Japan's Hometown Tax (2018)
kalzumeus.com
kalzumeus.com
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
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)
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.
Housing is not considered a long-term investment because demolition and new construction is easy.
I think it's a bit of both, it's not viewed as as much of an investment therefore zoning laws are lax, which mean that housing can't become an investment because anyone can build (up to) anything on a lot.
I'd love to see a sociologist's analysis of the ring of fire, though. If anyone knows of someone who isn't just talking out their butt (like me), please drop a rec
Like lawns! Like California is the completely wrong state for lawns.
https://upload.wikimedia.org/wikipedia/commons/6/6c/K%C3%B6p...
http://ponce.sdsu.edu/california_average_annual_precipitatio...
https://gisgeography.com/us-precipitation-map/
A cursory google search suggests that grass lawns need the equivalent of 1" of rain per week. Very few people live in the parts of California that get 50+ inches per year, which was the original point. Grass lawns are entirely unsuited to the parts of California where almost everyone lives.
Starting your housing stock from near zero must mean you favor getting something simple done quick.
There's no central heat, but that's because it's wasteful. Each room has one or more air conditioners (which are heat pumps). I heat (or cool) whichever room I'm currently in, and don't need to waste energy on the entire residence.
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?
https://www.aeaweb.org/articles?id=10.1257/mac.20170388
Originally found via: https://www.worksinprogress.co/issue/the-housing-theory-of-e...
I wonder if the US would just become a group of 3 or 4 large sprawling city-states.
Nah, the US would not become merely 3 or 4 large sprawling City-States. For all of us city dwellers, there’s plenty that want nothing to do with anything that resembles a City.
https://williamgibson.fandom.com/wiki/The_Sprawl#:~:text=The....
https://en.wikipedia.org/wiki/Tokyo#Demographics "During the daytime, the population swells by over 2.5 million as workers and students commute from adjacent areas. This effect is even more pronounced in the three central wards of Chiyoda, Chūō, and Minato, whose collective population as of the 2005 National Census was 326,000 at night, but 2.4 million during the day.[91]"
I'd imagine at least half of them wouldn't strictly need to be there but for cultural reasons.
As you might expect, these Tokyo-like cities are much more expensive at their centre than at their periphery. Nevertheless, I imagine your eyes may water when you find out just how much more so. I only know one of these cities well, and to be fair only in land values not in rentals.
In absolute amounts, Tokyo itself is of course more unequal than smaller big cities. But the relative value distribution is perhaps fairly consistent across Tokyo-like cities.
Within Tokyo-city, very central regions (Minato-ku) are valued at 4X over central urban districts (Nakano-ku), which in turn, are 8X more expensive to buy than the least valuable outer-Tokyo districts (Hachioji-shi). So there's a 32X differential in land values within that city's borders.
Now, let's zoom out from the city itself. Within just a few hours drive or rail journey, we can easily get to 300X land values: $300 in Minato buys the same area of land worth around $1 in a fairly central district of a fairly large town in Nagano. Parts of mountains obviously go for much cheaper than land in these towns, but I don't have good market data for that. My guess is a further 5X - 10X.
Undoubtedly, it is more than 1,000 times, and perhaps sometimes as much as 10,000X, more expensive to buy a plot of land in Japan, than another plot of the same size just 500Km - 1,000Km away.
One may reasonably dispute these figures in detail. I did try to be conservative. Nevertheless, they are certainly right in the order of magnitude.
Getting back to your point, I would say that in spite of the wonderful societal benefits of world-class transportation within and between cities, if the goal was to achieve ball-park economic parity across the regions then that policy in Japan has been a failure. Income & expenditure? Sure ... all of Japan looks pretty consistent. Property valuation? ... the discrepancy is almost unfathomable.
That said, the whole "tokyo is just turbo-expensive!" thing is, in the broad strokes, generally false. Buying land in high-density commercial districts is going to be expensive, just like if you wanted to build a detached single-family home in downtown manhattan, but to put some hard numbers to it:
In September 2020, the average listing price for a newly constructed detached wooden house in Tokyo of between 100-sqm and 300-sqm (1,076 sqft and 3,229 sqft) was:
https://resources.realestate.co.jp/news/how-much-does-it-cos...
