Economic Analysis of Personal Income Tax Reform
This research program will conduct two economic analyses of personal income tax reform: (1) panel analyses of the effects of personal income tax reform implemented in the 2010s, and (2) microsimulation analyses to explore the reforms required in the 2020s. With respect to the first, we will analyze the effects of personal income tax reform, based on actual household incomes obtained from household panel data in the 2010s. Regarding the second, we will make specific policy recommendations on the personal income tax reforms required in the 2020s, supported by microsimulation analyses, using the suggestions on changes in the deduction and tax rate structure of the personal income tax system obtained from the panel analyses. In the microsimulation analyses, we can numerically analyze the possible impact on households when a hypothetical tax reform is implemented using real household income data. Based on these analyses, we will analyze the effects of the tax reform and make policy recommendations based on what is included in the tax reform package for each fiscal year to be approved by the cabinet at the end of the calendar year. In addition, research will be conducted on the compatibility of correcting income inequality and promoting innovation. We will analyze the factors that inhibit innovation in Japan’s tax and social security systems and propose institutional reforms that are expected to be effective in promoting innovation.