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Monday, April 20, 2009
Aso's gift-tax cut for rich puts wealth gap issue on back burner
By NORIKO HAMA
Who are the people that are suffering the most as this global depression unfolds? Clearly, it is the weakest members of society who are getting the worst deal. That, sadly, is the way it has always worked. There's not much that can be done about this particular fact of life.
That, however, is all the more reason to make policymakers concentrate on alleviating the pain being felt by such people in times like these. But why is it then, that the much-vaunted ¥15 trillion extra economic stimulus package the Japanese government recently unveiled contains so much stuff favoring the rich?
If you are in the enviable position of being able to leave a lot of money to your children, you are now eligible for considerable reductions in the gift tax, provided the gift money will be spent on buying a house, renovating one, or making it bigger. People who trade in old environment-polluting cars for more ecologically minded ones will also get special treatment.
How very nice. But what has all this got to do with the homeless and the working poor?
Homeless people are homeless because they cannot buy houses. There is nothing for them to renovate or to enlarge. They have no car to drive, eco-friendly or otherwise. The argument that says if the rich get to keep more of their money as a result of tax breaks, they will spend more of it, thereby contributing to economic growth, may be true to a certain extent. Prime Minister Taro Aso's rich friends may decide to buy another house or two as a result of this measure.
Yet, for that to "trickle down" to make life more tolerable for the homeless will require a very long, meandering and precarious process. The relationship between one and the other is hardly something that justifies the tax policies that this government seems to be pursuing.
Moreover, one cannot help thinking that the really rich people for whom the gift-tax reduction will provide a sizable benefit will probably not care one way or the other. They will buy what they buy and renew what they want to anyway, tax breaks or no.
If the government is truly committed to saving the weakest in society, then trickle-down economics is surely not the way to go.
If Aso wants the rich to make themselves useful in saving the poor, he should ask them to build shelters for the homeless, not more new houses for themselves. He should ask them to provide the working poor with transport, so they can travel to job interviews that might get them out of the cycle of poverty that so afflicts them. For the rich to buy yet more cars for themselves will only mean more congestion, even if the cars themselves are eco-friendly.
It is not that kick-starting economic growth isn't important. It is. Yet growth per se is not the issue. It will serve no purpose if we get a good growth figure for a quarter, a year or even several years, if we cannot effectively deal with the issue of growing social disparity and the increasingly bleak spots of poverty within this most affluent of societies. The largest economic stimulus package on record means nothing if it does not address the relevant issues.
One has more than a sneaking suspicion that the size of the package came first and the contents were concocted later to fill in the box. Beware of a government bearing gift-tax cuts as a gift. It is surely a government that has run out of gift ideas.
Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.