Comments on: Economists think about soaking the rich, a little

By: Philip Brasor & Masako Tsubuku

Philip Brasor & Masako Tsubuku — Sun, 19 Feb 2012 00:08:21 +0000

Japan, of course, does tax land. In fact, revenues from property taxes go to both local governments and the central government. The main problem with raising this tax is that the authorities and the powerful construction/real estate industry don’t want anything that will further discourage home buying or building. As for land speculation, there hasn’t been much of that in Japan since the end of the bubble era. Property values continue to remain stagnant nationwide. And as far as controlling land use, such laws are already in effect, though probably not as effective as they could be. If a piece of land designated for residential use has no building on it, the owner pays more in taxes. Likewise if a piece of land designated for agriculture isn’t being used to grow anything, the tax is higher as well, but many owners get around this by planting a chestnut tree or two. For more information about property taxes, here’s an article we wrote recently.

http://www.japantimes.co.jp/text/fs20120103ht.html

By: LSTB

LSTB — Sat, 18 Feb 2012 16:51:49 +0000

The consumption tax is a bad idea as it just falls on workers, which slows down the economy, but the big problem here is that we’re defining “wealth” too broadly. “Wealth” here includes plenty of things that aren’t actually capital, i.e. land.

Land values are created by community activity and not by individuals like labor and buildings. Because site values are fixed, rather than tax people’s cash savings, tax the land values. Doing so requires a fraction of the bureaucracy required to administer an income or consumption tax because it only takes a computer-generated map. The other benefits are it’s an unavoidable tax and reduces land speculation and wasting of prime locations.

By: Miko

Miko — Sat, 18 Feb 2012 11:13:44 +0000

I think that under-the-mattress savings are more common than most people realise, but I also think that they are probably limited to the baby-boomer generation. Young people these days just don’t have the sense or the wherewithal to save money for themselves. Furthermore, they are all convinced that the government is going to bail them out, no matter what happens. Their elders are not quite so optimistic, and rightly so.

Two anecdotal stories: a mature student told me of cleaning out her deceased mother-in-law’s home and discovering about 1,000,000 yen stashed away in a cupboard. An elderly student told me that she kept the same amount in her bedroom drawer, in case of “emergency.” (I begged her not to share this information with other people!)

And lest you think it is limited to Japan, let me tell you that my New Zealand grandparents did exactly the same thing back in the ’70s … they hid a large sum of money in their home – amounting to roughly 10,000 dollars – simply because they didn’t trust the banks or the government. Whose to say that they were wrong?

By: Dave

Dave — Wed, 15 Feb 2012 11:53:52 +0000

While I agree with Rowan about money being sent abroad, I do think that it is about time for the government (and the people really) to start discussing how to get money circulating again. Clearly, large sums are resting in savings either in Banks or under Tatami mats and the governments futile attempts to bolster the economy only built up debt. Much like the rest of the world, Japan is suffering from a lack of cash flowing through the system. Older people are more likely to hoard their money (fair enough what with a pension system that seems incapable of policing fraud or ensuring that everyone is paying in), but this is going to cost Japan in the end. Birth rates are astoundingly low, jobs are leaving these shores, debt is skyrocketing and so on. So while this may be a futile endeavor, sitting on hoards of cash is damaging the economy far more than helping it. Where Americans have a spending problem, the Japanese have a huge saving problem. I’m not encouraging reckless spending of American proportions, but maybe people with a lot in savings could do more to help their family’s invest in schooling for their children/grandchildren, buy them houses/apartments, and so on. One of my grandmother’s favorite things to tell me is that I’ll be fine financially when she passes away. In the first place, I’d rather not rely on something that could change in value depending on economic conditions. Secondly, I think I’d much rather see my grandmother spend the money she worked so hard to save on things that are important to her so that she can see the fruit of her labor. Giving it to her grandchildren is a sweet gesture, but there are no guarantees that any one of us with be careful with it. I think that if the same thing is told to the elderly in Japan, they might reconsider something a little more practical to do with their money than just hoard it and hope for a better tomorrow.

By: Rowan

Rowan — Tue, 14 Feb 2012 23:22:56 +0000

Great article, always like reading your posts. I think that while these sorts of taxes sound fantastic, they tend not to work. Why would you put your money in a Japanese account and be subject to more tax than interest? You could do better offshore, and the wealthy people are, the more likely they would be to pursue this option.