＜prologue＞
I started a blog called “The Baby Boomer Generation’s Miscellaneous Blog”（Dankai-sedai no garakutatyou:団塊世代の我楽多（がらくた）帳） in July 2018, about a year before I fully retired. More than six years have passed since then, and the number of articles has increased considerably.
So, in order to make them accessible to people who don’t understand Japanese, I decided to translate my past articles into English and publish them.
It may sound a bit exaggerated, but I would like to make this my life’s work.
It should be noted that haiku and waka （Japanese short fixed form poems） are quite difficult to translate into English, so some parts are written in Japanese.
If you are interested in haiku or waka and would like to know more, please read introductory or specialized books on haiku or waka written in English.
I also write many articles about the Japanese language. I would be happy if these inspire more people to want to learn Japanese.
my blog’s URL:団塊世代の我楽多（がらくた）帳 | 団塊世代が雑学や面白い話を発信しています
my X’s URL:団塊世代の我楽多帳（@historia49) on X
(Reference) Original article in Japanese
・「１億円の壁」を岸田首相はどのように打破するのか？わかりやすく説明します。
Recently, the keyword “100 million yen barrier” has been appearing frequently in the news. This doesn’t mean creating a large middle class aiming for 100 million yen in financial assets.
The “100 million yen barrier” refers to the current situation where the income tax burden rate decreases once total income exceeds 100 million yen.
The economic policies attracting attention from the new Kishida Fumio cabinet, which was inaugurated on October 4th, aim to “break down this 100 million yen barrier.”
The specific method is “raising the tax on financial income” to “correct the average income tax burden rate.”
1. Average Income Tax Burden Rate
Many of you probably understand that “celebrities and athletes, who are high earners, have more than half of their income taken away in taxes, no matter how much they make.”
However, isn’t it difficult to understand why the income tax burden rate decreases once your income reaches 100 million yen?
Indeed, the income tax rates are as follows:
The tax rates on income, including local taxes, are as follows, with the highest rate being 55%.
Income tax rates increase with income; this is called a “progressive tax system.”
Theoretically, since the tax rate increases, the burden should also increase with income.
However, the reality is different.
According to the Ministry of Finance, the income tax burden rate increases steadily: 2.6% for those with an annual total income of up to 2.5 million yen, 4.6% for those with an income of up to 5 million yen, and 10.6% for those with an income of up to 10 million yen.
Then, for those with an annual total income of up to 100 million yen, it reaches 27.9%, which is the peak.
The income tax burden rate gradually decreases, falling to around 16% for those with an income exceeding 5 billion yen.
The reason the “100 million yen barrier” exists is said to be because the so-called wealthy have a large amount of income from acquiring or trading stocks (dividend income and capital gains from stock sales).
This is subject to “financial income tax,” which is not a progressive system where the tax rate increases with higher profits, but rather a flat rate of 20% including local taxes.
This is why there is strong criticism that the system “favors the rich.”
Prime Minister Kishida, in his “policy platform” for the Liberal Democratic Party presidential election, proposed breaking down this “100 million yen barrier.”
The underlying aim is to create a robust middle class and reduce inequality by reviewing how wealth is distributed.
2. Raising the “Financial Income Tax”?
In the past, income tax was highly progressive, with a top tax rate of 75% (1974-1984). Therefore, one option is to “raise the top income tax rate back to 75% or higher, as it was in the past.” However, this could provoke strong opposition from high-income earners and a decline in entrepreneurial spirit, potentially stifling the vitality of the Japanese economy.
However, Prime Minister Kishida’s specific method seems to be “raising the tax on financial income.”
However, there are hurdles to revising the tax on financial income. One of them is the concern that it will negatively impact the Tokyo stock market.
Market participants are wary that if the tax rate is raised, it could lead to a surge in stock sales and a decrease in investment, potentially causing stock prices to fall.
Furthermore, there are concerns that it would negatively impact the government’s goals of “establishing an international financial city” and “shifting from saving to investing.”
With the government’s call for “shifting from saving to investing” and the launch of “NISA,” the base of individual investors is certainly expanding. Stock investment is no longer limited to the “wealthy.”
Therefore, even if the tax on financial income is raised, it should be made “progressive,” similar to general income tax. For example, even if the tax on financial income were to be raised to around 30-40%, I believe that without bold preferential treatment for small investors, such as making annual financial income of 5-10 million yen tax-free (refunding the tax), it would be difficult to gain the support of many citizens.
However, it is also true that some argue that the rise in stock prices, driven by large-scale monetary easing by central banks in various countries, has widened inequality during the COVID-19 pandemic.
Under the Kishida administration, how will the discussion surrounding the “100 million yen barrier” proceed?
It is also necessary to pay attention to whether a conclusion that ensures tax fairness and satisfies many people can be reached.
3. The application of “external standard taxation” to “loss-making small and medium-sized enterprises” is absolutely necessary.
I previously wrote an article titled “Don’t allow loss-making small and medium-sized enterprises to evade taxes! Ensure fairness of the burden with external standard taxation!” While not widely known, approximately 70% of Japan’s loss-making companies are small and medium-sized enterprises (SMEs) with capital of less than 100 million yen that do not pay taxes. This is one of the unfair aspects of the current tax system. This is what I consider the “100 million yen barrier.”
I believe the new Kishida cabinet absolutely must address this issue. Otherwise, I don’t think they will gain the approval of the “independent voter class,” the salaried workers.
These are the people who are expected to become the “solid middle class” that Prime Minister Kishida speaks of.
4. The “Reiwa-era Income Doubling Plan” must clearly specify concrete methods.
Following in the footsteps of former Prime Minister Hayato Ikeda’s “Income Doubling Plan,” Prime Minister Kishida is advocating a “Reiwa-era Income Doubling Plan.” However, it is essential that he clearly outlines the “concrete methods” (specific roadmap) for achieving this.
This is likely to be one of the key issues in the upcoming House of Representatives election, so I believe he should provide a thorough explanation that the public can accept.