This is why Meloni rules out targeting wealthy Italians

Giuseppe Fonte and Gavin Jones, Reuters

Italy's longest-running TV quiz show, offering big cash prizes, is called "The Inheritance" — a choice of title that may reflect how many Italians see a legacy as the ideal route to money, and explain why Rome taxes such gifts so lightly. Yet raising Italy's inheritance tax levels closer to those of most of its peers could help ease the economic and social problems of the European Union's third-largest — but most chronically sluggish — economy, analysts say. Inherited wealth in Italy amounted to some 243 billion euros ($282 billion) in 2024, or 14% of national output, according to a study by economists Salvatore Morelli and Demetrio Guzzardi based on data from New York's Stone Center on Socio-Economic Inequality.

The ratio has doubled in 30 years and is the highest since the late 19th century, said Giacomo Gabbuti, an economic historian at Pisa's Sant'Anna University.

While Italy's level is particularly elevated, the trend is common to many advanced economies as the value of assets accumulated by post-war "baby boomers" has surged. However, handed-down wealth in Italy is taxed at an average rate of below 0.5%, a third of the global average, with the heirs of large fortunes getting particularly light treatment.

"Italy's low taxation of inheritance stunts social mobility and preserves privilege from one generation to the next," said Morelli, an economics professor at Rome's Roma Tre University and head of the City University of New York's Graduate Center Wealth Project. Most of Italy's richest people inherited their cash. A report by Swiss financial group UBS showed the country had 62 billionaires last year, of whom just 42% qualified as self-made, among the lowest percentages in Europe. The country's wealthiest individual by far, Giovanni Ferrero, whose net worth is calculated by Forbes at around $41 billion, inherited his majority stake in the Nutella hazelnut spread-making firm Ferrero from his father Michele in 2015. The phenomenon has deep roots.

Bank of Italy research shows families owning the top third of wealth in Renaissance-era Florence in 1427 were 50% more likely to still be in the top third in 2011, even after wars, plagues, revolutions, and capitalism. The study highlighting the relative persistence of inherited wealth in Italy made a splash when it was published in 2016, but did not prompt any tax policy changes. Italian inheritance tax yields just 1 billion euros per year. That compares with some 9 billion in Germany and Britain, and 21 billion in France, which have respective average tax rates of 2%, 2.9% and 7.5%. The inheritance tax rate in the U.S. is 1.3%. Just 30% of Italy's meagre inheritance tax take comes from assets exceeding 1 million euros, Morelli said.

Italy would garner almost six billion euros more by aligning its inheritance tax with the EU average. Economics professor at Milan's Bocconi University, said the revenue Italy foregoes could be used to strengthen state education and childcare, key ways to improve growth potential and reduce inequality.

Other economists say the cash could help Prime Minister Giorgia Meloni cut labour taxes for lower earners who spend more of their income than the rich, boosting domestic demand.

The issue, however, is highly charged, with Meloni's right-wing government repeatedly dismissing opposition and trade union calls to tax affluent Italians more heavily. "The left keeps proposing wealth taxes; it's reassuring to know that with the right in power they will never see the light of day," Meloni posted on X this month. Hostility to any sort of tax increases is particularly strong in Italy, where many public services are weak by EU standards and surveys show trust in the state is low. The late Silvio Berlusconi, a billionaire media tycoon, abolished inheritance tax altogether as prime minister in 2001, before it was reintroduced at low levels by the following government five years later.

Meloni, who took office in 2022, has changed the tax rules to make it easier for the wealthy to avoid inheritance levies by donating cash and assets to heirs during their lifetime. Italy exempts legacies of up to 1 million euros for spouses and children. Above this threshold they are taxed at 4%. Other beneficiaries pay rates of up to 8%, with lower or no exemption thresholds.

France and Germany have less generous exemption thresholds and tax bands between 5% and 60%. Italy's opponents of inheritance and wealth taxes say it is already a relatively high-tax country, and further hikes would hurt growth and encourage the better-off to move abroad. Yet rich Italians have strong incentives to remain. Recent research shows society's wealthiest 7% currently pay proportionately less tax than low and middle-income earners.

Italy has low taxation on some property and financial assets that are typical sources of income for the rich, and favourable "flat" income tax rates for the self-employed, while middle-income payroll workers are hit much harder.

Sant'Anna University's Gabbuti said France's and Germany's experience suggested that an increase in inheritance tax would carry little economic risk.

"The top two euro zone economies tax inheritances much more heavily without causing the wealthy to flee abroad or hurting economic growth in any significant way," he said.