Istalia

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L'APPROFONDIMENTO|UBI, work and the market: the new Istalian equilibrium
An expert explains how the Cantalamessa system works and how Istalia has chosen a reformist and pragmatic system based on Negative Income Tax and Credit for Work

Professor Alessio Verdini while giving a lecture at the Magliano State University

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CORRIERE D'ISTALIA

SOCIETA & ECONOMIA

November 5693 - International Edition

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The Cantalamessa government's introduction of the Universal Basic Income represents the most significant fiscal and institutional reform in Istalia in the last thirty years. This measure adopts a reformist yet highly pragmatic approach, combining social protection and economic incentives, blending advanced redistributive tools with a philosophy focused on market functioning and fiscal responsibility.

The reform has sparked heated political debate but also considerable technical interest among economists, who emphasize that what was approved is not a "pure" UBI, but rather a sophisticated system of Negative Income Tax combined with a proportional Credit for Work, perfectly in line with Cantalamessa's reformist-pragmatic approach.

To fully understand the structure of the new system, how it actually works and what effects it could have, we analyzed the reform with Professor Alessio Varini, an expert in applied economics specialized in redistributive policies and full professor at the Economy department of the Magliano State University, and we also received a counter-comment from Professor Silvio Carvani, a senior economist specializing in public finance and fiscal policy known for his more rigorous economic approach and who has expressed more critical positions.

A UBI that functions as a Negative Income Tax
The first essential element to clarify concerns the "mixed" nature of the Istalian UBI.

The version adopted by the Cantalamessa government effectively functions as a sophisticated Negative Income Tax combined with a credit proportional to work.

Varini explains that the transfer is only formally universal: its actual operation reproduces the logic of a Negative Income Tax. Those with low incomes receive an automatic proportional supplement and this transfer progressively decreases as overall income increases, avoiding abrupt decline thresholds or punitive effects for those who advance on the wage scale.

The mechanism integrates with ordinary taxation through a single progressive scale. This avoids duplication between welfare and the tax system, creating a stable, neutral and simple-to-administer safety net.

The mechanism significantly simplifies the redistributive system, replacing a series of fragmented benefits with a single instrument calibrated directly within the personal tax system. Varini notes that this integration is one of the reform's strengths: it makes the system more transparent, faster to deliver and more consistent in its overall impact on the population.

Credit for Work: a work-proportional incentive
The second crucial innovation is the Credit for Work, a tax mechanism that operates proportionally to earned income. In practice, it is a bonus that increases as employment income increases, up to a predetermined ceiling, beyond which the benefit stabilizes and then gradually disappears.

This system was designed to strengthen the net returns to employment compared to inactivity. Varini emphasizes that this design is particularly effective because it preserves the incentive to work at every point of the income distribution.

Every additional hour, every entry into the labor market, every return after a break, especially for groups such as young people, women and workers with irregular careers, brings a real immediate economic benefit. It is a framework that particularly values low-to-medium incomes and those with irregular careers, for example, the groups most exposed to the distorting effects of traditional welfare systems.

The underlying idea is simple: reward labor market participation while simultaneously "accompanying" the exit from economic support as the worker consolidates their position, avoiding sudden income losses and maintaining intact the incentives for job mobility. It is a tool that, if well-calibrated, can reduce both the poverty trap and the inactivity trap, mitigating the concerns raised by those who fear that UBI will distort the labor market: here, the system is designed precisely to avoid them.

The overall effect of UBI and Credit for Work is a reduction in poverty, greater economic security and incentives for employment, without creating excessive distortions for the tax system as a whole.

The decisive role of the Greens' programmatic reformists
Although some commentators have called UBI a "groundbreaking" measure, Varini insists on its pragmatic nature.

The Greens' pragmatic and reformist current, despite the defections in the last election, played a crucial role. Faithful to a "responsible" universalism, geared toward efficiency and sustainability, they steered the reform toward a model that combined economic security and fiscal responsibility, curbing more radical proposals from other coalition members, which were largely brought into a more balanced position. The result is a system that guarantees social protection but does not abandon incentives, in line with a philosophy that combines welfare and the market without preconceived opposition.

The result is a market-oriented system that does not clash with the productive fabric and can function within an already highly regulated, technologically advanced and structurally low-poverty economic framework. According Dr. Varini, this made the reform more solid and politically inclusive, capable of appealing to both progressive voters and the broad liberal-reformist base within the Italian political landscape.

