Nothing says “socialism” better than the redistribution of wealth. In fact, redistributing wealth is what taxes are all about, and no tax redistributes wealth more honestly than inheritance taxes.
In a true socialist system, the state would claim all your property when you die, assuming that the state allowed private property in the first place. Inheritance taxes force a person’s progeny to make their way in the world through their own devices rather than through their parents’. However, most people think that if they made their money through hard work and talent they should have the right to leave the fruits of their labors to their offspring, even if it means those offspring become lazy, fat and selfish as a result.
In 1991, inheritance taxes took 7 percent of all the money left by dead people for a total of ¥4 trillion. Last year, about 4 percent of legacies ended up going to the Japanese government, amounting to ¥1.2 trillion. That’s a significant decline, especially considering the fact that more people died last year than in 1991.
The reason it’s gone down is that exemptions and deductions have gone up, which makes no sense in a society struggling to find ways to fund social security for an aging populace. Japan still has a huge personal savings stash, more than ¥1,000 trillion. A former government tax investigator told The Asahi Shimbun that if current inheritance tax rates remain the same, the gap between rich and poor will become wider, because wealthier people aren’t spending their money. They’re just leaving it to their children.
The new government could pay for a good deal of their social projects if they tapped these legacies. And since the prime minister is one of the richest men in the country, he could prove his integrity as a leader by pushing for higher inheritance taxes.
Right now, however, he is being portrayed as a hypocritical fat cat because of all the money he received from his mother through shady donations to his political fund. It’s widely believed that Yukio Hatoyama’s 87-year-old mother, Yasuko, made the donations to avoid the huge inheritance taxes that will be levied on her estate when she dies. She’s been giving a lot of money to both her sons, Yukio and his Liberal Democratic Party nemesis Kunio. They may pledge to different parties, but to mom they’re equally lovable and thus deserving of equal shares.
Against this tide of accusation swims journalist Takashi Uesugi, who was an aide to Kunio from 1994 to 1998. In an essay that appeared last week in Shukan Asahi, Uesugi defends the Hatoyamas, in particular “Yasuko Oku-sama” (Madame Yasuko), from the slings and arrows of outrageous media invective.
Yasuko is the daughter of Shojiro Ishibashi, the founder of the world’s biggest tire maker, Bridgestone, and is believed to be worth more than ¥50 billion. Uesugi says she is a modest woman with little interest in her wealth, and describes Otowa Goten, the large estate in Tokyo’s Bunkyo Ward where she grew up, as being “old and drafty.” The lady of the house used to eat her meals in the kitchen with the help.
Nevertheless, when her husband, politician Iichiro Hatoyama, died in 1993, the inheritance taxes on his ¥15.2 billion estate became a “huge headache” for the family. Because of the spouse exemption, it presumably wasn’t a headache for Yasuko herself, but the three Hatoyama children were forced to cough up ¥600 million each to pay the tax, and thus had to sell some of their own Bridgestone stock and dip into their savings. After taxes their combined legacies came to about ¥6 billion.
It sounds like the sort of headache a lot of people would gladly endure, but Uesugi conjectures that the experience made Yasuko anxious about the problems her own estate would cause for her children when she dies. She will leave much more property than her husband did, and Uesugi calculates that each surviving Hatoyama will have to pay ¥5 billion in inheritance taxes. Consequently, she gives money to charities. This makes it sound like Yasuko is simply trying to reduce her property so that the government won’t take as much of it, but Uesugi insists that her contributions are purely altruistic in intention.
Uesugi’s theory about the shady donations from Yasuko’s foundation to Yukio’s and Kunio’s respective political funds is that they were carried out by an overzealous accountant in her employ who “took advantage of Yasuko’s love for her sons.” In the past, when she sent money to her sons, her accountants made sure the proper gift taxes were paid. Uesugi says Yasuko’s strict sense of propriety is such that she would never countenance money laundering.
This analysis jibes with Yukio’s self-defense of being a typical botchan (child of privilege) and thus innocent of how money works in the real world. If he weren’t so innocent, he would have done what other politicians usually do: have his parent set up a political fund through which she can legally transfer any amount she wants to his political fund. Though both Yukio and Kunio are fourth-generation politicians, they aren’t strictly speaking seshu (hereditary) lawmakers because neither was elected in his father’s constituency. That’s how most rich politicians solve their inheritance and gift tax problem. Dad just puts all his money into his political fund and then passes the fund on to junior along with the support group and the voters when junior runs for office. It’s what the Koizumis, Fukudas and Abes do.
Since prosecutors aren’t going to question Yasuko or her sons, it sounds as if Uesugi’s suppositions are probably correct. Both sons have said they will pay whatever gift taxes apply on the donations, which should be no headache for them since they’re loaded. It should come to about ¥400 million total. That won’t put a dent in the government’s current debt, but every little bit helps.