Basic Income and Flat Tax: The Italian Scenario.

The design of a nationwide policy of minimum income or basic income in Italy, comparable to the policies implemented in most European countries, is still a working enterprise. A first proposal to fill the gap was formulated by the “Commissione Onofri” (Onofri 1997) appointed by a Centre-Left Government. The proposal was tested in a sample of local areas during the following two years. However, the test was stopped by a Centre-Right Government that meanwhile had taken over also transferred the competence of income support policies to the Regions, where in fact during the last two decades some implementations of basic income policies took place. More recently, a national basic income scheme, “Reddito di Inclusione” (RdI) has been implemented in 2018. It addresses the population in absolute poverty. In perspective, it is meant to be universal although so far the funds are sufficient to covers about half of the target population. After the last political elections of March 4, the new Government is a coalition between Lega and Movimento 5 Stelle (M5S). Lega proposes a Flat Tax (FT). M5S proposes a basic income guarantee, “Reddito di Cittadinanza” (RdC) that should cover all the population below the relative poverty threshold. While it appears unlikely that the two proposals will be implemented, if ever, with the announced design and figures, their combination is interesting since it has roots in public economics and in policy debates involving different, but sometimes converging, sides of the ideological spectrum. The think tank “Istituto Bruno Leoni” has also recently proposed a comprehensive fiscal policy reform that includes a basic income guarantee and a flat tax. The purpose of this paper is to evaluate and compare the fiscal and behavioural effects of (simplified or modified versions of) the M5S+Lega package, the RdI and the proposal by “Istituto Bruno Leoni”. Moreover, we will show an exercise in identifying optimal (i.e. Social Welfare maximizing) packages that combine basic income and flat tax.