Comments due by March 15, 2015
TOKYO – Six months after Thomas Piketty's book Capital in the Twenty-First Century generated so much buzz in the United States and Europe, it has become a bestseller in Japan. But vast differences between Japan and its developed counterparts in the West, mean that, like so many other Western exports, Piketty's argument has taken on unique characteristics.
Piketty's main assertion is that the leading driver of increased inequality in the developed world is the accumulation of wealth by those who are already wealthy, driven by a rate of return on capital that consistently exceeds the rate of GDP growth. Japan, however, has lower levels of inequality than almost every other developed country. Indeed, though it has long been an industrial powerhouse, Japan is frequently called the world's most successful communist country.
Japan has a high income-tax rate for the rich (45%), and the inheritance tax rate recently was raised to 55%. This makes it difficult to accumulate capital over generations – a trend that Piketty cites as a significant driver of inequality.
As a result, Japan's richest families typically lose their wealth within three generations. This is driving a growing number of wealthy Japanese to move to Singapore or Australia, where inheritance taxes are lower. The familiarity of Japan, it seems, is no longer sufficient to compel the wealthy to endure the high taxes imposed upon them.
In this context, it is not surprising that Japan's “super-rich" remain a lot less wealthy than their counterparts in other countries. In the US, for example, the average income of the top one percent of households was $1,264,065 in 2012, according to the investment firm Sadoff Investment Research. In Japan, the top 1% of households earned about $240,000, on average (at 2012 exchange rates).
Yet Japanese remain sensitive to inequality, driving even the richest to avoid ostentatious displays of wealth. One simply does not see the profusion of mansions, yachts, and private jets typical of, say, Beverly Hills and Palm Beach.
For example, Haruka Nishimatsu, former President and CEO of Japan Airlines, attracted international attention a few years ago for his modest lifestyle. He relied on public transportation and ate lunch with employees in the company's cafeteria. By contrast, in China, the heads of national companies are well known for maintaining grandiose lifestyles.
We Japanese have a deeply ingrained stoicism, reflecting the Confucian notion that people do not lament poverty when others lament it equally. This willingness to accept a situation, however bad, as long as it affects everyone equally is what enabled Japan to endure two decades of deflation, without a public outcry over the authorities' repeated failure to redress it.
This national characteristic is not limited to individuals. The government, the central bank, the media, and companies wasted far too much time simply enduring deflation – time that they should have spent working actively to address it.
Japan finally has a government, led by Prime Minister Shinzo Abe, that is committed to ending deflation and reinvigorating economic growth, using a combination of expansionary monetary policy, active fiscal policy, and deregulation. Now in its third year, so-called “Abenomics" is showing some positive results. Share prices have risen by 220% since Abe came to power in December 2012. And corporate performance has improved – primarily in the export industries, which have benefited from a depreciated yen – with many companies posting their highest profits on record.
But Abenomics has yet to benefit everyone. In fact, there is a sense that Abe's policies are contributing to rising inequality. That is why Piketty's book appeals to so many Japanese.
For example, though the recent reduction in the corporate-tax rate was necessary to encourage economic growth and attract investment, it seems to many Japanese to be a questionable move at a time when the consumption-tax rate has been increased and measures to address deflation are pushing up prices. To address this problem, the companies that enjoy tax cuts should increase their employees' wages to keep pace with rising prices, instead of waiting for market forces to drive them up.
Herein lies the unique twist that Piketty's theory takes on in Japan: the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.
(Project Syndicate)
13 comments:
I believe that the high tax rate of 55% on inheritance that is charged in Japan according to this article completely contradicts their goal of no inequality. The article says that Wealth in Japanese families tends to last for only 3 generations due to these high inheritance taxes. I do not think this could be considered equality because the families had worked hard to accumulate their wealth and intended to pass it on to their children and it is simply taken away from them. Just because people achieve becoming wealthy does not mean that it should be taken away from them, that’s not equality. There are many arguments weather or not total equality can exist because it would be benefitting some while at the same time limiting others.
