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Source: Ministry of Health, Labor and Welfare

The government is considering cutting a tax benefit that critics say deters dependent spouses, mostly housewives, from seeking full-time employment.

The change, part of a set of fiscal policy proposals released June 10, could impel some women to work more, helping alleviate labor shortages and increasing tax revenue. However, it would raise the burden for spouses who mostly stay at home, and some observers say the change by itself wouldn’t be enough to bring a significant number of women into the workforce.

In Japan, when both spouses work full-time jobs, each gets an automatic deduction of ¥380,000. If one spouse doesn’t work at all, his or her deduction can be transferred to the other spouse. So if the husband works full-time and the wife is a stay-at-home mom, the husband gets a double deduction of ¥760,000 off his taxes.

The quirk in the system comes when one spouse works part-time—say, if the wife spends a few days a week stocking shelves at a supermarket, earning ¥1 million a year. In that case, the husband gets to keep the double deduction on his taxes, but that’s not all: The wife gets to deduct nearly ¥380,000 from her income on her taxes too. A double dip becomes a triple dip.

Many economists say the system doesn’t make much sense: Housewives have an incentive to take part-time work, but if they want to add hours or go full-time, they get punished on their taxes. The tax advantage given to part-time work phases out after ¥1.03 million of annual income and disappears entirely at ¥1.41 million. Moreover, many companies offer extra benefits to employees with dependent spouses, but such benefits typically stop when the spouse’s income tops ¥1.03 million.

Nearly 60% of women who work within the ¥1.03 million a year limit do so because of these circumstances, according to a survey by the Ministry of Health, Labor and Welfare.

The tax deduction was conceived when one-earner households were the norm. Times have changed, and there are now more households where both spouses work.

Despite the oddities of the current tax code, fixing it isn’t easy. The core question: Should the tax code encourage women to work or help them stay home to take care of the children? And if work is to be encouraged, should it be full-time work?

The U.S. and other countries have debated similar issues over the years. A “marriage penalty” in the U.S., under which married couples received a smaller tax deduction than the two spouses would get if they were single, was revised in 2004 to make taxation neutral. One difference in the U.S. is that married couples generally file their tax returns jointly, a system that doesn’t exist in Japan.

A survey of 551 people, mostly housewives, by a recruiting company called b-style Inc. found that 59% believed the number of working women would increase if the spousal tax deduction were abolished. However, b-style spokesman Keitaro Shibata said other parts of society needed to change to induce housewives to enter the workforce.

“Changing the tax deduction may pressure housewives to work more, but they won’t be able to do so unless the social environment, such as an increase in day-care center accommodation, improves,” Mr. Shibata said.

Yoshikazu Miki, a professor of tax law at Aoyama Gakuin University, said any changes to the system shouldn’t go too far in rewarding two-earner families at the expense of housewives. The number of women who carefully modulate their part-time working hours to ensure a maximum tax benefit suggests their families need help in making ends meet, he said.



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