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- And for taxpayer B the total rebate amount from the local tax schedule consisted of only the 49,600 JPY (≈ 500 USD) remitted in August 1994. B Robustness of the Results B.1 Sample Balance by Housing Price Exposure In this sub-appendix we present additional summary statistics to examine the extent to which our treatment households who received a tax rebate and control group of households in non-tax rebate periods are balanced on observables within each tercile of the housing price shock. Overall, with the exception of age, which we directly control for in our main specifications, we do not find any systematic differences between the treatment and control groups across areas. This supports the parallel trends assumption underlying our triple differences design.
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- Computing the stream of payments is more straightforward for the self-employed taxpayer B, who we suppose files taxes on a quarterly basis and thus simply receives the entire rebate as a lump-sum tax break at the end of FY 1994Q1, or August 1994. Turning to the national component of the stimulus program, salaried taxpayers like taxpayer A simply received a 20% rebate on national income tax payments that would have been due through withholding by the employer in June 1994.
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- In contrast, the self-employed only receive their 20% rebate on payments made between January 1994 and June 1994 once they have filed their end-of-year tax return and any adjustments (e.g. for dependents) have been made.
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- One key feature of this income tax system is that, except for exceptional cases where the taxpayer owns a business or earns income from self-employment, total earned income tax payments for salaried individuals are determined in advance based on the previous year’s annual (January through December) income. For the inhabitants’ tax, payments are fixed between June and May and based on the previous year’s (January through December) income. Since the 1994 stimulus rebate amounts we study in this paper were entirely determined by the sequence of counterfactual income tax payments that would have been due in 1994, this means that for salaried taxpayers our TaxCut variable is completely predetermined and therefore not responding to contemporaneous changes in economic conditions.
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- Putting everything together, for taxpayer A the total rebate amount across the local and national tax schedules received in June-July 1994 was 49,600 + 0.2 × 250,000 = 99,600 JPY (≈ 1,000 USD).
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- This example draws from our reading of Japanese-language fliers from the period which were designed to advertise the stimulus program to eligible taxpayers. One such flier provides the stream of payments assumed in this example to show how each of the sub-parts of the reform affected a household’s income tax liability in 1994.
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- We provide a detailed example below that contrasts how the national and local components of the income tax schedule interacted with the 1994 stimulus program for a salaried taxpayer versus a self-employed individual who is responsible for filing taxes at the end of the calendar year. The full English translation of the handbook can be downloaded here: https://www.mof.go.jp/english/tax_ policy/publication/comprehensive_handbook_2006e/index.htm. There are other potential exemptions, which include expenses for commuting, transferring locations within the firm, expenses related to on-the-job training or certifications. All of these are declared by the employee and certified by the employer to determine the appropriate withholding amounts.
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