A system built for today's Istalia
One of the points on which many analysts seem to agree concerns the model's suitability for the country's current context. IIstalia has emerged from thirty years of steadily declining job insecurity, consolidation of collective bargaining, strengthening of trade unions and the construction of one of the most extensive welfare systems on the continent. The structural poverty rate is low, and society has internalized a stable and well-accepted redistributive model. In this scenario, Varini states, the reform is not an emergency response to address a social crisis, but rather a technical evolution of an already mature system, making it more coherent and integrated.

This Istalian UBI, combined with the Credit for Work, represents the natural modernization of the redistributive system, a coherent response to the need for clarity, efficiency and integration between welfare and taxation.

The expected effects on society and the economy
Dr. Verdini explains that the new system is expected to produce three main effects: greater economic security, improved job affordability and increased domestic demand.

The automatic transfer ensures that no citizen falls below a minimum income threshold and a more income-stable population tends to consume more consistently, with positive effects on growth. Thus, not only greater economic security, but also to stronger consumption and strong maintenance of domestic demand. At the same time, the Credit for Work model adopted ensures that employment remains the most economically advantageous option, eliminating so-called "punishment steps", where an increase in income led to a net loss of benefits, but also avoiding welfare-oriented drifts.

The combined effect of the two instruments should translate into a more balanced society, a more active workforce and a reduction in situations of temporary economic vulnerability. Varini emphasizes, however, that the most significant effects will be seen in the medium term, once the full integration of the tax system, labor market and redistributive instruments is complete.

The risks of lax management
The economist, while promoting the reform, urges caution. Careless management could generate unwanted fiscal pressure, especially if new political majorities expand the universal benefit or make employment credit too generous relative to budget sustainability.

An overly generous expansion of the UBI or credits could require fiscal adjustments that, if poorly calibrated, could risk curbing investment and productivity.

Another risk concerns potential residual bureaucratic overlaps: if some welfare programs are not fully absorbed into the new structure, the system could remain fragmented and less efficient than expected. To avoid duplication, the consistency between UBI, credit and other forms of assistance will need to be constantly monitored.

Finally, there are risks of marginal behavior in the labor market, especially for specific sectors and categories, such as those with a low density of job vacancies or high seasonality. The reform reduces these problems, but cannot eliminate them completely.

The counter-comment: the voice of more traditional economists
Professor Silvio Carvani, an economic analyst known for his more rigorous and fiscally disciplined approach, offers a different perspective. While acknowledging the technical quality of the Cantalamessa model, Carvani believes the system is "solid but perhaps too generous".

The Cantalamessa model is technically sound, well-constructed and consistent with the Istalian context, but there are some critical elements.

According to him, Istalia could have opted for a less extensive NIT, with a more rapid reduction in the transfer as income increases and a more modest credit for work. This, he argues, would have made the model even more fiscally sustainable and more in line with a philosophy of strong fiscal responsibility.

Excessive generosity risks burdening public spending more than necessary, especially if the economic cycle were to deteriorate, and the system could require painful adjustments.

Carvani also notes that, should a future majority decide to ease the overall tax burden, a more selective and less universalistic system would be more easily compatible with a reduced spending framework and policies more oriented towards economic efficiency.

A government with a different economic philosophy might prefer to strengthen contributory mechanisms and reduce the measure's universality, to maintain a lighter tax structure and foster competitiveness. A leaner version of the NIT, with a more rapid reduction rate and a lower credit for work, would improve the system's efficiency and reduce the overall fiscal impact.

Conclusion: a modern, calibrated and adaptable compromise
The Cantalamessa reform emerges, from this multi-stakeholder analysis, as a modern, coherent and technically robust structural reform. It represents a rare point of equilibrium: universalist but not radical, redistributive but not welfare-oriented, attentive to market dynamics without sacrificing social protection. It is a model that reflects Istalia's long journey toward its modern welfare model, in which security and participation coexist.

Both Varini and Carvani, despite opposing perspectives, recognize that the system works because it is directly calibrated to the country's characteristics: an advanced economy, a relatively egalitarian society and a historically progressive tax system. As Dr. Verdini concludes:

The future of the system will depend less on technical design , which appears solid, and more on the political capacity to maintain the balance between universalism, sustainability and incentives. It requires vigilance, adaptability and broad institutional consensus to maintain the balances that are crucial to the success of the reform.