Italy’s Taxing Election

MILAN – A winter election is not to Italian tastes. But, on February 24-25, up to 50 million voters will go to the polls to elect a new parliament, delivering Italy’s 62nd government in the last 65 years.

Since November 2011, Italy has been led not by a politician, but by an academic economist and a former European Union commissioner, Mario Monti. His emergency technocratic government, supported by the left and right, was a masterstroke of outgoing President Giorgio Napolitano.

Napolitano’s move was crucial, filling Italy’s need to replace the inefficient and scandal-ridden Silvio Berlusconi, in whom fellow leaders and global markets had lost all confidence, with an internationally respected figure. Under Monti’s leadership, reforms were finally initiated and markets were calmed.

To enhance the credibility of public finances, Monti’s government substantially increased taxes, particularly on real estate, while preserving the already record-high income-tax rate. The tax plan highlighted that Italy, like Japan, is a country of public debt and private wealth. As the economist Marco Fortis points out, Italian family wealth is still, if not for long, second to none in Europe.