Poor redistribution of taxes in Japan

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Income disparity in advanced countries is growing in recent years, and the correction is an urgent political issue in Japan, too.

 

Looking at an international comparison of the income redistribution by social security and tax systems, despite the income gap before the redistribution of Japan is not big compared to other advanced states, that after the redistribution falls down below middle position in the ranking. It’s because the redistribution function is poorer than those of other countries, and especially it results from poor improvement by the tax systems.

 

It is caused by raising the highest tax rate and mitigating the progressivity after several tax system reforms. There is another reason. Financial incomes like stock investments are imposed taxes separating from earned incomes, which are adopted uniformly at low 20% tax. As the wealthier people get to be, the bigger their financial income proportion becomes, the tax rate among the whole income is declining more and more. Therefore, it becomes a regressive taxation.

 

The financial income is like letting money earn money. It has a different character from the earned income. I think there is a room to raise the tax rate to the wealthy layers who can get large amount of money from the financial assets.

 

French economist Thomas Piketty, who is an author of “Capital in the Twenty-First Century” published in 2013, suggested imposing a progressive tax to capital after he analized that the income gap between the wealth owing capital and labor workers would exceedingly expand. We shouldn’t forget his analysis.

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