the discount on the previous bracket would be added. An overall substantial and significant saving for the purchasing power of households.

Courage is needed: the challenge of the ‘Fiscal Drag’ and ISEE

A real rebalancing of the system cannot be limited to a single rate cut, but must address two structural problems:

1. The sterilisation of the Fiscal Drag

Fiscal drain(Fiscal Drag) is the ‘silent’ levy of the state that occurs in times of inflation. When wages are adjusted (even if only to cover price increases), theincrease in nominalincome pushes workers into a higher IRPEF bracket, raising taxes, even though there is no real increase in purchasing power.

The structural solution: indexing tax brackets and deductions/deductions to inflation. This would prevent the state from systematically gaining on the deterioration of employees’ purchasing power.

2. The adjustment of ISEE thresholds

Besides taxes, inflation and the Fiscal Drag have a perverse effect on social benefits. The nominal increase in income makes families exceed the ISEE (Indicatore della Situazione Economica Equivalente) thresholds for access to essential services (such as crèches or university benefits), causing them to lose social rights.

The Structural Solution: Indexing the income thresholds used for ISEE to inflation as well.

These reforms are initially costly for state coffers, because they reduce automatic revenues, but they would provide structural benefits, restoring fairness and certainty to millions of taxpayers who, today, feel unfairly penalised by the tax system. To really shift gears, we need more than just tweaks, we need courage.