New benefit system to be debated as a “blank slate” Target and amount will depend on financial resources – consumption tax reduction bill

This is an unusual situation in which the government's new benefit system, ``Employee Burden Reduction Support Fund,'' included in the consumption tax reduction bill, is heading to the Diet for deliberation with the targets and amount of support left blank. The biggest challenge is securing permanent financial resources for full-scale introduction in fiscal 2029, and the design of the system will depend on trends in tax revenue and the review of revenue and expenditure. However, it is unclear whether sufficient burden relief will be achieved, as the government will be competing for financial resources with the expanding defense budget.

The support money will be paid as a fixed amount to people with a certain level of earned income, and the amount will gradually increase until it reaches the level at which the resident tax will be taxed (the tax-exempt limit is 1.19 million yen). After that, it becomes a fixed amount again, and the benefit decreases as your income increases further.

The tax reform outline compiled earlier by the government provides three examples of the minimum income at which fixed-amount benefits will start, based on employment income: (1) over 530,000 yen, (2) over 740,000 yen, and (3) over 1,060,000 yen. However, the amount of benefits and the estimated income level at which the pace of benefits will change remain blank.

The outline indicates that the amount of benefits will be considered in consideration of overseas burden rates for taxes and social insurance premiums. A comparison with the average for the United States, Germany, France and the three countries presented at the National Council on Social Security's expert panel shows that in Japan, for a household with two working parents and two children, the burden per person is about 69,000 yen heavier for a household with an annual household income of 3.75 million yen, and 14,000 yen less for a household with an annual income of 5.4 million yen.

In his parliamentary response on the 8th, the Prime Minister emphasized, ``We will make sure that we receive support that exceeds the effects of the consumption tax reduction.'' On the 9th, he stated that the annual burden reduction due to the consumption tax cut would be ``approximately 36,000 yen per person.'' This sense of standards may serve as the basis for discussion.

The Japan Association of Corporate Executives estimates that the amount required to provide up to 150,000 yen to people with annual incomes of up to 2.5 million yen would be 1.7 trillion yen. However, while fiscal demands are increasing due to defense costs, public and private investment for growth strategies, and increased interest payments due to rising interest rates, even if financial resources are created, it is unknown how much will be allocated to support funds.