Work and Life | Is "My resident tax is so high" a misunderstanding? The surprising truth behind the "sense of burden"

Introduction

Hello. I am a salaryman nearing retirement age and a Grade 1 Financial Planning Technician.

"Where I live, the resident tax is so high!"

"I know! My municipality is expensive too, and I feel like I'm losing out."

Have you ever heard conversations like this while looking at your pay stub or chatting with neighbors?

It is common to hear rumors that "taxes are high there" based on the image of large cities or municipalities that make the news for financial difficulties.

But wait a minute.

"Does resident tax really vary that much depending on where you live?"

In this article, I will thoroughly verify this "resident tax urban legend" based on numbers, completely setting aside emotional arguments.

To conclude, the "common knowledge" we have believed in will be completely dismantled.

First of all, how does resident tax work?

Let's start by briefly reviewing the underlying mechanism.

Resident tax is a tax paid to the prefecture and municipality where you currently live, based on your "previous year's income."

For company employees, it is deducted from your monthly salary (special collection) from June of each year to May of the following year.

The structure of this resident tax consists mainly of "two parts."

1. Income-based levy (the part that fluctuates according to income)

This is the "main body" of the resident tax, calculated by applying a fixed tax rate to the previous year's income.

● Prefectural tax: 4% Municipal tax: 6% Total: approx. 10%
"My area is rural so it's high""It's not cheaper because it's Tokyo," and this "10%" tax rate is, in principle, the same everywhere in Japan.

2. Per capita levy (the part that is a fixed amount for everyone)

This is a part like a "membership fee" that is borne equally by everyone living in that area, regardless of income.

• Base rate: around 5,000 yen per year(*From fiscal year 2024, this includes the 1,000 yen national Forest Environmental Tax, and since the special measures for earthquake reconstruction have ended, the base is generally 5,500 yen per year combined for national and local taxes)

"Wait, then where does the difference come from?" you might wonder.

In fact, some local governments have introduced "excess taxation" (e.g., taxes for forest conservation or greening), which adds several hundred to several thousand yen on their own.

So, how much do these "minor additions" or "partial tax cuts" actually affect the final tax amount?

Let's run a simulation with concrete numbers.

[Experiment] Annual income of 5 million yen: Comparing 5 cities under identical conditions!

By setting identical conditions, we will estimate the "annual resident tax" in representative cities across the country.

★ Assumed Model

Annual income: 5 million yen (single, company employee)

General social insurance premium deduction and basic deduction only (no other deductions)

Taxable income: around 3.3 million yen

Here is the resident tax (annual, approximate) for each city calculated under these conditions.

[City: Resident Tax (Approximate)]

Tokyo 23 Wards: approx. 335,000 yen
Yokohama City: approx. 336,000 yen
Nagoya City: approx. 334,000 yen
Osaka City: approx. 335,000 yen
Fukuoka City: approx. 334,000 yen

*Nagoya City continues a "flat 5% reduction in municipal tax," which is rare in Japan, so it tends to be slightly cheaper than other cities.

*Figures are rounded to the nearest thousand yen for illustrative purposes.

Actual tax amounts may vary slightly depending on individual deduction status and the latest local government ordinances.

...Wait? There is absolutely no difference, more than I thought.

Comparing Yokohama City, which is often rumored to have "high taxes," with Nagoya City, which is the only city in the country to promote a "flat municipal tax reduction."

Even when comparing these two, the difference is only about "2,500 yen" per year.

When converted to a monthly basis, about 200 yen.

It is only a difference of about the price of one drip coffee at a convenience store or one bottled beverage.

Even in Yubari City, where financial collapse was reported as serious, the standard tax rate is currently applied, so looking at resident tax alone, it is almost the same as other municipalities.

In other words, choosing where to move based on the criteria of "a city with high or low resident tax" is completely nonsensical to say.

Then what is the truth behind "I feel like my resident tax is high"?

Even though there is so little difference, why do we feel that "that city is expensive" or "that city is cheap"?

Hidden there is a clever "brain illusion" and "other costs that really do have differences."

The "true culprits" creating the difference in the perceived burden are the following four.

1. The trap of "National Health Insurance premiums" rather than resident tax

(*For self-employed, freelancers, etc.)

For those who are not company employees (freelancers, retirees, etc.), this is the biggest culprit for municipal disparities.

National Health Insurance premiums have completely different calculation formulas depending on the medical expenses and financial status of each municipality.

Even with the same annual income and the same family structure, it is an everyday occurrence for insurance premiums to change by "tens of thousands to over a hundred thousand yen" per year just by living in a different place.

This sense of burden is often mistakenly identified as "high resident tax" for some reason.

2. The illusion of time lag due to "Furusato Nozei" (hometown tax donation) and "deductions"

Resident tax is a system where tax is levied in the "following year" based on the previous year's income.

• "I made many hometown tax donations last year, so this year's resident tax became cheaper"

• "I had a home loan deduction the year before last, but the period ended and it suddenly became expensive"

There are many cases where people mistake these "differences from the previous year" due to their own life events or the presence or absence of deductions for differences between municipalities.

3. The difference in "hidden costs" that directly hit child-rearing generations

It is not the difference in the "amount deducted" for taxes, but the difference in "money going out (expenses)."

• Childcare fees and after-school care costs

• The age range for child medical expense subsidies (whether it is up to 15 or 18 years old)

• The income limit barrier (whether subsidies drop to zero if annual income exceeds a certain level)

These vary as much as heaven and earth depending on the local government's financial strength and policies.

Even if the tax rate is the same 10%, there is a difference in the "benefits (services) received back from the administration," which ultimately leads to the dissatisfaction that "this city has poor cost performance = taxes feel high."

4. The disparity in "water rates" that threatens daily life

Water rates, which are used every day, also vary by several times depending on the municipality.

The base rate itself is completely different for cities with nearby water sources versus cities that must draw water from far away, or cities struggling to maintain infrastructure due to population decline.

Conclusion: The difference in resident tax is almost an "error." What you should look at is elsewhere

Here is a summary of this article.

• The "income-based rate (10%)" for resident tax is almost the same throughout Japan

• Differences between municipalities are at the level of an "error of several thousand yen per year" even if they exist

• The true identity of a "city with high resident tax" is the difference in image, national health insurance, and administrative services

Next time someone says, "My area has high resident tax," please gently tell them in your heart:

(That might not be the resident tax, but the national health insurance, water bill, or the difference in child subsidies...!)

If you look past the images and rumors to identify the true nature of the numbers, the mysteries of your household budget will be cleared up.

Thank you very much

for reading until the end.

[Written by: Around-60 FP]
I am an around-60 salaryman FP.
I deliver money-related stories, work-related stories, and essays from an FP perspective.
Level 1 Financial Planning Technician

I also write a modest essay series called "Grumbles of a Near-Retiree." I would be happy if you could drop by whenever you have some spare time.