1. The economical philosophy of basic income
A basic income is a uniform income paid by a political community to all its members on an individual basis, without a means test or work requirement.
The famous basic income theorist Philippe Van Parijs suggests basic income as real freedom for all (Van Parijs (1995)). Generally, the concept of freedom is not being prevented from doing what one wants to do. The freedom which Van Parijs suggests is related to potential desire. This freedom entails that one has the means for realizing what one might want to do.
Van Parijs remarks that a basic income scheme is a constraint to a certain concept of equity, because people with serious physical or mental handicaps do not have enough to live on under basic income. Thus, basic income should not fully replace present social security policies, but basic income could take the place of the social security relevant to income support.
Can basic income realize full basic income in contemporary Japanese situation? Perhaps, it can not. So, can partial basic income realize? This presentation examines some variations of partial basic income. Especially, this presentation focuses on the earned income tax credit, child allowance and the negative income tax.
2. The earned income tax credit
First, this presentation picks up the earned income tax credit as a partial basic income. The earned income tax credit involves a means test or work requirement. In the 1970s, the earned income tax credit emerged as a more modest or mini version of the negative income tax (Haslett (1994), Fitzpatrick (1999)).
In Japan, the tax commission suggested the introduction of an earned income tax credit in 2009. This has become a high priority task for the government.
Some researches have examined the feasibility of the earned income tax credit in Japan (Morinobu ed (2008), Takayama, Shiraishi and Kawasaki (2010) etc). They emphasize that the earned income tax credit is a characteristic of workfare policy.
However, the earned income tax can be interpreted as a kind of partial basic income. Then, the earned income tax credit is categorized into the refundable tax credit. The refundable tax credit is related to child care support policy (Pressman (1992) etc). This is similar to the child allowance which was introduced in Japan, June, 2010. In the following, this topic is considered.
3. Child allowance
An allowance for each child up to the third grade in middle school was a main promise in the Democratic Party of Japan's election manifesto in 2009. The party plans to make the monthly 26000 yen allowance a permanent measure. The administration plans to give half the amount, or 13000 yen, in fiscal 2010, the first year of the measure, and give the full amount from after fiscal 2011. This child allowance is without a means test, so it may be called partial basic income.
However, the new government is examining a combination of in cash and in kind payments ―the latter being a voucher related to a child's care and education. In the name of encouraging administrative localization, the government is also suggesting that the proportion of the combination of the payments be determined by local governments.
The government's proposal is different from unconditional basic income. Only households with a child up to the third grade in middle school are eligible for the child allowance. And the Japanese child allowance is at a relatively low level.
Meanwhile, the another variation of partial basic income is a kind of negative income tax which is selected by a means test. This presentation turns to the topic of partial basic income with a means test and tax reform.
4. The possibility of realizing partial basic income in Japan
Finally, this presentation considers one way of realizing partial basic income in Japan. This is an examination of the relation between the earned income credit and the negative income tax. This idea is inspired by Moffitt (2003). The goal of this presentation is to apply his ideas to Japanese welfare and tax policy.
Meade (1972), Parker (1991) and Van Parijs (1995, 2004) have discussed the difference between the negative income tax and basic income. They show that the points of divergence between them are the form of provision (ex ante /ex post) and the use of a means test.
In contrast, this presentation focuses on the similarity between the negative income tax and the earned income tax credit by adopting the standpoint of synthesizing the income tax regime and subsidy policy.
This theme is related to the computerization of tax technology and the social security number to capture the true revenue level. These are being discussed by the Japanese government and researchers. This presentation surveys this discussion and considers its implications for realizing partial basic income in Japan.
In addition, this presentation refers to reform of the progressive rate of the income tax in Japan. Recently, the progressive rate of the income tax has been flattening in Japan.
However, the new Japanese government is suggesting a return to a more progressive income tax and increasing the rate of the consumption tax. Japan's new prime minister Naoto Kan and new finance minister Yoshihiko Noda suggest increasing taxes on high earners, not just to raise revenue but to narrow the Japan's income inequality.
The new Japanese government is examining introducing a refundable tax credit to compensate low income earners for an increasing of the rate of the consumption tax. This may be interpreted as a partial basic income.
This presentation briefly reviewed the economic philosophy of basic income and present Japanese policy reforms. Of course, there are difficult problems of realizing basic income. However, the Japanese policy reforms will link to some version of basic income.
Fitzpatrick, Tony (1999). Freedom and Security: An Introduction to the Basic Income Debate. Basingstoke, Hants: Macmillan Press.
Haslett, D. H. (1994). Capitalism and Morality. Oxford: Oxford University Press.
Meade, James (1972). "Poverty in the Welfare State", Oxford Economic Paper, Vol. 24, No. 3, pp. 289-326.
Moffitt, Robert A. (2003). "Negative Income Tax and the Evolution of U.S. Welfare Policy", Journal of Economic Perspective, Vol. 17, No. 3, pp. 119-140.
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Van Parijs, Philippe (1995). Real Freedom for all: What (if Anything) Can Justify Capitalism? Oxford: Clarendon Press.
Van Parijs, Philippe (2004). "Basic Income: A Simple and Powerful Idea for the Twenty-first Century", Politics and Society, Vol. 32, No. 1, pp. 7-39.