Isee, the “passport” of benefits is a fundamental tool. But a review is needed

ISEE has become a fundamental tool in identifying subjects who deserve public support (“targeting”). However, the system has become increasingly complex: we have identified about twenty benefits that are conditional on ISEE, each of which has specific thresholds and methods of application. This increases the costs of administering the assistance system and has no clear logic. Furthermore, for most measures, one euro more above the threshold entails the loss of the entire benefit, creating a disincentive to exceed the threshold in question. It would be useful to consider whether a simpler system, with a smaller number of types of benefits for the same expenditure and better graduated, would not be preferable.

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The Budget Law for 2024 provides for the exclusion from the calculation of the Equivalent Economic Situation Indicator (ISEE) of government bonds and other instruments guaranteed by it up to 50,000 euros. Let's take this opportunity to review what ISEE is and how it works.

What is ISEE?

The ISEE (introduced in 1998 with legislative decree no. 109 and reformed in 2000 and 2013) is an index, expressed in euros, of the economic condition of families, which combines information on income, assets and characteristics of the family unit. [1] The ISEE is equal to the sum of the income, before taxes, of the family members and 20% of their movable and immovable assets, divided by a parameter ("equivalence scale") that increases with the number of family members and with the presence of minor children or disabled members. [2]

The ISEE is used to identify cases in which a certain public benefit is appropriate (“targeting” in Anglo-Saxon terminology). [3] Benefits are attributed only if a family (and in some cases an individual) has an ISEE that does not exceed a certain threshold.

Benefits accessible through ISEE

The benefits conditioned by the ISEE are numerous, including the following.

Single and universal allowance , for each dependent child from the seventh month of pregnancy until the age of 21. The allowance varies from 201 euros per month for families with an ISEE of up to 17,227 to 57 euros for ISEE over 45,939 euros and is increased by 50% for children under one year old. This is one of the few benefits (along with those in points 8, 12 and 14) for which the amount paid decreases gradually and which is therefore less subject to a “threshold effect” that discourages income growth.

Appliance bonus : a 30% reimbursement of the price of an appliance, up to a maximum amount of 200 euros for ISEE up to 25,000 euros and 100 for those who exceed this threshold.

Bonus for language courses and sports activities for children under 14: a contribution of 500 euros per year with ISEE up to 15,000 euros.

First home guarantee fund for under 36s with ISEE under 40,000 euros, with 80% coverage of the capital portion of mortgages.

Shopping Card , the electronic payment card worth 40 euros per month for families with children under 3 years old and ISEE up to 8,117 euros.

Youth Culture Card : 500 euro bonus to purchase cinema and theatre tickets, books and newspaper subscriptions for those who turn eighteen with an ISEE of up to 35,000 euros.

Bills bonus : discounts (of variable amount depending on the composition of the family) on electricity, gas and water for families with ISEE up to 9,530 euros and a maximum of 3 children and 20,000 euros for those with at least 4 children.

Psychologist bonus up to 50 euros per session up to 1,500 euros per year in case of ISEE lower than 15,000 euros, 1,000 euros for ISEE between 15,000 and 30,000 euros and 500 euros for ISEE between 30,000 and 50,000 euros.

Inclusion allowance for families with disabled people, minors or people aged 60 and over and ISEE up to 10,140 euros. The amount can reach up to 541 euros per month.

Card dedicated to you : 500 euros per year to purchase basic necessities for families with at least three members and ISEE up to 15,000 euros. [4]

Training and work support : 500 euros per month for training activities, with ISEE up to 10,140 euros.

Savings on university expenses , with total exemption from registration fees for ISEE under 22,000 euros, 80% reduction for ISEE between 22,000 and 24,000 euros, 50% between 24,000 and 26,000 euros, 25% between 26,000 and 28,000 euros and 10% between 28,000 and 30,000 euros. Furthermore, with ISEE lower than 27,726 euros it is possible to obtain scholarships . [5]

Birth bonus , a one-off contribution of 1,000 euros per child born or adopted in 2025 for families with an ISEE below 40,000 euros. [6]

Nursery school bonus : 3,000 euros with ISEE up to 25,000 euros, 2,500 with ISEE between 25,000 and 40,000 euros and 1,500 with ISEE greater than 40,000 euros.

Maternity allowance , of 2,020 euros (paid once over a period of five months) for women who, for various reasons, do not receive support from INPS related to maternity leave, with an ISEE of up to 20,221 euros.

Universal benefit : 850 euro monthly allowance for over-eighties with ISEE up to 6,000 euro. [7]

Home care premium : when requesting reimbursement of expenses incurred for home care, the ISEE value determines the ranking and the amount of the contribution.

Long term care : coverage of the cost of long-term care in RSA. The ISEE, which determines the ranking and the amount of the contribution, takes into account the economic condition of the beneficiary's children.

