Personal income tax is more progressive and redistributive today than it was in the 1970s

One of the most established myths in the Italian tax debate holds that Irpef, the personal income tax, was more progressive and redistributive in the 1970s than it is today. The loss of redistributive effectiveness would be due to the flattening of the tax rate scale, which at the time was 32, reaching 72 per cent, while today we have only four brackets with a maximum rate of 43 per cent (excluding local surcharges). Has Irpef’s ability to redistribute income really been reduced? To answer it, it is not enough to look at the highest rates, one must also consider how many people were taxed so much. According to data from the Department of Finance, the highest brackets, in the 1970s, were almost empty: in 1979 in the highest bracket with a tax rate of 72 per cent there were only 39 taxpayers, 0.00016 per cent of the total, and only 2,152 people (0.009 per cent) fell into the 10 brackets with rates from 54 per cent upwards. It is therefore not sufficient to consider only the formal structure of the tax. Of course, very high incomes pay less with today’s rates, but they are few and with very modest effects on revenue and redistributive effect.