The 6 advantages of the Superbonus and the farmer

by Paolo Becchi and Fabio Conditi

First Minister Giorgetti and now Prime Minister Meloni insist on the need for the decree-law approved by the government which prevents the transferability of tax credits. The measure has so far cost each Italian 2,000 euros. In our previous article we wondered if we were dealing with what John Maynard Keynes called the “parody of an accountant's nightmare”. Let us try with two simple examples to explain our point of view.

The bonuses have generated a deficit for the State of 110 billion euros, which divided by 59 million inhabitants in Italy, effectively make just under 2,000 euros each. This is less revenue for the state, not necessarily a cost to citizens. Also because invoices were issued against these bonuses which instead generated more revenue. But neither Meloni nor Giorgetti talk about this. You focus on the tree and you don't see the forest.

The tree and the forest

There is a deficit tree for the State , equal to 110 billion euros, moreover distributed over 5 years, i.e. a loss of revenue of 22 billion euros a year, part of which has already returned in recent years.

However, there are also many other trees in the forest, which only produce benefits for the state and especially the 1st year. Here a list:

• the tree of the direct economy , because in the face of these bonuses invoices were issued for 110 billion euros, which generated the immediate payment of VAT and various taxes for at least 30%, i.e. 33 billion euros, which generate greater tax revenues;
• the indirect economy tree , because the companies that carried out the works will certainly have paid their employees and suppliers, with other VAT, taxes and contributions to pay, further increasing revenues;
• the tree of the induced economy , because the employees then have to live and therefore will spend their money, generating more VAT, taxes and contributions to be paid, further increasing revenues;
• the tree of unsubsidized jobs , because not all the jobs you do are subsidized; therefore, even non-subsidised jobs that are necessary or stimulated by the incentive generate additional VAT, taxes and contributions to be paid, which further increase revenue;
• the employment growth tree , which generates lower costs for the state to support the unemployed;
• the macroeconomic effects tree , because increasing GDP without increasing public debt improves the overall Maastricht parameters and reduces debt refinancing costs.

If we go to evaluate the whole forest, we discover that the advantages of the Superbonus 110% today amply cover the future disadvantages , precisely because the latter are distributed over time, while the advantages arise immediately.

A smart government would make it structural so that each year the higher revenues generated by the new bonuses compensate for the lower future revenues generated by the previous years' bonuses. But if you block them, you will only have lower tax revenues. In short, you shoot yourself in the foot. This expression leads us to another example.

The example of the farmer

A farmer has to face the expense of buying seedlings to use in his greenhouses to produce vegetables, but has no money at his disposal. Find a supplier who gives you the seedlings with a facilitated payment in 5 annual installments for 5 years, so in the 1st year he will have time to sell the vegetables and also pay the 1st installment with the amount collected. Clearly he will have to pay the other installments in the following years, but if he repeats the same investment every year, the cost will always be covered by the new crops. The farmer will only have to verify that the sale of the crop each year is higher than the cost of the seedlings and other costs incurred.

In the case of the Superbonus, the State is in the same situation as that farmer, citizens and businesses, in the face of discounts on future taxes in 5 annual installments, are available to carry out work, paying VAT, taxes and contributions on their business and on the indirect and induced activity generated.

Except that unlike the farmer, the government, after having verified for two years that the investment is convenient because it produces an immediate increase in tax revenues, decides it wants to stop assigning future tax credits because it believes they are an unsustainable cost.

In this way he ends up in misery begging for money from the financial markets and the European Union with the ESM, becoming open to blackmail and ready for new austerity policies. It is only a hypothesis, but the government's decisions do not leave many alternatives.

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The article The 6 advantages of the Superbonus and the farmer comes from Economic Scenarios .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-6-vantaggi-del-superbonus-e-il-contadino/ on Tue, 21 Feb 2023 19:00:02 +0000.