Japanese Government Spending so High that they are going to Double the National Sales Tax

Posted by PITHOCRATES - January 1st, 2012

Week in Review

And we thought our government debt was high (see Japan PM’s Sales Tax Plan Hits Another Snag by George Nishiyama, Dow Jones Newswires, posted 12/27/2011 on NASDAQ).

Japanese Prime Minister Yoshihiko Noda’s plan to double the sales tax by the middle of the decade suffered another setback Tuesday as lawmakers bolted from his ruling party in protest over the proposed tax hike to 10%.

In addition to opposition from lawmakers, sliding public support is making it difficult for Noda to push ahead with the politically precarious task, but one that is badly needed to address Japan’s debt load, the largest among the world’s rich nations at more than twice economic output…

Noda’s DPJ, which came to power in the summer of 2009, has so far failed to meet many of its promises to slash unnecessary spending, such as cutting the number of lawmakers and the wages of government officials.

Instead, Noda’s Cabinet last week approved funding for the resumption of a dam project, which had come to symbolize unwanted public works and which the DPJ had initially put on hold…

“But we need to watch the issue going forward as if the administration backs down from hiking the consumption tax further, non-Japanese investors may start selling the bonds.”

With domestic investors holding almost all of its government debt, a Greek- style debt crisis is unlikely in Japan. But Tokyo is under increased scrutiny to lessen its debt, and credit rating agencies have threatened to downgrade its rating if Japan fails to proceed with the sales tax hike.

Japan’s debt as a percentage of GDP is over 200%.  America’s is about 100%.  So some think that American debt is not a problem.  However, domestic investors don’t hold almost all of America’s government debt.  The Chinese hold a big chunk of U.S. debt.  So a Greek- style debt crisis is more likely in the United States.  I mean, Standard and Poor’s has already downgraded U.S. sovereign debt.  So we’ve already started down that road.

Worse, those in government have been talking about a consumption tax for years.  Such as the Value Added Tax (VAT).  Which will become a reality if debt approaches Japan’s levels as a percentage of GDP.  And without entitlement reform, it will.

So this is our future.  A 5-10% national sales tax.  Which will hit rich and poor alike.  On top of all our other taxes.  This is the consequence of too much federal spending.  Which answers the question “are there consequences to too much federal spending?”  And the answer is, of course, yes.  Taxes.  More and more taxes.  That is the consequence of too much federal spending.  Because the federal government can only spend what it takes from us.



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