Electric car bonus : incentive of 13,750 euros with ISEE up to 30,000 for those who buy an electric car and scrap a polluting one. The incentive is reduced for higher ISEEs or without scrapping.

To evaluate the overall effect of these benefits, let's first consider a family of two parents, both workers, with a child on the way, who has purchased a household appliance and requires the assistance of a psychologist. This family will have access to the benefits at points 1, 2, 5, 7, 8, 10, and 13 above, whose value decreases as the ISEE increases (Fig. 1). With an ISEE of up to 7,000 euros, the benefits for 2025 would be almost 8,500 euros. At 9,000 euros, the 480-euro shopping card is lost. Above 15,000, the family loses the 500-euro card dedicated to you and the psychologist bonus is reduced by another 500 euros. The overall benefit is 6,700 euros. Subsequently, the benefit is progressively reduced because the single allowance regularly decreases as the ISEE increases. Above 30,000, the psychologist bonus decreases further and the benefits drop to around 4,500 euros. Finally, at 40,000 the birth bonus of 1,000 euros is lost and the overall benefits are 2,400 euros.

Fig. 2 shows the case of a family identical to the previous one but with a two-year-old child in addition to the one on the way. In addition to the previous benefits, this family receives the nursery bonus. Below 7,000 euros of ISEE, the overall benefit for 2025 will be almost 14,000 euros. Above 15,000 you lose the card dedicated to you and the psychologist bonus is reduced by 500 euros. Above 40,000 you lose the birth bonus and the nursery bonus is reduced by 1,000 euros. The total loss, which occurs when the threshold of 40,000 is exceeded, even by just one euro, is 2,200 euros.

To highlight the reduction in benefits as the ISEE increases, Figs. 3 and 4 show the same benefits as the previous figures except for the single and universal allowance, the amount of which is proportional to the ISEE between 17,227 and 45,939 euros. This better highlights the "threshold effect", that is, the situations in which a small increase in the ISEE leads to the total or partial loss of a benefit.

Conclusions

The picture described poses several problems. The most obvious is the existence of marked "jumps" in the amount of benefits exceeding certain thresholds (in addition to those included in the examples there are naturally others; see the list of 19 benefits subject to ISEE), even just one euro. This can induce families corresponding to these thresholds to produce (or declare) less income. [8] The disincentive risks being particularly strong for the second earner of the family.

One solution could be the introduction of a single income support measure with a decreasing amount as the ISEE increases, with increases for families with children, in place of the measures listed. By simplifying the available benefits in this way, there would be a more gradual reduction in benefits compared to the current system, avoiding "jumps" in figures. The elimination of the numerous thresholds that give access to different benefits would then make the system more transparent, facilitating access to information on the benefits to which one is entitled, and easier to administer.

Finally, the ISEE considers the income before tax, without distinguishing between different taxpayers, especially between employees and self-employed workers, who are taxed differently in terms of Irpef. Unless these differences are eliminated, as would be appropriate, referring to disposable income to determine the ISEE seems to be a fairer solution.

[1] The family nucleus (hereinafter “family”) is defined as a group of people linked by marriage, civil union, kinship, affinity, adoption, guardianship or emotional ties, cohabiting or having their habitual residence in the same municipality.

[2] The calculation considers income and assets from two years prior to the request for the ISEE certification, unless there are significant changes such as in the case of job loss. Therefore, in 2025, the average income and assets of 2023 and the asset values ​​of the end of 2023 are used. The family unit is instead that of the time of the request. The regulation on the ISEE includes criteria for calculating income and assets, for example, providing for exemptions on certain forms of wealth, similar to those now introduced for government bonds. Among these, that on the owned home, the value of which is considered net of the residual debt for the purchase, is 52,500 euros. Furthermore, a quota equal to 20% is subtracted from the income of each member up to a maximum of 3,000 euros.

[3] For a discussion of whether it is preferable to have a universal or targeted welfare system, also with reference to advanced countries, see the work by Raj M. Desai published in 2017 for Brookings at the link .

[4] The contribution is not compatible with other social inclusion or poverty support measures such as the inclusion allowance.

[5] If the student is "self-employed" (i.e. does not reside with his parents and has an income from employment of no less than 9,000 euros), the ISEE is calculated on his income and wealth.

[6] For this and the two subsequent items, the ISEE that must be presented is called ISEE for minors (see the dedicated page on the INPS website).

[7] For this and the two following items, the ISEE is called socio-sanitary ISEE and allows the unmarried disabled person without children who lives with his parents to consider individual income and wealth, except for the benefit referred to in point 18.

[8] This is a criticism also advanced by the OECD report on the Italian economy last year (see OECD Economic Studies: Italy 2024 , OECD, January 2024) with specific reference to the measures that have replaced the Citizen's Income, i.e. the Inclusion Allowance and the Support for Training and Work. Similarly, the Bank of Italy highlights a threshold effect, which discourages female participation in the labor market, related to the nursery bonus (see Women, work and economic growth , Bank of Italy, June 2023).