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Japan's Hometown Tax (2018)
- caseyross 4y ago(2018) Discussed at the time: https://news.ycombinator.com/item?id=18256660 https://news.ycombinator.com/item?id=18256660
- EE84M3i 4y agoDisclaimer: IANAL, IANATA, this isn't tax advice, etc Foreigners residing in Japan are eligible to participate in furusato nouzei, but Americans might want to note the following clause in the section "Tax Must Be the Legal and Actual Foreign Tax Liability" in Publication 514 Foreign Tax Credit for Individuals[1], which states: >Subsidy received. Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. >The term “subsidy” includes any type of benefit. Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Whether or not furusato nouzei falls under this clause seems to be up for some debate, and AFAIK the IRS hasn't made a public determination on it either way. I don't risk it, but I am under the impression there are some that do. Alternatively, the furusato nouzei portion could be not included in the tax credit? But would it be worthwhile...? Sounds like it depends on the situation and frankly seems like a lot of work to get a few gift baskets. [1]: https://www.irs.gov/publications/p514#idm139978451112272 https://www.irs.gov/publications/p514#idm139978451112272
- Hello71 4y agois it common to need to take the FTC on residence taxes? my understanding is that US federal income taxes are lower than most foreign taxes, and skimming the Japanese personal income tax brackets, it seems to be slightly higher than US federal income taxes (ignoring deductions).
- YouMeWeThem 4y agoI would imagine most people earning under the Foreign Earned Income Exclusion limit ($112,000 in 2022) are taking that over the FTC, if just to avoid the headache.
- chrischen 4y agoGift baskets is just what you opt for if you don’t want a cash equivalent gift card.
- seanmcdirmid 4y agoOh man, this is so confusing, and affects any American citizen/PR living abroad. In China, there are a bunch of weird kickbacks on your paycheck (e.g. public medical insurance cash benefit) that you have to be careful to document as income on your American tax return. And the whole mess of dealing with social security taxes.
- deleted 4y ago[deleted]
- Hamuko 4y agoThere's an ongoing study into furusato nôzei in Finland. However, they've apparently decided to axe the tax rebate aspect of the system, so it's basically only going to amount to a municipal marketplace ("donate" money, get goods in return). https://www.epressi.com/tiedotteet/maaseutu/japanin-kotiseutulahjoitusmallille-ideoidaan-suomalaista-vastinetta.html https://www.epressi.com/tiedotteet/maaseutu/japanin-kotiseut...
- boomboomsubban 4y agoWasn't 2008 roughly the start of the "every town has a mascot" trend in Japan? I wonder if this law helped is part of the reason pushing that trend.
- resoluteteeth 4y agoI don't think there is any particular connection
- skhr0680 4y agoI think the modern mascots are inspired by Hikonyan (2007)
- boomboomsubban 4y agoA mascot existing wouldn't inspire towns to invest resources in developing their own. Sure, they mah have had some hopes that it would lead to similar merchandizing sales or tourism growth, but that dream likely died quickly. A cute character regularly reminding people of their home to take advantage of this tax makes more sense to me.
- resoluteteeth 4y agoEven though the furusato nozei system was originally created around the same time as local mascots started to become popular in 2008, there wasn't competition from municipalities to try to attract donations until around 2016. Mascot characters like Kumamon, which were created after 2008 but before the furusato nozei system really started attracting attention, were specifically created to attract tourism, not to attract donations. So even though it might seem that the timing would match up, it's not really true that there is a connection. Furthermore, when municipalities started trying to compete for donations, they didn't use mascots, they just started bribing people with return gifts. Maybe in theory municipalities could have used mascots to try to attract donations, but in reality they don't seem to have done that.
- skhr0680 4y agoI think you’re underestimating what a phenomenon Hikonyan was, most tourist attractions would be happy if their character made them an extra 1% of what Hikonyan made for Hikone Castle
- deleted 4y ago[deleted]
- LatteLazy 4y agoFull disclosure: I am a londoner and this is basically how our tax system works except without any of the optionality. I am not at all convinced that towns have a claim to the tax revenue of people who don't use it's services. The fact regions can force this onto Tokyo etc is a failure of democracy, not a success. We're living in a time when Cities work, and bigger cities work better than smaller ones. They're cheaper, greener, have better social outcomes, provide more opportunities etc. And the response is to try to starve them of revenue to maintain some strange tradition life of worse health, poorer people, less equality and more pollution. /rant
- traceroute66 4y ago> except without any of the optionality Or the reciprocal gifts, or .... I'm not entirely sure it is "basically how" the London/UK tax system works ? Perhaps you could elaborate. Local government is ultimately funded by central government, which is (as we've seen from the present UK government) subject to political whims as to who gets what and how much (Tories favouring Tory seats/councils). I suspect you might have Council Tax in mind, but I'm not entirely convinced that is "basically the same thing" either.
- stdbrouw 4y agoThe purpose of the hometown tax is wealth transfer to less populated, poorer regions. In that sense, the reciprocal gifts etc. are just a funny implementation detail.
