The French do it better. The distributive effect of introducing French family fiscal policies in Italy.

Italy has one of the lowest fertility rates in the world. A solution, often advocated to incentivize fertility, could be to reform the Italian tax and benefit system taking inspiration from the French fiscal family treatment. This would imply to introduce the quotient system, where taxation is not on an individual basis, as in Italy, but the tax applies to the family as a whole, and to introduce the cash- benefits provided in France to families. The purpose of our paper is to assess the distributive effects of such a fiscal reform. We estimate these effects using MicroReg, a static microsimulation model able to predict the first order effects of tax and benefit system reforms. We show that a shift to the French income tax system would lead to decreased income inequality and a substantial tax reduction for households with three children, especially those who are medium- high income. The new income tax would result in a substantial disincentive to female labour supply, albeit mitigated by greater progressivity in favour of low income groups with children. Moreover, adopting French- style family benefits would further reduce inequality and increase disposable income for households with at least two children. However, those with just one child would be slightly worse off.