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The Yomiuri Shimbun Liberal Democratic Party Policy Research Council Chairperson Itsunori Onodera, center right, and his Democratic Party for the People counterpart Makoto Hamaguchi, center left, attend policy talks in the Diet on Friday morning.
By Hiroki Takao and Miyako Taniguchi / Yomiuri Shimbun Staff Writers
21:00 JST, November 9, 2024
The Democratic Party for the People, during separate policy talks with the Liberal Democratic Party and Komeito that began Friday, made it clear that it would seek to quickly realize increases to take-home pay, starting with a review of the so-called ¥1.03 million barrier, the income threshold above which income tax is incurred.
The ruling parties plan to accept the review, but coordination over the details may be difficult.
Maintaining election momentum
DPFP Policy Research Council Chairperson Makoto Hamaguchi pressed his LDP counterpart Itsunori Onodera to review the income tax threshold during their meeting on Friday.
“I want you to do what you can this fiscal year,” Hamaguchi told Onodera.
Changes to the ¥1.03 million barrier would require amendments to the Income Tax Law, among others, so it would not be realized until the next ordinary Diet session at the earliest.
On a radio program on Thursday, DPFP leader Yuichiro Tamaki said, “Our campaign pledge was to reform the tax system, and we will never make compromises such as merely issuing benefits or anything else. We won’t waver on our policy of increasing the basic and other deductions.”
Within the DPFP, there is a proposal to have the ruling parties, by the end of the year, make clarifications, such as the amount the income tax exemption limit of ¥1.03 million is raised.
The DPFP is in a hurry to see results as it wants to carry the momentum of the recent House of Representatives election into the House of Councillors election in the summer.
Cautious approach
The main pillar of the ¥1.03 million barrier review is to raise the total value of deductions by ¥750,000, setting the minimum taxable income at ¥1.78 million. The basis of this is the fact that the minimum wage has increased by 73% from 1995, when the income tax threshold was set at its current level.
According to estimates by the Daiwa Institute of Research, if the income tax threshold is raised to ¥1.78 million, a person earning ¥2 million a year would see their tax cut by ¥82,000, a person earning ¥5 million by ¥133,000 and a person earning ¥8 million by ¥228,000. However, tax revenue for the national and local governments would decrease by ¥7.3 trillion.
Voices of caution are strong within the government and ruling parties over such a huge decrease in tax revenue. After a meeting with Hamaguchi on Friday, Komeito Policy Research Council chair Mitsunari Okamoto hinted that a tax threshold increase of about ¥100,000 is also an option. “The minimum wage is an important indicator, but prices have only risen by about 15%,” Okamoto told reporters.
Tamaki said, “If [raising the threshold] costs ¥7 trillion, it is the responsibility of the government and ruling parties to trim costs from somewhere.” Tamaki apparently hopes to negotiate with the ruling parties on the size of the threshold increase and gain an advantage for his party by leaving the details of the changes to the threshold to the government and ruling parties, and then assessing their response.
Time limit
The DPFP has touted lifting the freeze on the so-called trigger clause to enable a temporary gasoline tax cut as one of its signature policies, which is also aimed at increasing people’s take-home pay. However, Internal Affairs and Communications Minister Seiichiro Murakami said at a press conference on Friday, “Revenue is expected to fall by about ¥500 billion a year in regional areas.”
Both the comprehensive economic measures and the supplementary budget need to be approved by the Cabinet by the end of this month, so there is only about two weeks left for discussions. The discussions are also intertwined with the ongoing debate on tax system reforms for fiscal 2025, the next deadline for which is in December.
The LDP and Komeito — now a minority ruling coalition — must continue to come up with answers that the DPFP can accept. If the talks fail to reach a conclusion and they fail to receive cooperation from the DPFP in the passage of the supplementary budget and the fiscal 2025 budget, the Cabinet of Prime Minister Shigeru Ishiba could reach a deadlock as early as the extraordinary Diet session at the end of the year.
However, the DPFP’s response has also been confused.
“The realization of policies has suddenly become a reality, and there is some confusion within the party,” said a mid-ranking DPFP member.