> Greater Tokyo Area: ¥36,850,000 ($354,000)
> Tokyo (23 Wards + Western Suburbs): ¥42,880,000 ($412,000)
> Tokyo 23 Wards: ¥59,410,000 ($570,000)
> Tokyo western suburbs: ¥40,110,000 ($385,000)
--
> For July to September 2020, the average sales price for a previously owned detached house in Tokyo was:
> Tokyo (23 Wards + Western Suburbs): ¥46,150,000 ($443,000)
-This was a year-on-year increase of 5.5% and an increase of 14.6% compared to the April to June period, when sales dropped sharply due to coronavirus social distancing measures.
-This was also the highest average sales price since the July to September (3rd quarter) 2018 period of ¥47,020,000.
> Tokyo 23 Wards: ¥57,170,000 ($549,000)
-This was a year-on-year increase of 5.7% and an increase of 15.8% compared to the April to June period.
-This was also the highest average sales price since the July to September (3rd quarter) 2018 period of ¥57,170,000.
> Tokyo Western Suburbs: ¥32,730,000 ($319,000)
-This was a year-on-year increase of 10.1% and an increase of 5.7% compared to the April to June period.
--
Honestly those prices aren't bad at all for "the densest metropolis in the world", especially considering the excellent transportation and other infrastructure that remove the need for cars (and they have cheap healthcare/etc by US standards as well). That is for 1k-3k sq-ft detached family homes, so that's not $300k for a shoebox, that's $300k for an average home by western standards. Undoubtedly some difference in materials/etc but it's not uncommon to see houses going for $750k-1m in 2nd-tier or 3rd-tier tech cities in the city proper and $500k+ on the outskirts.
The bigger factor, by US standards, is that salaries are much lower, obviously that is a much bigger number if you're making $50k a year at the peak of your career, but again, with US housing prices generally being 2-4x japanese prices, it probably ends up being similar-ish.
I have a friend that was subletting a room who got the boot because the owner was selling, got $750k for an average single-family home in a second-tier or third-tier city with insane tax rates.
Perhaps limited house prices in Tokyo are more a reflection of normal incomes of employees?
https://resources.realestate.co.jp/buy/guide-home-mortgage-l...
https://www.tytoncapital.com/projects/get-foreign-mortgage-h...
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.
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.
This is the most Neal Stephenson thing I have read all morning.
https://www.epressi.com/tiedotteet/maaseutu/japanin-kotiseut...
Discussed at the time: https://news.ycombinator.com/item?id=18256660
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.
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.
A cute character regularly reminding people of their home to take advantage of this tax makes more sense to me.
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.
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.
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
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.
>We pay farmers for the food they grown when they buy it. We pay them again with farm subsidies. Do we really need to pay a third time with town subsidies?
Not allowing them to be squeezed so much by oversized supermarketchains and the like would probably do more
Seriously, why exactly are we throwing away free solar resources only to have to generate them through some other method that is much harder?
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.
Why? Raising a child is a six-figure investment of money that doesn't go somewhere else. Every expenditure that doesn't immediately go back into the local economy like food is wasted when a person leaves. That fraction of a tax is probably never going to equal what the hometown spent on things like education it will receive no return on.
First, even if someone actually paid the 300k it takes to raise a child, that doesn't mean that person owns the adult.
And second, who is paying that? Education (in Japan and the UK) is primarily funded at a national level. So Tokyo/London, have already contributed significantly to the cost of that person's education (and to the education of plenty of people who will never move there to work). And most of the costs of raising kids are paid either by parents or at a national level.
It seems to me this is just post hoc justification for taking resources out of productive areas that need them and sending them to unproductive areas that don't. That might be "democratic" if there are a lot of unproductive areas. But it isn't fair or efficient or effective. And it will soak up resources better spent helping people who actually need them...
The article mentions such a service tho. Education. On the other hand I don't think the support for those early years amount to 40% of ones paycheck but not everyone participates so...
>worse health
How so? I would think it is the opposite based on studies about allergy prevalence, etc
>less equality
I don't think this is a constant either. I'm curious to see a broad study but if there's ever places i've seen stark wealth divides to slap one in the face it's been big cities.
That said as towns person I still agree that the move to cities is not a bad thing especially if we wish to preserve more nature and so is the push for it. I also think this continuous urbanisation will help their or our birthrates but the world population can't and shouldn't grow endlessly.
