Taking from the Big Pile and Adding to the Small - Giving to Those who Need More
■ A concept called basic income
Recently there is some interest in a system of secured social welfare payment called basic income. This system is different from the social relief system such as that employed in Japan, in which the government conducts a census of people's income and assets, selects the poor and pays secured social welfare payment to them. Instead, in basic income, government provides the same amount of money to everyone. Wide discussion on this subject started in Japan fairly recently. In Basic Income: Possibility of the Minimal State that Distributes, (2010, Seidosha) by Shinya Tateiwa and Taku Saito that was published this year, specifically in part III Discourse regarding BI in Japan by Taku Saito, there is a comprehensive overview of discussion on this subject in Japan.
Often people with opposing views on other subjects can come to terms when it comes to basic income. Why?
First of all, some think that there are many people who fall short of requirements of the social relief system and other such welfare systems but are still struggling with their livelihood, and that the system of basic income, if adopted, would help them live better lives ? and thus this system is worth adopting. Introduction to Basic Income (2009, Kobunsha Bunko) by Toru Yamamori is also enjoying a wide readership - also because it has been published quite recently as a paperback edition. This book argues that the idea of basic income is not something than appeared suddenly in recent years, but has been present for a long time, formed and advocated by many thinkers and people across the world, who fell short of requirements for social security.
On the other side, there are those who support this system pointing out that it can eliminate the need for complicated procedures and is more efficient than the present system. These people also advocate it for the reason that if we get rid of all other systems and use just this one instead, social relief would be much cheaper to operate.
Perhaps it would be an overstatement to say that these two assertions are completely different. However, they still seem to me as quite distinct. Naturally, the question remains of what kind of taxes should be used for funds for basic income and how much money should be supplied.
If I support the idea of basic income, I support it from the former of the two points of view above. There are many people who are by right entitled to receive social relief and should be receiving it but, in fact, are not. And this is a very big problem. Supply rate of social relief of Japan - the percentage of those actually receiving social relief among those who are entitled to it - according to Yamamori's book mentioned above is said to be under 20%. This is ridiculously low - even compared with other countries. Five times as many people as the number of those receiving social relief now are entitled to it - even under the present system. It would be possible to change the system itself and the way it is being employed to increase the supply rate. But how effectively would it function even then? From this point of view, would not it be better to simply provide everyone with a certain amount?
However, in the end of the day, funds have to come from tax revenues. If we do not take the money from consumption tax alone - and I am against it - this means that there is a need to identify income and assets and levy taxes according to the amounts thus identified. One way would be to take more from the rich - including the amount to be supplied to them - and provide to them a certain amount also. This is the usual method advocated by the proponents of basic income. But, as this would require the government to identify income and assets of the population, from my point of view there is no need to give money to those, who have plenty. And, well, no matter which of the two methods is employed, they are essentially the same - it is possible to set them up so that the amount people can actually use stays the same. The only difference is that with the first method nominal revenue and expenditure of the government will increase and people may feel uneasy about it. Also, this method may allow the government to keep the amount of the basic income low, which would also be a concern. And if it is so, I would think that there is no need to stick to the method of unconditional provision of the same amount.
In that sense, I am not a particularly enthusiastic supporter of the basic income system. Moreover, there is also a valid critique of the mechanism pointing out that it unreasonably favors those who can work but do not. Some essential points of argument regarding this issue are listed in Part I of Basic Income entitled "Is Basic Income Cool?".
■ Straightening out the taxation system
And now - rather than the above - for the main issue. It is my belief that ‘taking from the big pile and adding to the small ? giving to those who need more’, that is, the primary function of the taxes and the government itself has now got weak, that this is a large problem, and that this function should be reinforced. I think that we really need to make it happen.
I have written a lot about it in books and newspaper articles. Short texts written for newspapers are available on the homepage. One book related to the issue is Repairing the Tax (2009, Seidosha) by Shinya Tateiwa, Shinji Murakami, and Shoji Hashiguchi. In the book, there is a section by one of the coauthors, Murakami, containing trial calculations of tax revenues. There is also a section entitled "Books on disparity in income levels and poverty" by another coauthor, Hashiguchi. Recently a great number of books on disparity in income levels and poverty have been published. This section offers a survey of these books and is highly useful for someone who wants to know which book to start with and whether there is anything he or she missed. My section was an attempt to show the direction for the basic policy and offer a review of the discussion from a historical point of view. I examined the process that has been going on in Japan over the last two decades - although the phenomenon is not limited to Japan alone - that resulted in weakening of the redistributive function of taxes, listed the assertions made at the time and examined their soundness.
After the book was published, I received an e-mail from Naoki Minezaki, deputy minister of finance, who read the book, and only day before yesterday (on the 25th of August) I made a presentation at the Skull Session on Taxation System, a breakfast meeting organized by the deputy minister of finance with many participants including the head of Taxation Bureau. Another presenter was Shuji Ozawa from the Kyoto Prefectural University, the author of the first book on basic income published in Japan entitled Welfare Society and Social Security Reform: A New Ground of Basic Income Concept (2002, Takasuga Publishing), and while he stressed the effectiveness of the basic income system, I spoke about taxes.
