After a sinuous course, the ruling Liberal Democratic Party and Komeito have reached a decision on cash benefits to be given to households as part of the government’s economic stimulus package. The decision itself contains problems. It could confuse municipalities that will distribute the money. Moreover, it is unclear whether the ¥2 trillion cash giveaway from the government will actually stimulate the economy.
In late August, the government under then Prime Minister Yasuo Fukuda decided to carry out a fixed-amount income tax reduction at the insistence of Komeito. When Prime Minister Taro Aso announced the ¥26.9 trillion stimulus package Oct. 30, he said the government would distribute the cash benefits to all households. But people within the government and the ruling coalition argued that high-income households should be excluded.
The ruling coalition eventually decided to distribute ¥12,000 per person in principle while an extra ¥8,000 will be given for each person 65 or older or 18 or younger. But it has left to municipal governments the important decision on whether to set a limit on personal income when deciding eligibility for the cash benefits. The coalition decided that municipal governments could ask people earning ¥18 million or more after deductions to voluntarily refuse the cash benefits.
Since the ¥18 million limit is just a guideline and does not have binding power, municipal governments that distribute the benefits have to make their own decisions on the limit. This is likely to cause confusion. There also could arise the question of impartiality if different municipalities make different decisions. The ruling coalition and the government are to blame for their slipshod way of using tax money.
A Kyodo News poll conducted this month shows that only 16.9 percent of the polled are ready to use the cash benefits to pay for entertainment or purchase expensive items. This casts doubt over whether the measure will provide the desired boost for the economy. It would not be far-fetched to call the cash giveaway a publicity stunt in the runup to general elections.
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