The high-income tax on the rich in Japan is a significant matter. I was under the impression that Japan was a very wealthy nation, apparently not. Prior to reading this article I believed since Japan was so advanced technologically speaking, that the country itself was in good shape. In terms of income, Japan has a way of suppressing the extremely wealthy (through generations) by imposing such a high tax. Now, the money that was supposed to be passed down to children and grandchildren has become scarce. Another interesting takeaway is how different the lifestyles of the rich are in Japan. It leads one to ponder why it is that the Japanese do not flaunt and indulge in their wealth. In American society, many rich people would not miss a chance to showoff their success.
The 55% tax rate that Japan puts on their rich is very high. I believe that the wealthy should have noticeably heavier taxes than the poor, but not that much. Its crazy how it said rich Japanese families only tend to last for three generations due to these taxes. Their wealth is stripped from them because of this tax. In America the rich would never let that happen. They have to much power here and it would never pass taxes that high. I believe we should raise taxes on the superrich in order to help equality. Raising taxes to the one percent here would help the poor.
With this high tax, Japan can not be considered a wealthy country. I do not believe that a tax rate of 55% should be in place on inheritance. It is way too high and families lose their wealth throughout each generation. Yes the wealthier families should be taxed more than the lower class, but the difference in tax should not be this drastic. They achieved this wealth one way or another and it is being stripped from them for equality. Equality will never be reached even if these high taxes are being put in place. It just is not fair.
Everyone has different views on economic equality. In the United States we always complain how the top one percent should get taxed heavier then the poor so we can reach economic equality. This article shows that our idea of taxing the rich harder could be worse for us. The wealthy families in Japan have a 55% tax rate. That is a huge tax rate and it has its effects on Japanese families. The article says that Japanese families will loose their wealth over three generations causing Japan to become a poorer nation. The United States government should take this into consideration. The wealthy in America will never accept a 55% tax rate. Our dream of economic equality and taxing the rich heavier may never come for this reason in Japan.
This article discusses the issue of income inequality and new characteristics brought to light by Thomas Piketty's book Capital in the Twenty-First Century. Piketty asserts that "the leading driver in income inequality in the developed world is the accumulation of wealth by those who are already wealthy." The article also goes on to state how Japan has a higher income-tax rate and lower levels of income inequality. However, I believe that increasing taxes on the wealthy will not do anything to stop the rise of income inequality. It seems as though the government is looking to push their issues onto the wealthy instead of looking for an alternate way to fix the problem. Additionally, the article states that due to these high taxes the richest families in Japan frequently lose their wealth through generation. This is yet another example of government taking away what people have worked hard for in order to fix their issues. Consequently, the government is making individuals not want to be in the top 1 percent.
Japan has a lower level of inequality than other countries because they heavily tax the rich, 45% on income, and have an inheritance tax at 55%. They are basically taxing them to take their money so that they can come closer to income equality. The article even says that because of these taxes Japanese families are moving Australia and Singapore so their future generations can enjoy their inheritance. Income equality will never be achieved and in societies where it has been tried, it has never worked out. Therefore, I do not see why people want to push to try and achieve equality. Among other reason huge American companies have most of their business overseas because they are taxed less.
"Japan has a high income-tax rate for the rich (45%), and the inheritance tax rate recently was raised to 55%.” I do not agree with such a high taxation. Although the purpose of these taxes are to reach income equality, with such a high tax it is affecting the families of the rich negatively. I do not agree with such a high tax. These are people who are and have been working hard for their money and instead of being able to save their money for generations to come, they cannot. "This is driving a growing number of wealthy Japanese to move to Singapore or Australia, where inheritance taxes are lower.” These rich people are moving to different areas just to try to save their money for their inheritance. The article also stated that these families usually loose their wealth within three generations. So they are working hard in order to try and support their families and generations to come, but all of their hard work is lost and their savings are lost due to such high taxes. The Japanese people are doing whatever they can in order to avoid spending their money, even if that means avoiding buying lavish things.
