Perspective Lacking in the Discussion on Financial Income Taxation -Proposal for Introduction of comprehensive selective taxation and emphasis on "equality of opportunity"

 Since the Liberal Democratic Party (LDP) presidential election in September this year, discussions on strengthening the financial income taxation have been attracting attention in Japan. For high-income earners with an income of more than 100 million yen, the lower their income tax burden rate becomes (regressive) as incomes rise, a problem arises from the perspective of income redistribution (the so-called "100-million-yen barrier"). It has been pointed out that the ratio of financial income to total income is high in the high-income group, while the tax rate for financial income subject to separate taxation is lower than the progressive tax rate on labor income subject to comprehensive taxation.

 Many countries adopt a system in which financial income is separated from labor income and taxed at a lower rate. In the wake of economic globalization and digitalization, taxes on labor income, which is not easily transported across national borders, have become heavier, while taxes on financial income, which is easily transported across national borders, have been reduced.

 To strengthen the financial income taxation, raising the rate of the tax levied separately, not only yields the space for consideration of the tax burden and the impact on the financial market, but also contains several problems such as （１）if the increase is small, regressivity will not be eliminated and （２）the tax burden on low-income households will increase.

 On the other hand, adopting the progressive tax rate under the comprehensive taxation shall yield the outcome that , (1) the income tax burden rate on the income group exceeding 100 million yen will also be progressive, and (2) the tax burden on the financial income of the low-income group will be reduced, therefore the income redistribution will be strengthened, but the tax rate on the financial income of the high-income group will rise from 20% to 30 ~ 55%.

 If we strengthen the financial income taxation in order to strengthen its income redistribution function, it is desirable for us, in addition to raise the proportional tax rate, to adopt a system that enables anyone to select the comprehensive taxation, not the separate taxation, for his interest income and capital gains from stocks. We can avoid an increase in the burden on low-income households.

 Regarding recent discussions on the strengthening of financial income taxation, the problem is that those who argue for it are too focused on equality of results for the current generation and lack the perspective of equality of opportunity. Instead of focusing on strengthening taxation on financial income based on "equality of results," we should review the entire tax system, including strengthening inheritance and gift taxes, by focusing on measures to enhance "equality of opportunity."

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