Japanese Voters Reject VAT Hike

Posted by Jeremy Weltmer on Monday, July 26th, 2010, 1:41 PM PERMALINK

In Japan’s recent parliamentary election, the ruling Democratic Party of Japan lost seats to the party that they replaced last election as voters took a decisive stand against the high-tax proposals advanced by the Prime Minister. He had proposed a significant tax hike to the national VAT, and his party received a sharp rebuke for it.

As the Wall Street Journal reported, “Mr. Kan made his party's prospects tougher with an unpopular pre-election pledge to boost the [Japanese VAT] to rein in the country's outsize borrowing, thinking that Japan's voters would understand the severity of its fiscal conditions and appreciate his honesty.”

Yet just as one can expect of the struggling Democratic Party here in the U.S., he refused to lay the blame on failed and unpopular policy. “The prime minister admitted after Sunday's election that the strategy didn't work. ‘My discussion on the consumption tax was received by the voters as rather abrupt,’ a sober-faced Mr. Kan said at his news conference. ‘I, myself, feel that a big reason [for the defeat] was I didn't explain it well enough.’”

It seems that Messers. Kan and Obama have something in common: an inability to consider that voters do not look favorably on lawmakers’ desires to increase tax rates, or in Mr. Obama’s case, impose a national VAT. While the implementation of the Japanese subtraction-method VAT differs substantially from the European-style VAT suggested by Obama’s advisors and officially still on the table in spite of its crippling effects, both leaders seem incapable of conceiving of a government constrained in what it can extract from the economy. One can only hope that the significance of the public’s will as expressed in elections will eventually sink in for the sake of those voters who gave these men their jobs.

For more information on the perils of a VAT in the U.S., examineATR’s Anti-VAT Toolkit.

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