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That's not just true of Japan it's true of pretty much any income tax system: Say you have a two person household consisting of person A and person B. First co

That's not just true of Japan it's true of pretty much any income tax system: Say you have a two person household consisting of person A and person B. First configuration: Person A engages in wealth creation by running the household, raising the children, etc. etc. That wealth-creation is tax-free since it's never paid for in monetary terms. Whatever time is left over can be spent doing jobs that don't demand fulltime status. Those jobs don't pay as much on an hourly basis, but that income will be very tax efficient as the total sum of money will be lower and therefore a larger proportion of it will end up in the lower income-tax bands. This frees up person B to do a fulltime job, maximizing income (albeit earned in a less tax-efficient way). Second configuration: Both person A and person B do a fulltime job, maximizing income. Now they both pay a lot of taxes, since the both earn a lot of money. They use some of the money left over after taxes to pay for a nanny, housekeeper, etc. In order for first and second configuration to "break even" the hourly rate for person A under the second configuration would have to be A LOT more than under the first configuration to make up for the added inefficiency in tax. My contention would be: It's pretty rare for both person A and person B to be able to earn so much under the second configuration so as to break even with the first configuration (as measured by hosehold disposable income, i.e. after taxes and everything).

intopieces 8y ago
>My contention would be: It's pretty rare for both person A and person B to be able to earn so much under the second configuration so as to break even with the first configuration (as measured by hosehold disposable income, i.e. after taxes and everything). This depends on your timescale. If you look at the tax returns of years 0-5, your contention will look spot on. If you compare the tax returns of two couples -- with double income in all years vs single income for years 0-5, you may find that in the long run, given the sacrifice involved in taking a career break for 5 years, it is in the favor of the couple to shell out in big in those 5 years.
- mantas 8y ago
  That applies in very few careers. Many careers are reverse hockey stick and go flat soon. Loosing 5 years means you get to the same spot 5 years later. You loose only the difference for few years. Don't forget working also adds extra costs for commute, professional clothes, food at workplace etc. And then you got certain joys in raising kid on your own. Which can be translated into monetary scheme too - how much you have to earn extra to compensate for that by buying all sorts of shit (be it things or experiences)?
- larrik 8y ago
  That's only one kid, though. If you have 3 or 4 kids, the difference isn't close anymore.
  - intopieces 8y ago
    Having 3 or 4 kids in Japan is exceedingly rare; the average family size is 2.4 [0] [0]https://www.arcgis.com/home/item.html?id=083db34f40f94a55a266ac114c7fddc9 https://www.arcgis.com/home/item.html?id=083db34f40f94a55a26...
DrPhish 8y ago
The tax calculation is impacted greatly by the income-splitting or (as in the case of the article) dependent spouse deduction regime. That can swing the full/part or full/full decision wildly in a particular direction, as appears to be the case in Japan. It's definitely tax policy as social engineering, depending on how much value a society places on children being reared primarily in the home vs. daycare. Are there any studies comparing outcomes? The other dimension of the full/part vs full/full configuration is elasticity in case person A has a crippling injury or is otherwise unable to work full time. If your lifestyle is set up with a need for maximal income, it's very difficult to take a large hit like losing one full time income. On the other hand, if there is the slack to allow person B to take on full-time employment and have person A do whatever (if anything) they are able on other fronts, then it may be possible to get the bills paid. It will likely be at the expense of a less ideal home life, but that beats the heck out of having mounting debt or being evicted due to financial obligations that cannot be filled. It's much like the engineering principle of designing a 25-50% material strength buffer into infrastructure where failure would have a large negative impact. I realize its an oversimplification in MANY ways, but this is more of an issue further down the income ladder. e.g. losing that 2nd income means that you can't pay rent or buy food, vs higher income couples where you might have to give up a vehicle or look at re-mortgaging the cottage on the lake. Those with higher aggregate incomes would also find it easier to have an emergency savings fund vs living paycheque to paycheque (I'm ignoring the question of whether full time employment in a career is a fundamental requirement for a fulfilling adult life)

intopieces 8y ago

>My contention would be: It's pretty rare for both person A and person B to be able to earn so much under the second configuration so as to break even with the first configuration (as measured by hosehold disposable income, i.e. after taxes and everything). This depends on your timescale. If you look at the tax returns of years 0-5, your contention will look spot on. If you compare the tax returns of two couples -- with double income in all years vs single income for years 0-5, you may find that in the long run, given the sacrifice involved in taking a career break for 5 years, it is in the favor of the couple to shell out in big in those 5 years.

mantas 8y ago
That applies in very few careers. Many careers are reverse hockey stick and go flat soon. Loosing 5 years means you get to the same spot 5 years later. You loose only the difference for few years. Don't forget working also adds extra costs for commute, professional clothes, food at workplace etc. And then you got certain joys in raising kid on your own. Which can be translated into monetary scheme too - how much you have to earn extra to compensate for that by buying all sorts of shit (be it things or experiences)?
larrik 8y ago
That's only one kid, though. If you have 3 or 4 kids, the difference isn't close anymore.
- intopieces 8y ago
  Having 3 or 4 kids in Japan is exceedingly rare; the average family size is 2.4 [0] [0]https://www.arcgis.com/home/item.html?id=083db34f40f94a55a266ac114c7fddc9 https://www.arcgis.com/home/item.html?id=083db34f40f94a55a26...

DrPhish 8y ago

The tax calculation is impacted greatly by the income-splitting or (as in the case of the article) dependent spouse deduction regime. That can swing the full/part or full/full decision wildly in a particular direction, as appears to be the case in Japan. It's definitely tax policy as social engineering, depending on how much value a society places on children being reared primarily in the home vs. daycare. Are there any studies comparing outcomes? The other dimension of the full/part vs full/full configuration is elasticity in case person A has a crippling injury or is otherwise unable to work full time. If your lifestyle is set up with a need for maximal income, it's very difficult to take a large hit like losing one full time income. On the other hand, if there is the slack to allow person B to take on full-time employment and have person A do whatever (if anything) they are able on other fronts, then it may be possible to get the bills paid. It will likely be at the expense of a less ideal home life, but that beats the heck out of having mounting debt or being evicted due to financial obligations that cannot be filled. It's much like the engineering principle of designing a 25-50% material strength buffer into infrastructure where failure would have a large negative impact. I realize its an oversimplification in MANY ways, but this is more of an issue further down the income ladder. e.g. losing that 2nd income means that you can't pay rent or buy food, vs higher income couples where you might have to give up a vehicle or look at re-mortgaging the cottage on the lake. Those with higher aggregate incomes would also find it easier to have an emergency savings fund vs living paycheque to paycheque (I'm ignoring the question of whether full time employment in a career is a fundamental requirement for a fulfilling adult life)