The Taxation of Labour and the Financing of Public Expenditure in Italy (1960-90)

Between 1970 and 1990, Italian public expenditure as a percentage of GDP rose from 19.4 to 38.4%, excluding interest expenditure. At the same time, the tax burden (taxes and social security contributions) rose from 25.4 to 34.7% of GDP, following the introduction of a new progressive income tax in 1973. Extensive literature has highlighted how this increase in revenue was mainly borne by employees. This article contributes to the debate on the distribution of the tax burden between income from employment and other types of income. Firstly, it reconstructs the economic and institutional debate that justified shifting the tax burden onto labour to safeguard the capacity for savings and capital accumulation, considered fundamental to the country’s economic development. Secondly, the article offers a new quantitative reconstruction of the tax burden borne by employees and by other types of income, showing how the imbalance was mainly the result of high social security contributions prior to the 1973 reform. The latter aligned the tax burden on labour income with that on other kinds of income, which, however, were not encumbered by the costs of financing the social security system, while still benefiting from social security provisions.

Keywords: economic history, taxation, public finance, public debt, tax reform, cost of labour

Paolo Bozzi, La tassazione del lavoro e il finanziamento della spesa pubblica in Italia (1960-90) in "ITALIA CONTEMPORANEA" 310/2026, pp 67-92, DOI: 10.3280/IC2026-310004