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I recently came across an interesting blog post by Patrick McKenzie at Kalzumeus about Japan’s Hometown Tax System. Having already recommended the post for New Leaf Journal readers, I will focus on one small part of it for the instant article.

Japan’s Hometown Tax System

Mr. McKenzie explains that Japan implemented a tax system called “Furusato Nouzei,”which he says translates roughly to “Hometown Tax System.” Under the Hometown Tax System, an individual may “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.”

According to Mr. McKenzie, Japan implemented the Hometown Tax System because many prefectures in the country are frustrated that many people move to and work in cities, taking with them much potential tax revenue. As he explains: “[Other] regions are quite annoyed that they pay to educate their children but that Tokyo reaps the benefits.”

The name of the program suggests that its intended purpose was for Japanese taxpayers who file taxes to be able to shift some of their tax payments to their home prefecture. However, no such limitation exists technically – “one actually has unfettered discretion as to which city/prefecture one donates to.”

Unsurprisingly, Mr. McKenzie tells us that municipal governments in Japan came up with creative ideas to incentivize people to choose them to be their Hometown Tax beneficiaries

Ōgaki City’s Grave-Tending Thank You

I do not mean to make the reaction of Japan’s municipalities to the Hometown Tax System sound entirely cynical. Mr. McKenzie explains that Japanese culture includes a sort of social obligation to return a gift with a gift This cultural system of reciprocity permeates how cities in Japan seek to reciprocate Hometown Tax gifts.

Photograph of Ōgaki City from Yoro Mountains - Credit:  Alpsdake, CC BY-SA 3.0 https://creativecommons.org/licenses/by-sa/3.0, via Wikimedia Commons
Photograph of Ōgaki City from the Yoro Mountains. Credit: Alpsdake, CC BY-SA 3.0 https://creativecommons.org/licenses/by-sa/3.0, via Wikimedia Commons

Mr. McKenzie explained how his adopted hometown of Ōgaki and some other Japanese cities thank people for making it their Hometown Tax beneficiary:

[F]or a no-cost-to-you donation of $100 or more, the city will send someone out to any grave in the city limits. That person will clean the grave, make an appropriate offering, and send you a photo.

Patrick McKenzie on Ōgaki’s Hometown Tax gift

Mr. McKenzie described Ōgaki’s way of saying thank you as “a beautiful thing.” I wholeheartedly agree. In its ideal form, the Hometown Tax System is not only a way to redistribute tax revenue, but also a means for maintaining a connection between people and their hometowns. In return for thinking of Ōgaki, Ōgaki thanks people for making it the beneficiary of a Hometown Tax designation by tending to the grave of the designator’s choosing.

One can imagine Ōgaki ex-pats choosing the grave of a family member or friend. Others who may not have grown up in Ōgaki may choose the grave of a family member or friend who is buried there. Others who adopt Ōgaki as a Hometown Tax System beneficiary could use the gift to ensure that a grave of someone who otherwise has no living relatives is tended to – a beautiful thing indeed.

Final Thoughts on Hometown Tax Incentives

From Mr. McKenzie’s piece, it seems that most municipalities in Japan have come up with creative ways to thank people for thinking of them for Hometown Tax gifts. I know not which municipality has the best gift, but Ōgaki’s is quite lovely. To thank people for gifts, it shows its gratitude by caring for those who lived and died in the city. That is a subtly elegant way to foster hometown connections.