Less to Assistance, More to Work: Territorial and Distributional Effects of Italian fiscal Policies in 2022–2025

In recent years, Italy has experienced a phase of significant discontinuity in the design of its redistributive policies. The national government has introduced a broad set of measures that, taken together, have reshaped the relationship between the instruments to tackle poverty, the structure of personal income taxation and the measures affecting labour costs. On the one hand, the abolition of the guaranteed minimum income, introduced by the previous government, the so-called Reddito di cittadinanza, and its replacement with two new categorical measures, Assegno di inclusione and Supporto per la formazione e il lavoro, have led to a reduction in resources allocated to households facing economic disadvantage. These reforms have profoundly restructured the target population of recipients, introducing new eligibility criteria and a stronger link with activation and labour-market participation pathways. On the other hand, the reduction of the tax and social security wedge and the revision of personal income tax (IRPEF)—with the broader legislative process aimed at moving towards a flat-tax model—have increased the resources available to employees and taxpayers with low- and middle-income levels, producing differentiated effects along the income distribution and across occupational groups. This paper aims to provide an integrated analysis of the costs and benefits of this “redistributive trade-off” between reduced social assistance spending and lower tax pressure on labour, at both the individual and territorial levels. Using the IRPET static microsimulation model, MicroReg*, the study quantifies the direct and indirect effects of the reforms implemented between 2022 and 2025 on Italian households. Particular attention is devoted to: (i) vertical and horizontal redistribution across income groups and household types (e.g. households with children, single-parent households, households’ employment status of their members); (ii) potential effects on absolute and relative poverty; and (iii) territorial impacts, measured at the regional level, in relation to differences in socio-demographic, labour-market, and income structures across the country. Territorial comparisons are carried out by constructing a net redistributive balance for each region. The objective is to systematically assess which groups are overall beneficiaries and which are disadvantaged by the new equilibrium between reduced cash assistance and increased tax relief, highlighting potential concerns in terms of equity, territorialisation of social risk, and the coherence of the redistributive system with ongoing demographic and economic dynamics. *M. Luisa Maitino, L. Ravagli, N. Sciclone; 2017; Microreg: A traditional tax-benefit microsimulation model extended to indirect taxes and in-kind transfers; International Journal of Microsimulation; 10(1); 5-38. DOI: 10.34196/IJM.00148.