Hidden tax pitfalls expose gaps between public and private workers in Italy

Italy's 2026 Budget law created a reduced 5% tax rate for salary increases tied to private-sector contract renewals, but the benefit excludes civil servants, who remain under the regular tax rules. The measure was intended to ease wage growth for private workers, yet the tax system still contains numerous bonuses and deductions that interact in ways most taxpayers cannot easily decipher. Calculations reveal that a private employee with a modest raise pays a fraction of the tax a public employee with the same raise would owe.

Further examples, such as a high-school teacher's net pay, illustrate how inflation-adjusted tax brackets and diminishing deductions can erode any nominal savings, effectively acting as a hidden tax drag. The article argues that piecemeal tax cuts do not solve the deeper structural issue of a tax system that penalises incremental earnings, and calls for comprehensive impact assessments before adopting new measures.