[Tax Burden Exceeds 50%] What Is the True Nature of the “De Facto Tax Hike” the Government Is Hiding? The Top 3 Most Harmful Tax Hikes and What We Should Do About Them

Conclusion (Key Points)

• Japan’s effective tax burden has exceeded 50%
• While the government claims it will not raise taxes, it is cleverly implementing effective tax increases
• Particularly egregious tax hikes include: (1) Child-rearing Support Allowance, (2) Special Income Tax for Reconstruction, and (3) the reconstruction surcharge on resident tax—which has been converted into a Forest Environment Tax
• The “most rational tax-saving method” identified by financial planners is investment
• This is driven by the “structure of capitalism,” where tax rates on earned income are high, while tax rates on investment income are low

1. What is the tax-to-income ratio?

The tax-to-income ratio refers to the proportion of taxes and social insurance premiums relative to national income.

• Income Tax
• Resident Tax
• Consumption Tax
• Social Insurance Premiums (Health Insurance, Employees’ Pension Insurance, Long-Term Care Insurance, etc.)

When these figures are added together, they serve as an indicator of the burden on the entire population relative to total national income.
The Ministry of Finance also publishes a figure known as the “potential national burden ratio,” which reflects the “actual burden” after accounting for government bond issuance; this ratio exceeds 50%.

However, the “potential national burden ratio” is merely a metric the Ministry of Finance uses to “justify tax increases” and has little practical significance.

2. Why Japan’s Burden Rate Exceeds 50%

Japan is facing a declining birthrate and an aging population, leading to a surge in social security costs.
To secure the necessary funding, the government has repeatedly raised taxes and increased social insurance premiums.
Social insurance premiums, in particular, are easy to raise under the pretext that they are “not taxes,” so the burden on the public is increasing in ways that are difficult for people to notice.

3. Actual Taxes Paid by Someone Earning 5 Million Yen Annually

■ Taxes and Insurance Premiums Deducted from Salary

• Employee Pension Insurance
• Health Insurance
• Long-Term Care Insurance
• Unemployment Insurance
• Income Tax
• Resident Tax
  → Approx. 1,158,000 yen

■Consumption tax, gasoline tax, alcohol tax, automobile tax, etc.

→ Approx. 410,000 yen

■Total

Approx. 1,568,000 yen (tax burden rate: 31.4%)

This is strictly based on a “case with an annual income of 5 million yen.”
Since there are many high-income earners in Japan as a whole, the average tax burden rate is around 45%.

4. The “Top 3 Malicious De Facto Tax Increases” the Government Hides

■No. 3: Child and Child-Rearing Support Allowance (De Facto Increase in Insurance Premiums)

The Child and Child-Rearing Support Allowance was introduced as a funding source for the “unprecedented measures to address the declining birthrate” proposed by the Kishida administration.
The government initially explained it this way:

“We will not raise taxes.” “We will not impose a burden on the public.”

However, in reality… it has been added to health insurance premiums.
In other words, it amounts to a de facto tax increase.
Furthermore, the government’s logic is: “Since wages will rise in the future, we will collect the funds from those increases, so there will be no actual burden.”

■ 2nd Place: “Misuse” and Extension of the Special Income Tax for Reconstruction

The Special Income Tax for Reconstruction (2.1%) was introduced to fund reconstruction efforts following the Great East Japan Earthquake.
It was originally intended to be a limited measure lasting 25 years.

However… before anyone realized it, the funds were diverted to defense spending, and the tax period has been extended until 2050.
Isn’t it a serious problem that a tax increase accepted by the public for reconstruction is being used for an entirely different purpose?

■No. 1: Reconstruction Surcharge on Resident Tax → “Permanent” Forest Environment Tax

The reconstruction surcharge, which added 1,000 yen annually to the resident tax.
It was originally intended to be limited to 10 years.

However… its name was changed to the “Forest Environment Tax,” transforming it into a tax that will be collected indefinitely.
Isn’t this “the most illogical tax hike”?

5. Why are such tax hikes being approved?

The reason is simple.

• The public is unlikely to notice
• The media doesn’t dig deeper
• Many people are apathetic toward politics

The government repeatedly implements “stealth tax hikes,” and by the time the public realizes it, the system is already set in stone.

6. The “Only Rational Tax-Saving Method” Recommended by Financial Planners

■ The Most Rational Tax-Saving Method Is “Investment”

The reason lies in the difference in tax rates.

• Income from employment → Taxed at up to 55%
• Investment income → Taxed at approximately 20% (tax-free under the NISA program)

In other words, capitalism is structured in such a way that those who don’t invest end up losing out.
The reason wealthy people always invest is that “tax rates are lower, so they end up with more money in their pockets.”

Summary: If the public knew this, politics would change

To summarize the key points of this article:

• Japan’s Effective Tax Burden Exceeds 50%
• While claiming it will “not raise taxes,” the government is implementing effective tax hikes
• Particularly egregious tax hikes include the “Child-Rearing Support Allowance,” “Special Income Tax for Reconstruction,” and “Forest Environment Tax”
• Politicians can sneak in tax hikes precisely because the public is unaware
• The financial planner’s conclusion: “Investment is the best way to save on taxes”

If the public is made aware of this, politics is bound to change.
If they remain unaware, the burden will only continue to grow.