3.2% of one's paycheck. 40% of the residence tax, which the article asserts is about 8% of one's pre-tax salary; 40%×8%=3.2%.
The parts about hometowns are almost irrelevant, as each donations are one time transactions.
If this isn’t scheme of a fraud I don’t know what is one.
No, 4% of your taxable income. There's a 10% residence tax on your taxable income, and 40% of that 10% can be paid as Furusato Nouzei.
Do you simply mean that the counties get most of their income, not from local tax but from national tax? This then counts as 'stealing from the city' because most of the national income is created by the city?
It's quite tiring to see all these "faux" free market advocates or liberals, while they do absolutely nothing to actually get closer to the impossible ideal. They see the free as in free beer, i.e. reducing "government intervention" to let special interest groups get away with shady behavior instead of addressing known conflict sources and making control over them irrelevant.
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
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.
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/ja...
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-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.
You still haven't explained what this means. The Japanese tax to GDP ratio is 31%, below the OECD average
https://www.oecd.org/tax/tax-policy/revenue-statistics-japan...
Japan spends 38% of its GDP, about the same as the US does.
To balance the budget the government would thus have to take 38% of GDP. That would put it in the same range as Germany, Norway, Netherlands, and way below Italy, Sweden, Denmark, France,
Define “properly”, paying particular attention to explaining why the standard “revenue/GDP” method is wrong, and show your supporting data for Japan being near 100%.
https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...
Japan's is 38.4%. Eyeballing their position in the table suggests they're 66th percentile. (The US is at 38.1%; Germany is Europe's economic powerhouse, and is at 43.9%)
Taxes are progressive in Japan. The highest bracket may be that high, but very few people pay anything anywhere near that. I'm paid quite well here, and my rate isn't anywhere near that, and something you're leaving out is that health insurance is covered in those taxes.
>1. What is the criminal conviction rate in Japan?
>2. Is there penal labour in Japan?
If I'm reading this argument correctly, it's that because Japan has a high (>99%) conviction rate and uses mandatory penal labour, Japan, therefore, has a modern slavery problem.
There's a few issues with this, the generally accepted consensus for Japan's high conviction rate is that it can be explained almost entirely by the fact that Japan's prosecutors are underemployed and overworked and this is something that can be trivially seen, e.g., while the 42% of US felony arrests result in prosecution the figure in Japan is only 17%, or while the US prosecutes 75% arrested for murder Japan only tries 43%. The implication is that the conviction rate is a result of prosecutors being incredibly selective of which cases they bring to trial, only selecting cases with strong evidence of wrongdoing with a high likelihood of a guilty plea in exchange for a more lenient sentence, rather than any nefarious corruption or underhanded tactics like wrongful confessions.
The second issue is that if the high conviction rate is a result of a need or desire for prison labour then it would also be visible in the incarceration rate, however this is not the case. Japan has one of the lowest incarceration rates in the world. To emphasise just how few people Japan actually jails, let's look at some other countries countries. Incarceration rates are per 100k population: US: 639, England and Wales: 130, China: 122, Spain: 122, South Korea: 105, Canada: 104, France: 93, Hong Kong: 90, Italy: 89, Germany: 69, Japan: 38. Japan has half the prison population that the UK does while having twice the population, if they are jailing people with the intention of using them for slave labour they are doing a terrible job at it.
The only conclusion that can be drawn here is that the conviction rate is irrelevant to the discussion, and while it's still entirely possible to argue that Japan has an unintentional modern slavery problem as a result of prison labour it seems less of an argument against Japan specifically and more of an issue with prison labour in general. But if the problem is with Japan specifically, just how big of a problem is it? Using the globalslaveryindex[0] mentioned in a parent comment we can take a ham fisted approach and simply assume that all Japanese prisoners are slaves, add the Japanese prison population (around 50k) to the estimated number of modern slaves, and, well, Japan still has an incredibly low number of modern slaves, lower than the UK, France, Germany, Spain, Italy, and South Korea despite being roughly twice the population of any of these countries, and a quarter of the number of modern slaves that the US has despite being half the population. While I don't agree with prison labour I also don't think it's modern slavery, but even assuming that it is it's incredibly hard to come to a conclusion where Japan looks worse than any other comparable country.
[0] https://www.globalslaveryindex.org/2018/data/maps/#prevalenc...