Friday, October 26, 2018

Japanese towns are "bidding" for citizens

Japan's productive cities like Tokyo are growing, and the smaller towns and cities are shrinking:
Educating children is incredibly expensive. The regions are quite annoyed that they pay to educate their children but that [cities like] Tokyo reaps all the benefits. This state of affairs has continued for decades.

A substantial part of Japan's income taxes (8%) are paid to the city that is designated as the citizen's "hometown."  The program is called "Furusato Nouzei" and
... allows you to donate up to 40% of next year’s residence tax to one or many cities/prefectures of your choice, in return for a 1:1 credit on your tax next year. This is entirely opt-in. Anyone can participate, regardless of where they live.

When the program was created, it appeared that it wouldn't be very popular because people have to take affirmative steps to transfer the money, and they have to float the money for a year before they get a tax credit in the following year.

But this program created an incentive for cities to "bid" for taxpayers to select them as their "hometown."  Internet sites popped up, and rewarded taxpayers with "travel vouchers" that were almost equivalent to cash.
...many rural towns without large expatriate (inpatriate?) populations and without much to differentiate them in terms of local food had bid the consideration for a donation up, up, up. 

Eventually, the central government had to step in to "cap" the amount that a city could bid for a taxpayer:
...the maximum they’d allow is you rewarding a taxpayer with 50% of the donation in consideration. So, if you “donate” ~3% of your gross salary to one of these cities (which is 1:1 matched by e.g. Tokyo; you’re donating someone else’s money), they will give you ~1.5% of it back in all-but-cash.

I wonder how high the bids would have gone (would all of the tax been returned to the citizens?) if the government hadn't stepped in?  I am going to blog this under "bid rigging" which, which if done by private parties is a criminal violation of the antitrust laws. 

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