Increasing the incomes of young people, thus reducing their anxiety regarding the future, and redesigning the social insurance system to ensure that it is neutral with regard to the way they work will be important factors in combating Japan’s declining birthrate and encouraging women to play a more active role in society. The government's response to these issues remains inadequate, and there has been no serious studies or discussion regarding whether the tax and social insurance burden and benefits such as allowances are fair, in particular when viewed on a household basis. This paper uses the OECD tax-benefit model in order to analyze tax and social insurance burdens and benefits for employed households from a variety of perspectives, including an international comparison, in order to examine the most desirable direction for burdens such as tax and social insurance and benefits such as child allowance.

The analysis conducted in this paper revealed that Japan’s system is not neutral with regard to household budget behavior due to the existence of jumps in the rate of burden on households according to income level, that support for households with children is lower than support for households without children compared to other countries, and that the burden rate for the low-income bracket is relatively high compared to other income brackets. In order to realize an environment in which people are able to raise children with a feeling of security, it will be essential to ensure fairness with respect to burdens and benefits. To achieve this goal, there is an urgent need, first, to enhance support for low-income households with children. It will also be necessary to strengthen the focus on the principle of “affordable burden”, and to review the method of increasing, decreasing, or eliminating the burden of taxes and social security contributions and providing benefits such as allowances at specific levels of income.

*This is a translation of a paper originally published in Japanese in May, 2023.