- causi 4y agoDid you miss this part? To the extent that taxpayers donate to their hometowns, Tokyo no longer freerides on the substantial public expenditures required to raise and educate internal migrants. The cost to raise a child to adulthood in Japan is around $300,000. That's quite significant.
- jefftk 4y agoYour $300k includes costs paid by the parents, though, but in this case we only care about government costs.
- namovat 4y ago
- Arn_Thor 4y agoAn incredibly cool, inventive and awesome system! And somehow quintessentially Japanese too. Lovely writeup.
- tomatowurst 4y agoThis is essentially equalization payments, it's not at all unique to Japan. Even Canada does it.
- xunn0026 4y agoNeeds a (2018). I knew I read it and wondered if there's anything new here?
- Semaphor 4y agoThe article generated a big discussion at the time (254 comments): https://news.ycombinator.com/item?id=18256660 https://news.ycombinator.com/item?id=18256660
- Gordonjcp 4y ago"And then some bureaucrat realized that this created a market: you, as a city government, can bid for taxpayers to select you as a hometown." This is the most Neal Stephenson thing I have read all morning.
- deleted 4y ago[deleted]
- benou 4y agoLooks similar to Equalization payments [1] already used in several places in the world. It looks to me that this being organized by the state should be more fair and efficient, but the additional "local connection" you get is a nice touch though. [1] https://en.wikipedia.org/wiki/Equalization_payments https://en.wikipedia.org/wiki/Equalization_payments
- azernik 4y agoWith a big difference: Instead of the state deciding how much to equalize and who the recipients should be, rich cities preempted that and set their own equalization contributions unilaterally. In the process, instead of deciding on the equalization recipients through any political process or deliberation, they opened that decision up to individual taxpayers.
- cool_dude85 4y agoAnd apparently some search engine intermediary gets to take a cut for making the proverbial website. Sounds way efficient, good job to the free market of choice on this one.
- coobird 4y agoActually, many city governments in Japan already get a redistribution from the national government in "local tax allocation" to the tune of over 100 billion USD every year, and cities like Tokyo with a large tax base or industry are excluded from this. Then there's "hometown tax" so local municipalities in Tokyo and the surrounding areas are losing local tax revenue. I suspect a that many are not aware that taxes destined for the local government they live ("residence tax") in gets diverted to other cities, especially because many salaried workers don't do their own taxes, as was mentioned in the article. It's gotten to the point that some cities were running public service announcements saying that "donating through hometown tax leads to loss of local tax revenues" and saying funding for services like city-run daycare can be at risk. In 2021, Tokyo "lost" about 400 million USD in tax revenue to this program, so it's not a trivial amount.
- erwincoumans 4y agoOmoshiroi! This is a really nice write up. Education is indeed very expensive and the towns outside of Tokyo have difficulties surviving, with only older people remaining there. Those towns have to be very creative to attract money and people. You can get a house for free, if you will live there, similar to some Italian towns. In the Netherlands we have similar issue of towns fighting for survival in more rural parts (Limburg). They try to combine schools of several towns to reduce the cost of teachers, and similar combining police stations. Lowering the friction for such 'gift tax' is interesting, Japanese are big into all kind of little gifts: if you go on holiday you bring something small, an Omiage. If you attend a birthday party, not only you bring a present (which is usual everywhere) but the guest also get a little gift in return, an Okaeshi.
- helen___keller 4y ago> This counsels that a young person born and educated in e.g. Gifu move to Tokyo after graduation to earn a living. > Many, many do. While Japan’s overall population is declining, Tokyo’s increases by about 100,000 people per year. Notably this differs from America in that rent acts as a natural counterbalance here. It’s not common knowledge that a university graduate should move to New York or San Francisco, in fact if you aren’t in a top paying field it’s probably common knowledge that one should not move to these cities. I wonder how much different the population landscape of the United States would look like if NYC, the Bay Area, LA etc had ever figured out how to plan for urban growth in the same way Tokyo did (context: you can afford a small single family home on a middle class income in Tokyo, I think prices there are around 30% over other Japanese cities)
- ghaff 4y agoNote that parts of somewhere like NYC are extremely expensive. Of course, those are the large parts of Manhattan and parts of Brooklyn where young professionals want to live. Other boroughs can be significantly less expensive but it's not what most professionals mean when they think NYC. Of course, the general point applies. If you're talking about a lower income job you can get just about anywhere, moving to many big cities isn't a great financial decision.
- MengerSponge 4y agoSomeone who knows more about Japanese culture and tax policy needs to weigh in, but my understanding is that housing is typically not considered a long-term investment vehicle, to the point that houses are expected to be demolished after some number of decades and depreciated accordingly. This mindset prevents an established base of property owners from blocking subsequent development, resulting in their property values skyrocketing. America might have a chance of fixing this with national-level zoning, which will never happen as long as current political alliances are the way they are.
- srcreigh 4y agoThe way I understand this (as a Canadian) is When most voters own homes, politicians increase home prices When (or if) most voters don't own homes, politicians decrease home prices In your understanding, what is the force which breaks this equilibrium?
