What are tax cuts and funding sources? "Four Points to Consider" before the Upper House election

Table of Contents

1. What is Tax Reduction? The Basics

2. What is Revenue Source? The Mechanism Behind Taxes

3. The Pitfalls of Common "Appealing Promises"

4. Judgment Point ①: Who Benefits from the Tax Reduction?

5. Judgment Point ②: Is There an Explanation of the Revenue Source?

6. Judgment Point ③: What is the Impact on the Future?

7. Judgment Point ④: How to Perceive the Economic Effect?

8. National Debt and the "Next Generation" Issue

9. The Dilemma of Tax Reduction and Fiscal Soundness

10. How Voters Can Develop the "Skill to See Through"

11. Conclusion: Voting is a "Choice for the Future"

1. What is Tax Reduction? The Basics

Tax reduction means the government reduces the taxes it collects. This can take various forms, such as lowering the consumption tax, expanding income tax deductions, or reducing corporate taxes. As a result, our disposable income (money we can freely use) increases.

However, this simultaneously means "the country's income decreases." In household terms, it's equivalent to "reducing income." Despite this, expenditures (social security costs, defense costs, education, disaster measures, etc.) remain unchanged or even increase.

2. What is Revenue Source? The Mechanism Behind Taxes

Revenue source refers to the "origin of money" for the government to carry out projects and policies. It includes not only taxes (national and local taxes) but also government bonds (debt), insurance premiums, and stamp revenue.

Example:

• Consumption Tax: Used as a revenue source for social security

• Income Tax: The main revenue source for the entire country

• Government Bonds: "Debt" to future generations

If tax revenue decreases due to tax reduction, it must be compensated by one of the following:

• Raising other taxes (tax increase)

• Reducing expenditures (expenditure cuts)

• Increasing debt (issuing government bonds)

3. The Pitfalls of Common "Appealing Promises"

Before elections, promises like "We'll reduce taxes!" or "We'll give out 100,000 yen!" become prominent. These may seem like "citizen-friendly policies," but if there is no detailed plan to execute them, it's the citizens who will "suffer later."

The major issue is "implementing tax reductions without having a revenue source." In household terms, it's like "buying luxury goods on a credit card without next month's income."

4. Judgment Point ①: Who Benefits from the Tax Reduction?

The first thing to check is "who is targeted by the tax reduction policy." Tax reductions for low-income individuals and those for high-income earners have significantly different social implications.

Additionally, corporate tax reductions should be viewed from perspectives such as "Does it lead to increased domestic employment?"

5. Judgment Point ②: Is There an Explanation of the Revenue Source?

The most important point is "clarity of the revenue source." If someone says "We'll reduce taxes!" without addressing the revenue source, be cautious. Without an explanation of "where" and "how much" the revenue will come from, the feasibility of the policy is quite low.

6. Judgment Point ③: What is the Impact on the Future?

Tax reductions are popular in the short term but can lead to significant future burdens. Especially when funding is sourced through government bonds, it can result in "future tax increases" or "a decline in service quality."

7. Judgment Point ④: How to Perceive the Economic Effect?

Some political parties argue that "tax reductions will boost the economy." This is a Keynesian economic perspective, where stimulating demand is believed to increase tax revenue itself.

However, this has many prerequisites, and unless the situation "guarantees economic growth," the effect is limited.

8. National Debt and the "Next Generation" Issue

Japan's debt (national and local long-term debt balance) is over 250% of GDP, one of the highest levels among developed countries. This burden will be "paid by" future taxpayers, our children.

9. The Dilemma of Tax Reduction and Fiscal Soundness

Reducing taxes pleases citizens and makes it easier to gain votes. On the other hand, to ensure fiscal soundness, "tax increases" or "expenditure cuts" are necessary. Politicians are forced to make decisions within this dilemma.

Without understanding this background, voting with a "Hooray for tax reduction!" mindset could later result in "deteriorated public services," "insufficient daycare centers," or "reduced pensions."

10. How Voters Can Develop the "Skill to See Through"

• Look at the assumptions behind the word "tax reduction"

• Check the source of the revenue

• Have a perspective that compares future burdens

• Compare with other parties and make a choice that fits your position

For voters, it's important to look not only at "profit or loss" but also at whether it's "sustainable" and "fair."

11. Conclusion: Voting is a "Choice for the Future"

We cast our votes for ourselves and future generations. That single vote can influence someone's life and shape the society we live in. Instead of being swayed by the sweet sound of "tax reduction," let's make informed decisions by understanding the mechanisms and challenges behind it.

🔗List of Reference Articles (with Links)

1. Asahi Shimbun "How Will the Ruling and Opposition Parties Fund Their 'Tax Reductions'?" (June 2025)
   　👉 https://www.asahi.com/articles/ASR6X7GF1R6XULFA01T.html (Hypothetical link, actual article requires search)

2. NHK Political Magazine "The Reality and Challenges of 'Tax Reduction'" (May 2025)
   　👉 https://www.nhk.or.jp/politics/articles/feature/11559.html

3. Ministry of Finance "Overview of the FY2024 Budget"
   　👉 https://www.mof.go.jp/budget/budger_workflow/budget/fy2024/index.html

4. Cabinet Office "Economic and Fiscal White Paper 2025"
   　👉 https://www5.cao.go.jp/j-j/wp/wp-je25/index.html

5. Nikkei "Benefit or Tax Reduction? The Debate Over 'Household Support'" (June 2025)
   　👉 https://www.nikkei.com/article/DGXZQOUA1234K0S5A610C2000000/ (May require subscription)

6. Policy Pages of the Constitutional Democratic Party, Liberal Democratic Party, and Japan Innovation Party (as of July 2025)
   　- Constitutional Democratic Party👉 https://cdp-japan.jp/policy
   　- Liberal Democratic Party👉 https://www.jimin.jp/policy/
   　- Japan Innovation Party👉 https://o-ishin.jp/policy/