Pedestrians cross a street in Tokyo's Ginza shopping district.Katsumi Kasahara
As debate rages in the U.S. and U.K. over top-end tax rates, Japanese authorities appear to be adopting a different approach: soak the rich, quietly.
Big earners in Japan already face a top marginal income tax rate of 50 per cent -- the level found so objectionable by many U.K. Conservative members of parliament. But Tokyo officials plan to dun them further with a temporary tax surcharge to fund reconstruction of areas devastated by the huge March 11 tsunami.
And while their plan still faces political obstacles, Japanese policy makers have at least managed to avoid the accusations of "class warfare" levelled at U.S. President Barack Obama over his effort to lift taxes on the wealthiest Americans.
To be sure, the redistributive element of Japan's reconstruction tax proposal is buried safely in the small print. While the government has proposed a flat 5.5 per cent surcharge on income tax, deductions that slash the standard bill for lower income payers mean it's the better-heeled that will really pay.
For a family with two children on a single annual salary of ¥5-million ($65,500) a year -- a level close to the median -- the government's tax panel estimates the extra cost of the 5.5 per cent hike at a mere ¥4,300 a year. But a similar family earning ¥10-million annually would pay an extra ¥36,700 and one on ¥100-million would have to stump up ¥1.84-million.
That means the temporary hike marks a small but potentially important turning point in the general trend of recent decades toward lower income tax rates on Japan's rich.
Such a turnaround should not be a surprise. Japan once boasted of its creation of a "nation of middle-class" but falling average salaries and a shift toward temporary and contract employment have largely destroyed the post-war dream of salaryman "job-for-life" security.
Worries about income inequality were one factor in the rise to power in 2009 of the left-of-centre Democratic party. Mainstream political discussion is dominated by talk of how to ease the travails of a squeezed middle rather than of ways to cultivate "wealth creators" by coddling the better-off.
Cynics claim that many of Japan's richest pay less than their fair share of tax. This was a perception fuelled by revelations in 2009 that the prime minister at that time, Yukio Hatoyama, had failed to pay the required tax on more than ¥1-billion in funds given to him by his heiress mother over six years.
Mr. Hatoyama eventually handed over hundreds of millions of yen in overdue tax -- but forgiving officials gave some of the money back because the statute of limitations for payment had expired.
So wealthy taxpayers will be wise not to make too much of a fuss about the temporary hikes. After all the tsunami reconstruction surcharge is still only a tweak to a tax system that captures only the equivalent of 17 per cent of gross domestic product, one of the lowest levels among advanced economies.
It would be seen as poor taste to oppose a tax hike intended to ease the suffering of the residents of the stricken north east whose stoicism in the face of the March 11 disaster drew worldwide admiration.
One of the best arguments for higher taxes on the rich is their potential to reinforce public confidence that all income groups are sailing in the same national boat. Japan, after all, is still a nation mercifully free of the kind of crime-ridden no-go zones that mar some U.S. cities or the riots that raged across English communities this summer.
Prime Minister Yoshihiko Noda has himself suggested that social calm is not guaranteed, warning this month that the dismay of people who fall out of the middle class could "eventually turn to despair and then to anger, and then the collapse of the stability of the Japanese society from its core".
Many top-rate taxpayers are no doubt still hoping that worries about a faltering economic recovery will at least force the postponement of the temporary tax hikes. But Japan's dire fiscal trends mean generally higher taxes are all but inevitable. This will not be the last attempt to ensure the rich pay more.