In previous studies, including the Ministry of Internal Affairs and Communications (2013), it was pointed out that the estimated theoretical tax base of Japan’s consumption tax using data from input-output tables greatly exceeded the tax base declared by taxpayers. In this paper, we applied a consistent method provided by Hutton (2017) for estimating the size of the consumption tax base for each economic activity and demand item to data from Japan’s input-output tables for 2011 and 2015. The estimated result for 2011 was about 13.2 trillion yen, and the result for 2015 was about 22.6 trillion yen, which do not greatly exceed the tax amount declared by taxpayers.
This paper confirms the basic structure of Modern Money Theory (MMT) and examines it from tax and budget theory of Public Finance. Although MMT expands the endogenous money supply theory developed by the post-Keynesians to the vertical money such as cash, reserves, and public bonds, issued by the central government and the central bank, the complexity of the theoretical structure hinders its understanding. This paper explains MMT by classifying it into the following theoretical systems: “money is a debt” derived from the definition of “horizontal money creation” and its attendant “accommodation,” “vertical money creation” and its attendant “monetary sovereignty,” “taxes-drive money view,” “debt hierarchy,” which integrally grasps horizontal money and vertical money, and “Stock-Flow Consistent.” Furthermore, by adding the recognition of “Money Manager Capitalism” and “Minsky’s half century,” the “Need for a budget deficit” was derived. Combining “functional finance with these systematic monetary theory,” the structure leading to the policy proposal of “Job Guarantee Program (JGP)” was explained. Finally, by examining MMT’s tax and budget theory in detail, we have come to a point out that there is a different perspective from the existing Public Finance.
Property tax has been identified as a case of a “good” local tax in the literature. Such argument, however, presumes that property tax is levied solely on land. In practice, property tax applies to housing and depreciable assets such as machinery and buildings, which implies a feature of capital tax. It is known that capital tax distorts capital investment. The present paper analyzes the effects of property tax on capital investment. To be concrete, we use panel data of manufacture census such as Census of Manufacture and Economic Census for Business Activity, and examine how property tax on depreciable assets in Japan affects capital investments by small and medium enterprises. It is established that property tax negatively affects their investment and such adverse effects are exacerbated among enterprises with liquidity constraints.
In cities where the population is concentrated in the center of the city (cities with high levels of compactness), land prices tend to be high in locations such as residential areas. This is because the level of public services is high, living is convenient and economic activities are efficient in these cities. This paper analyzes the effects of levels of compactness on land prices compiled by the Japanese government for various levels of compactness, various types of land use and various levels of distances from the center of the city by using a fixed effect model with panel data.
The results show that land prices become higher in cities with higher levels of compactness, and that the impact on land prices varies with the level of compactness and whether the land is used as a residential area or commercial area. The results also show that rises in land price are bigger in zones that are closer to the center of the city than in zones that are further away.
Treasury control over maintaining fiscal discipline is considered to have collapsed in the 1970s after it ran an enormous budget deficit. This paper analyzes the process of organizing the 15-month budget in the late 1970s and shows that the budget deficit occurred despite the functioning of treasury controls. Until the second supplementary budget for fiscal year 1977, which constituted a 15-month budget, the budget was prepared under the rule of keeping the dependence on public debt within 30 percent. However, the Japanese government had to adopt a policy of expanding domestic demand in the face of a strong yen. To manage this dilemma, Takeo Fukuda sent a secret letter to the United States. On this basis, hard-liners in the US government took the lead in foreign policy and exerted “foreign pressure” (gaiatsu) on Japan. As a result, Fukuda was able to implement a budget that broke through treasury control. Meanwhile, the Ministry of Finance turned to “reversibility” to consolidate its control; it then expanded public works and introduced a fifty-fifty rule. However, the “reversible” policies remained and contributed to the budget deficits in later years.
This paper criticizes the fact that the uniqueness of the local government as a public sector is not dealt with in the concept of regional economic circulation in previous studies. Therefore, this paper posted the recursive and continuous movement of money originating from local governments within the existing concept of regional economic circulation by the concept of “fiscal circulation.” As a result of the case analysis of Nishiawakura-village, Okayama Prefecture, the uniqueness of the recursive flow of money to the local government starting from fiscal expenditure was found in the regional economic circulation. This uniqueness was because of financial resources that change every year and the policy or structure made by the government.