Tokyo, February 24, 2025 — A heated debate unfolded in the Japanese Diet today as opposition lawmaker Tamura from the Japanese Communist Party challenged Prime Minister Ishi and Finance Minister Kato on the government’s tax reform proposals, spotlighting the heavy burden of consumption tax on low- and middle-income households.
Tamura opened the discussion by questioning the government’s focus on raising the minimum taxable income threshold from 1.03 million yen (approximately $6,800 USD), a figure often highlighted in budget talks. While acknowledging that lifting this threshold aligns with the principle of not taxing essential living expenses, she argued it fails to benefit the most vulnerable—those earning less than 1.03 million yen annually. “There are about 15 million households exempt from residential tax and another 9 million people exempt from income tax,” Tamura stated. “Prime Minister, do you recognize that millions are left behind with no relief under this plan?”
Finance Minister Kato responded by explaining that the proposed increase in the basic deduction and minimum salary deduction by 100,000 yen each aims to address rising real tax burdens caused by inflation. “This adjustment reflects recent consumer price trends,” Kato said, noting that it counters the impact of low deduction levels on taxpayers amid rising costs. He also pointed to additional measures like cash handouts for low-income households and regional support packages to mitigate inflation’s effects.
However, Tamura pressed further, arguing that these measures—temporary cash payments included—do little to address systemic issues. “You’re offering one-time handouts in this year’s supplementary budget, while discussing permanent income tax cuts for next year. That’s leaving people behind,” she charged. Prime Minister Ishi countered, “We’re not abandoning anyone. We’re ensuring payments are delivered and wages rise through various proposals in this budget.”
The debate intensified as Tamura shifted focus to the broader tax burden, presenting data from the Ministry of Internal Affairs’ Household Survey. Her chart illustrated tax burden rates by income level: households earning under 2 million yen face a 0.6% income tax rate but a 6.3% consumption tax rate—over ten times higher. For those earning 2.1 to 3 million yen, income tax is 1.2%, while consumption tax is 4.6 times higher at 5.5%. Even at 7 to 8 million yen, consumption tax (3.9%) outpaces income tax (2.3%). “For most people, consumption tax is the heaviest burden,” Tamura asserted. “Prime Minister, do you agree?”
Ishi acknowledged the burden perspective but emphasized benefits, saying, “If you only look at burdens, you miss the essence. Social security benefits, like pension support funded by consumption tax, are thicker for low-income groups.” Tamura shot back, “I’m asking about tax burdens, not social security. A 2-million-yen household pays 12,000 yen in income tax but 126,000 yen in consumption tax. Low-income people feel the weight of medical and caregiving costs, not enriched benefits.”
Kato clarified that consumption tax includes local taxes, suggesting a fairer comparison with combined income and residential taxes. “Above 6 million yen, income and residential taxes exceed consumption tax,” he argued. Yet Tamura countered, “To taxpayers, local or not, it’s all consumption tax—and it’s overwhelmingly heavy.”
Criticizing the government’s plan—offering a mere 5,000-yen annual income tax cut for a 3-million-yen earner (less than 420 yen monthly)—Tamura questioned its effectiveness. “Even revised proposals reach just 10,000 yen yearly, or 830 yen monthly. Without touching consumption tax, will people feel relief?” With inflation driving up living costs, she argued, “Consumption tax grows heavier as prices rise. Shouldn’t we discuss protecting lives through tax reform?”
Ishi conceded that rising prices naturally increase consumption tax burdens but defended multiple tax rates and budget measures aimed at boosting low-income support. Tamura, undeterred, highlighted another issue: tax progressivity. Her data showed that while income and residential taxes rise with income, overall tax burdens (including consumption tax) remain flat—10.8% for under 2 million yen and 7 to 8 million yen alike. “Progressivity vanishes,” she said. “Consumption tax erases fairness. What’s your view, Prime Minister?”
Kato questioned the inclusion of “other taxes” like tobacco tax in her calculations, while Ishi emphasized consumption tax’s role in redistribution. “It’s hard to build progressivity into consumption tax, so we use direct taxes for that and redistribute through benefits,” he said. Tamura retorted, “Progressivity is a constitutional principle tied to survival rights. Consumption tax’s regressivity undermines it. Is that not a problem?”
Calling for consumption tax reduction, Tamura cited Ishi’s own 2022 book, where he wrote, “With today’s economic disparities, I wonder if the original logic behind consumption tax still holds. Its regressivity hits low-income groups hardest.” She argued, “You’ve said it yourself—shouldn’t we debate this?” Ishi acknowledged his past remarks but stressed stable revenue for an aging society. “Consumption tax ensures social security isn’t swayed by economic fluctuations,” he said, defending budget priorities.
Tamura closed by accusing the government of using social security as an excuse while ignoring corporate tax cuts—11 trillion yen in 2023 alone—that could fund a 5% consumption tax reduction. “This data, calculated by us because the Finance Ministry wouldn’t, shows consumption tax drives regressivity and unfairness,” she said. “It’s time to discuss reduction.”
As the session ended, the exchange underscored a deepening divide over Japan’s tax system, with opposition pushing for relief and the government defending its framework amid rising inequality and inflation pressures.
