Thursday, June 24, 2010

And the Home of the Brave

Just four weeks ago, we were looking, with not an insignificant amount of despair, at a 2010 House of Councillors election being fought over whether or not the PM is such a dufus that did not actually know how $14,000,000 of donations from his mom were handled in his accounts; whether Ozawa Ichiro is or is not Richard III; over whether the Democratic Party of Japan should be castigated for making promises it could not keep (because they were fiscally unsound) or for not keeping those promises; over how far backwards the DPJ was willing to bend -- to the small-scale farmers, to the trucking industry, to the postmasters and the postal unions -- in giving them what they wanted to the detriment of the national weal.

An ugly, dispiriting exercise, in other words.

Now, just a few weeks later, with Hatoyama Yukio, Kamei Shizuka and Ozawa Ichiro sent to the sidelines, the public is being hit with a hard, inconvenient truth -- the country takes in too little revenue to pay for the services the public has come to expect, meaning that taxes will have to be raised -- and that the voters will have to make their choices in the election booth based in large part on the soundness of their plans the various parties have put forther confronting that inconvenient truth.

On May 2, just a month and a half ago, the Tokyo Shimbun ran an explainer article, a little Socratic dialogue about the struggle inside the ruling coalition over when the subject of raising taxes will be broached: before the election, after the election or never.

Q: "So if the experts and the politicians both are thinking the same way, then it is in fact already decided that tax rates will be raised?"

A: "No, no, no. While you are likely to hear expressions like 'We will have to with haste grapple with fundamental reform of the tax system, including the raising of the consumption tax", nobody is brave enough to say what the new tax rate will be or when it will come into effect. Because whatever the government's plan is, it will be in effect a part of the DPJ's manifesto for the House of Councillors election."

Q: "And the DPJ has made a public promise to raise the consumption tax before, hasn't it?"

A: "Yes, in the DPJ's 2005 House of Representatives election manifesto the party put forth a plan to raise the consumption tax rate exclusively in order to stabilize the pension system. However, in that election, the DPJ suffered a landslide loss."
Nobody is brave enough...while it is true that Prime Minister Kan Naoto, DPJ Secretary-General Edano Yukio and Chief Cabinet Secretary Sengoku Yoshito are calling the bluff of the Liberal Democratic Party, which had challenged the ruling coalition to show some guts and talk about raising the consumption tax to 10% - a number the LDP never dared mention when it was in power save as a hypothetical -- it is not hyperbole to say that they have proven the Tokyo Shimbun wrong. The DPJ's new core leadership knows that talk of raising taxes is political poison. The party has taken a body blow (as did the LDP before it under Takeshita Noboru and Hashimoto Ryutaro) for talking honestly about Japan's fiscal situation and the unpleasant business of rebalancing the whole.

Let the tough talk continue. Hurrah.

(This post has been reedited for clarity, based upon a reader's comment. - MTC)


Anders said...

Would you be kind enough to post that Tokyo Shimbun article? I think it could be good Japanese practice...

Anonymous said...

I don't really understand the taxation system. Out of the portion that is deducted from my paycheck every month, the lion's share goes to health insurance and pension, but only a tiny sliver is actual income tax. I own neither a car nor a house so I have no idea how onerous related taxes are, but surely we could survive a bit of a raise in the 所得税.

Anonymous said...

Is anyone discussing doing the tax as an increase in income tax, as opposed to consumption tax? The latter is very regressive, and income inequality in Japan is rising.

MTC said...

Anders -

I have only read the dead tree version of the article. It appeared on page 2 of the May 2 morning edition of the Tokyo Shimbun and was second of a series called "GW後の政治".