Earlier quoted context omitted.
It seems like the overhead of the system is paid for out of the tax savings you get by participating in the program. As I understand it: 1. Earn $2000 in Tokyo. 2. Owe $200 to Tokyo. 3. Donate $80 to Gifu. 4. Receive $40 from Gifu. 5. Liquidate gifts for $38.80 You just saved almost 20% on your income taxes. This presumably lowers the deadweight loss associated with them. Does it lower it by more or less than the 3%…
When you can just lower tax revenue by 40$ and keep 40$, a system that lowers tax revenue by 40$ and only gives you 38.80$ is less efficient. Why does someone else not you get that 1.20$ from your income? Remember, long term the government ends up raising the taxes to cover that 40$ and your just out 1.20$ for zero gain. On top of that even if you kept the full 40$, the dead weight loss of extra paperwork is pure eco…
1. Lower Tokyo's income tax by 20%
2. Transfer 25% of Tokyo's (reduced) income tax out to rural areas chosen for sentimental reasons.
3. Incur overhead costs of 3% of the value transferred. This seems comparable to what you'd pay to directly transfer through Square.
It strikes me as a little excessive to look at this list of effects and condemn the system as "perverse".