Italy’s Populists Come to Terms with Reality

The Five Star Movement and League shelve proposals for a universal basic income and flat tax.

Italian prime minister Giuseppe Conte attends a meeting with Five Star Movement leader Luigi Di Maio, August 15
Italian prime minister Giuseppe Conte attends a meeting with Five Star Movement leader Luigi Di Maio, August 15 (Governo Italiano)

Italy’s ruling Five Star Movement and League have shelved proposals for a universal basic income and flat tax, La Stampa reports.

Implementing either policy, let alone both, would have blown a hole in Italy’s public finances and broken the EU’s 3-percent deficit ceiling.

Watered down

  • A universal basic income was the Five Star Movement’s signature policy proposal. It is now content with a basic income for the poor — which is not universal.
  • A 15- to 20-percent flat tax was the right’s signature policy. The League now accepts a “flat tax” for the self-employed — which is not a flat tax.

Told you so

Before the election in March, the Five Star and League dismissed warnings from economists and other parties that their proposals would require either deep spending cuts or tax increases to pay for.

The libertarian Bruno Leoni Institute calculated that a 25-percent flat tax would lower tax revenue by €27 billion.

I’m not sure if anyone has done estimates on the cost of a universal basic income in Italy?

For comparison, total Italian public spending last year was €831 billion, or 50 percent of GDP.