- Linda703 4y ago[dead]
- jollybean 4y agoNow imagine this playing out on a global scale. Canada grabs a ton of doctors from developing nations. US grabs tons of Canada's best home grown talent for whatever economic purposes.
- deleted 4y ago[deleted]
- Aperocky 4y agoIt is playing out on a global scale, but it's much more self organized. Remittances are sometimes the only thing supporting an impoverished nation from imploding. For instance, the hard currency remitted would allow the nation to import enough food to keep prices stable.
- incomingpain 4y agoJapan is writing the economic textbooks. Tremendous government debt, nearly 100% total tax burden. Quantitative easing will tend to target entities in say Tokyo. It creates an imbalance that will only get worse as people move to Tokyo to get some of that QE. Negative interest rates, they basically are giving away free money so that the economy doesn't blow up in a deflationary death spiral. This imbalance to then be fixed comes in form of another tax? The hometown tax? Worse yet, the government debt to gdp is still increasing. Debt still going up and up because they havent balanced the budget since the early 90s. https://en.wikipedia.org/wiki/Lost_Decades https://en.wikipedia.org/wiki/Lost_Decades Japan has lost 3 decades so far because of high taxes and high debt. You can't default on the debt, it's your own people who own the debt. Defaulting would mean your elderly have to go back to work. Yet it's worse... Japan has a major silver crime issue and well unspoken probable slave labour problem. The fix for Japan is so simple yet for 30 years nobody has been willing to do it.
- deleted 4y ago[deleted]
- ascar 4y ago> nearly 100% total tax burden. What kind of number is this? The debt to GDP is actually more than 200% and you will find the US also above 100%. So yes Japan has a big debt problem, but what metric are you using? > Yet it's worse... Japan has a major silver crime issue and well unspoken probable slave labour problem. Do you have any source for that? I don't know about silver crime, but the globalslaveryindex ranks Japan as literally the lowest country (167/167 [1]), 4 times better than the US and more than 6 times better than a few European countries I looked up like Germany, Austria, France or UK. > The fix for Japan is so simple yet for 30 years nobody has been willing to do it. If it's so easy, why don't you at least enlighten us instead of just stating it's easy? [1] https://www.globalslaveryindex.org/2018/data/country-data/japan/ https://www.globalslaveryindex.org/2018/data/country-data/ja...
- incomingpain 4y ago>What kind of number is this? The debt to GDP is actually more than 200% and you will find the US also above 100%. So yes Japan has a big debt problem, but what metric are you using? Governments like to split up taxes and tax different things. Middle east generally has no personal income tax or even a corporate tax. Yet you can't say the middle east has no taxes. You have to analyze 'total tax burden' but you also can't allow even more tricks like progressive taxes making it apples/oranges. Japan has one of the highest personal taxes in the world at 55%. You work for the government 6 months of the year. When you analyze total tax burden properly. There's only a few countries in the world whose taxes are near 100%. Basically Japanese people work for the government the entire year and don't realize it. The government sure doesn't provide everything for them to live. >Do you have any source for that? I don't know about silver crime, Something like this: https://www.telegraph.co.uk/news/2017/11/20/poverty-ageing-japanese-population-fuelling-silver-crime-wave/ https://www.telegraph.co.uk/news/2017/11/20/poverty-ageing-j... Basically in population declines or situations like world war 2 countries are currently in or soon to be in. Effectively elderly retirees are forced to go back to work. They let their skills expire. They take an ego hit being forced to work a mcjob. So they steal instead. This wasn't even marginally the problem it will be. It's something that's set it stone. >but the globalslaveryindex ranks Japan as literally the lowest country (167/167 [1]), 4 times better than the US and more than 6 times better than a few European countries I looked up like Germany, Austria, France or UK. That's literally impossible. Answer me 2 things that will tell me if it's the lowest slavery in the world. 1. What is the criminal conviction rate in Japan? 2. Is there penal labour in Japan? >If it's so easy, why don't you at least enlighten us instead of just stating it's easy? Well I touched on it. total tax burden being at 100% means you cant raise taxes. Balancing the budget is step #1. Figure out all the positive rights that need reducing or cancelling. End abenomics asap. Balanced budget amendment to the constitution. Massively increase immigration in order to dilute tax cost or debt/capita. Not sure how that'll work but probably also a later disaster for japan. 1 problem at a time. Probably need to build a free trade zone. Massive increase in tourism needed. Probably will need a massive amount of deregulation that will blow your mind. Now you have to deal with the consequences of the above options. They aren't good. Probably going to be ~25% unemployment. Probably about 4% poverty. GDP contraction of -5%/year for several years. Depression level disaster to be sure. Yet this depression is far less painful than Japan's current path.
- 1270018080 4y agoWell... I can say I am glad America doesn't have this.
- cardiffspaceman 4y agoDon't you think block grants or revenue sharing are different jargon for the same thing? The big difference is I don't get the chance to choose to donate to Eastern Washington.