Of course, members of the Parliament and government officials know much more about the specialized and technical side of taxes than I do, so I had no need to touch on these aspects of the issue and - as I am no expert in taxation system - naturally could not have said much about these subjects even if I wanted to. I said that those whose job is to levy taxes should - based on clearly specified rules, or, rather, clearly specified new rules - properly do their jobs, and do it proudly.
Naturally, in politics taxes a point at issue. Some are in favor of it, while some are against it. However, at least, the actual alternatives that we have to make our political choice from should be very clear. But during the recent Upper House election, these very alternatives became confused. Or obscure. Or, even, they were made obscure on purpose. I believe that the statement made by the prime minister in connection with the consumption tax comes out of his earnest concern for financial resources which must be ensured, and this reason per se is not something we can blame him for. However, it stands to reason that in general many people oppose tax increases, and any statement of that purport serves as material for critique by the other party. To defend his opinion, he had to resort to different wording, which, in its turn, also was critiqued. And that brought about the result we saw.
A part of me wants to sympathize with those who lost the battle. But, at the same time, I feel that in essence what has been said and the order of the statements was all wrong, that the prime minister should have made his statements stressing different points - and that this still has to be done. That is, he should have presented us with a clear choice: whether to move towards proper redistribution or not. Needless to say that in my opinion, we should do the former.
■ Things we should not worry about, things that can be done right now
Naturally, some are against tax raise. It is only natural that among those, who have plenty, there are people who are against paying plenty. At the same time there is quite a sufficient number of people, who agree to the basic direction.
Thus what we need to do is to deal with the so-called ‘concerns’. And these concerns have been listed in the book I mentioned above. Over the last twenty years or so, there have been two prominent assertions made from those, who were in favor of weakening of the redistributive function of taxes. One concern is that if we levy a lot, people will stop working. Another is that people and companies will run away to places with lower taxes.
Let us start with the latter. To be sure, this concern is not an unfounded one. At the same time, at least if we are talking about individuals, compared with tax revenue lost with the rich who run away, there will be surely more revenue from the rich who would not go that far to protect their savings. Also, there are many policies making it difficult for individuals and companies to escape and, if we decide to, these can be fortified further. As no country wants to lose tax revenues, there are ways to create systems of cooperation; in fact, although very few know about it, some measures in this direction on the international level have already been taken.
And now about the former. How about people who will have to pay more taxes? Will they lose their will to work and quit working or decide to start working more instead? Theoretically this question cannot be answered. Empirically also it has not been confirmed that people will stop working, or that as a result of it there will be no tax revenues, or that the economies will stagger. Rather, some studies show the opposite results.
Nevertheless, for over twenty years or so, and although some respectable scholars have been making assertions to the contrary, their statements have never been mentioned, while reasons of those wanting to weaken the redistributive function of taxes have always been at the forefront, and governmental policies have been driven entirely in this direction. What had to be done is to trace the path we have been walking so far, to show that there is nothing to worry about, that there are ways to deal with the problems, and boldly declare a change of direction. In fact, from autumn of last year and until the first half of this year, prime minister and other government officials made statements of that purport, and after the change of government, the Tax Commission, all members of which were replaced, also basically upholds the same course of action. My opinion is that it would have been better if everything went that way.
If it did, I would not have necessarily opposed the increase of consumption tax. However, as everyone knows, this system would not be a progressive one but, rather, would sometimes work regressively. Thus there is a need to enforce and take such measures - supported, by the way, by proponents of basic income - as tax deductions with benefits package.
Another undisputed fact is that we cannot expect much tax revenue by merely increasing the highest taxation rate of the income tax. Increase of the highest taxation rate is, in large measure, a symbolic measure, a measure symbolizing reexamination of tax rates for income tax as a whole and increasing its progressiveness - although such step would be merely a step back to what the system has been some time ago - as well as securing and ensuring redistribution of everything including assets and inheritance. And for that purpose there is a need to identify only assets and income ? but identify these in a way that would not invite the only natural concerns and critique that have been leveled at the national identity numbering. This is also needed if we are to pay proper benefits. Because the way it is now, the stance of government of Japan is to pretend that there are no people who have no money, and thus not pay the due benefits.
As for how much can be done by reducing waste, well, I would say that it is not much, and this has to be fully and calmly understood ? and made public too. Of course, waste, by definition, is something we have to eliminate, and there is nothing wrong with measures in this direction. However, the problem is what has been actually cut or reduced in the pursuit made under this slogan.
By my speech I meant to show my support to the chief of Taxation Bureau and the others present, but the general idea was that with income tax there are always taxes that should and are not levied - as here there will inevitably be a difference in the taxes to be paid, even among people, who have the same amount of money - so it lacks fairness, which is why the opinion was that tax increase should be better done with consumption tax, and there is some truth in that assertion for sure, but before that - or, even, at the same time - the government should declare that it will take what should be taken and establish a system to enable this course of action. According to one calculation (Repairing the Tax, p.65), if we use some money to support the work of the staff at the tax revenue department, we can levy from five to ten times more tax revenue - and this is how much the government should be getting in the first place - than what we are getting now. And then use this money the way it should be used. I support this course of action and support those, who clearly state that this is what should be done. And there are many people like this.