Abstract

The Japanese personal income tax system has been designed to mitigate the tax burden by granting generous deductions and by employing a steep marginal tax curve. The failure of it is that the combined burden of tax and social-security contributions of low-income people has not been dealt with. The purposes of this article are twofold: first, to show that the social-security burden is in fact higher than the tax liability for most of the working population, and second, to show that it is possible to mitigate the burden by introducing refundable tax credits. Results of micro-simulation using a survey of household income are presented to show the combined tax and socialsecurity burden of families of various income classes.

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