Posted by ampontan on Thursday, December 30, 2010
THE WESTERN MEDIA has chosen to describe the DPJ administration that assumed power in Japan last year as a “center-left government”. From a limp-wristed foreign policy to spendthrift social welfare schemes designed to bribe the public with its own money, however, we’ve seen a lot more of the left so far than we have of the center. Writing on the Agora blog, Fujisawa Kazuki presents further evidence that their relationship with the center is little more than a passing acquaintance in a post titled Labor Unions will Destroy Japan. Here it is in English.
Since the Democratic Party of Japan formed a government, the political power of labor unions has grown, starting with the Japanese Trade Union Federation (Rengo), the DPJ’s largest support organization. It is possible to glimpse their enormous influence in the outline of the 2011 revision of the tax code.
This revision is said to focus on those with higher incomes. The revision will strengthen the “progressivity” of the code and result in a de facto tax increase on those with annual incomes of at least JPY 15 million (about $US 182,000) by reevaluating (i.e., eliminating) deductions from earnings. Corporate officers are expected to be subject to a more stringent elimination of income tax deductions.
First, I will examine the signs that the government has taken great pains to please the labor unions. The leading executive officers of labor unions generally have annual incomes of JPY 10 to 15 million. They were likely the ones who decided that the floor for tax increases would be an annual salary of JPY 15 million. This is not the only example of beneficial treatment they received, however.
A close examination of the outline of the 2011 tax code revision shows that in addition to the elimination of tax deductions, there will also be a revision of the “specified expenditure deductions”. For example, the expenses required to obtain certification as a lawyer or accountant will become deductable. Also, the following is written on page 44 describing the categories that will now be subject to specified expenditure deductions.
“Expenditures for the purchase of books or other documents related to work assignments, expenses for clothing worn at the workplace, entertainment expenses ordinarily required for work assignments, and the operating expenditures of groups related to one’s occupation.
N.B.: If the total amount of the operating expenditures required for work exceeds JPY 650,000 in a year, the limit of the deduction will be JPY 650,000.”
I didn’t understand what they meant by “groups related to one’s occupation” until I read an entry on the blog of Liberal Democratic Party upper house member Katayama Satsuki. The groups the passage refers to are only labor unions, and it means the union members will be able to deduct expenditures for union activities from their income tax. It gave me a gloomy feeling to realize the extent to which the current government had to curry union favor.
There are likely to be continued tax increases in the future, but labor unions, with their political muscle, will be able to escape those taxes, including their relatively high-paid executive officers. These people are indeed the “labor aristocracy”.
Ikeda Nobuo, the proprietor of the Agora website, often claims that the bottleneck in the Japanese economy is the rigidity of the labor market, and I agree. Under the current government, however, the politically powerful labor unions are pushing policies that will increase labor market rigidity. The burden is being forced on those without entrenched interests, such as newly graduated job seekers and irregular employees. I am concerned that at this rate, labor unions will destroy Japan.
Mr. Fujisawa ensures a boffo finish by quoting Milton Friedman. I couldn’t find the exact English equivalent, but paraphrased it was this: Labor unions aren’t necessary, because the sacrifice of other workers is required to ensure that certain union members receive benefits.
Let’s get it while the gettin’ is good.