Under Prime Minister Shinzo Abe, Japan’s economy is doing extremely well. Especially if you factor in the fact that they were in a long economic slump until recently. Japan has a sort of moral that tries to reduce inequality, which is what many countries strive for. However, Japan is trying to reduce inequality through exorbitantly unfair taxes on the rich. Rich families have a 45% income tax rate and families who have inherited wealth have a 55% tax rate. This is absurd. After only about 3 years, most of Japan’s very wealthy families completely lose their riches due to the tax. This creates no incentive for people to work hard as they see that it will just be taken away from them. I believe an economy should have a progressive tax system in order to be effective, however there should be a limit. I don’t know how the rich Japanese feel about it, but if I were lucky enough to become very wealthy and have it taken away from me quicker than I was able to gain it, I would be pretty upset. Personally, I make many of my life decisions based on how I can better financially equip my future family, taxing them 55% just because I left them money would drive me crazy. I mean this is just cruel and unusual punishment, and in my opinion, for no good reason.
For starters I would like to say that I feel that Piketty’s assertion is completely correct in my own opinion. If you look at the world’s economy and how everything is ran by those who are wealthy making develop the world, but in their own way. Now, when I say in their own way I mean by using the power of wealth to their advantage. I think we should probably look into what Japan is doing being that they are the world’s most successful communist counties.
Even the rich are being taxed in Japan meanwhile; the rich people here are barely even forced to pay a cut. The article stated “Japan’s richest families typically lose their wealth within three generations.” If you take a look at families here in the United States that are the richest, they’re just getting richer and richer as generation passes by. One thing that caught my attention as well was how even a wealthy man such as the CEO of japan Airlines lived just a regular kind of lifestyle. He didn’t flaunt his money, buying expensive material items like the way people do here in the United States. That makes me think that they know how to spend their money wisely. Plus he even went out to lunch with his employees of the company. Honestly, how many CEO’s in the United States that you know actually go out to eat with their companies employees. Most of the time working at a company you wouldn’t even see the CEO and he probably wouldn’t even know your name.
Having a 45% income tax on the rich and a 55% tax on inheritance is very socialistic. This type of taxation would not stand in America or other western countries. Japan's infrastructure is based more on the community than the individual. The CEO of Japan Airlines took the subway to work and ate lunch in the cafeteria with blue collar workers everyday. This is unheard of in the United States. Generally CEO of major corporations are shuttle around in the back of limos and are rarely seen by lower level employees. This article also touches upon the problem Japan is having with the wealth of corporation growing and extraction of wealth from individual Japanese.
Japan's socialist income tax rate system seems to be faulty. The people who worked their way to the top to achieve wealth are being punished? It is seems very unfair. It is easy for a typical middle-class worker to get by in the country, so that may satisfy most people. If you're looking for a place to live in a gigantic mansion, Japan is not the place. I am a natural supporter of capitilsit systems, for I am against the idea of the poor free loading off a system when they haven't shown any contribution to society. Hard work should pay off, so I disagree with this 55% tax rate on the wealthy. Perhaps a percent that is a bit smaller would lead to less people leaving the country. However, It also seems that Japan has found a way to deal with their deflation of the Yen through Abenomics, so I applaud them for that.
The ‘income inequality hypothesis’ has been the subject of intense scrutiny in academic journals for several decade for japanese economy. Japanese infact take pride that they have income equality, not regarding the fact that every one was facing the battle of keeping within low income level. Its really shocking that large corporations are being let off and people grinded in churn. Then there is a differenece of culture. japan present itself as 90% of middle-class income famies.there is contrast between equality of opportunity and equality of outcome, they need to evaluate equality of opportunity in terms of education and occupation, analyzes the relationship between income distribution and income growth, discusses the role of corporations who are expanding at the expense of society.
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