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Friday, Dec. 24, 2010


Child allowance has strayed

The shape of the child allowance for fiscal 2011 could end up distorting the basic idea behind it. The government needs to find stable funds to make the allowance sustainable and keep it true to its basic idea.

In line with the Democratic Party of Japan's manifesto for the 2009 Lower House election, the DPJ government started giving a monthly allowance of ¥13,000 per child up to third-year middle school students in fiscal 2010 and was to double the amount from fiscal 2011. Japan's financial straits have forced the government to give up on doubling the amount.

The Kan administration, however, has decided to pay an additional ¥7,000 a month to a child younger than 3 to help some households whose disposable income in fiscal 2011 will be less than in fiscal 2010 due to the planned abolition of the deduction for young dependents on the family's taxable income.

The approach and the scheme contradict the basic idea that society as a whole should help child-rearing families irrespective of their income levels. The allowance was not intended as an income compensation measure. The confusion is due to the Kan administration's failure to abide by the DPJ's original idea of securing funds for the allowance by abolishing taxable-income deductions for spouses and dependents.

The Kan administration has decided not to abolish the deduction for spouses, fearing that the DPJ may lose support from housewives in local elections next year. It has decided to abolish the deduction for all young dependents. But the abolition of the deduction for adult dependents will affect only high-income families.

High-income households get more benefit from the deduction for spouses than low-income households. Among households with an annual income of ¥2 million or less, only about 10 percent can apply for the deduction because most housewives in this group are working. The corresponding rate for households with an annual income of ¥9 million or more is about 60 percent. The deduction is also said to work to lower wages for working housewives. It is clear that the government should abolish it to strengthen the child allowance.

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