Tax Policy: The Elephant in the Revenue Stream
Day 469, 16:34
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Published in USA 
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by
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by scrabman
This is article references to my last article (and several others before that). Please read them all for the complete picture of my platform and policies.
Having already discussed the critical nature of an established, semi-static federal budget to meet national priorities as a destination, and adding to that the value of identifying the value of a balanced budget so that we do not drive past, or come up short, of that destination. The next logical discussion should be a determination of the appropriate vehicle to get us there.
Taxes
Having spent as much time in the forums and reading the media as I have in my political career, I can guarantee you that my mere mention of the word has likely resulted in a collective shudder on the internet that is pixelating Facebook pages around the world. But speak of them we must, because, once again, voters need to know where the candidates stand on such a volatile issue prior to March 5th.
There is a large contingent of passionate anti-tax advocates in our midst, from RL fiscal conservatives to RL free market advocates, additionally there is an offsetting army of RL fiscal liberals and RL protectionist arguing for tax increases, to what end most of us moderates aren’t sure, but we assume that they are trying to balance the non-existent budget as well (see part 1 for more on that). What we do know is this, making war, alliances and population growth require funding, the argument is not over this fact but again what the methodology of revenue generation will be.
Our problem is that there is an elephant in the revenue stream which governs all eRepublik taxation dynamics. Now, even conservatives know about this elephant, in fact many of them embrace the elephant, but they refuse to show why the elephant’s footprint on their theory eliminates it from the stable of possible solutions.
The elephant is a monster loophole in eRepublik game mechanics…that is, savvy General Managers through the use of the Monetary Market do not pay income taxes. So, for those that advocate for lower income taxes I have a suggestion … figure out a method to close that loophole and taxes, in theory, can effectively be slashed in half and still meet budget requirements.
Now, since businesses can effectively avoid income taxes, and, additionally, are not required to pay the value added tax on any of their raw materials, the average eUSA citizen is required (by game mechanics) to shoulder, however unfairly, the burden of the federal budget. Good, bad or indifferent, those are the economic dynamics of eRepublik.
Therefore, any discussion of taxation must begin by admitting the following acknowledgment: The eUSA citizen will need to furnish the bulk of the revenue for the budget; domestic companies will not be sharing the load unless they ignore the elephant, which admittedly would state more about their business savvy than their commitment to the eUSA prosperity.
Now that the formidable truth about who bears the revenue burden has been put to rest (the eUSA citizenry), the next question presented is, which is the better vehicle to drive to reach our destination of a balanced budget. The simplistic answer to this question is, unfortunately, another question…
How do we, as eUSA citizens, prefer to get to our destination, a balanced budget which reflects our priorities? The choices, as I see them, are the VAT (Value Added Tax ) or the Income Tax; so lets take a closer look at the advantages and disadvantages of both:
VAT
Advantages:
*Like sales tax, the VAT generates revenue from consumption.
*The tax is semi-transparent to the consumer and therefore presents limited political risk when changed.
Disadvantages:
*Since the revenue stream generated by the VAT is contingent on consumption, the level of receipt is likely to trend in unpredictable cycles.
*The VAT directly increases the cost of goods on the market and therefore may contribute to increased competition for domestic producers.
*The VAT cannot be levied on Raw Materials and therefore adds to the elephant, in that the VAT still cannot be relied upon to generate consistent revenue from companies.
Income Tax
Advantages:
*Since the revenue stream generated by the Income Tax is contingent upon daily wages, the level of receipt will maintain a predictable level of consistency.
*The income tax does not directly increase the price of goods on the market (because of the elephant), and therefore will not result in increased competition for domestic producers.
Disadvantages:
*The Income Taxes reduce the amount of earnings and therefore reduce the discretionary income of the taxpayer.
*The income tax is obvious to the consumer and therefore presents increased political risk when changed.
Now presented with the two options for revenue, and given that a budget will be established based on the consent of the eUSA taxpayer to meet OUR priorities; My preference is for the consistency and predictability of the Income Tax as the primary revenue stream to fulfill the requirements of the budget. Regardless of the level of Income Tax, the goal is to establish a revenue stream which meets our budgeted priorities consistently and with an acceptable level of predictability. At the same time, my preference for any VAT is that it remain at a consistent 1-3%, but only as an offset to the small margin of revenue unpredictability of Income Tax…but not provide a substantive escalation of the market price for domestic goods.
With all of this being said, it is important that I admit to you, that I too would love to see income taxes in the 1-5% range, however, I will not sacrifice OUR budget priorities for the sake of votes from those that detest any form of taxation based on RL experiences and yet indulge in the benefits of a stable revenue stream by a nation willing to make the right choice for progress rather than the easy choice for the status quo.
Let's move past the rancor of whether lower taxes or higher taxes are better, and focus, as a nation, on establishing the right taxes to fund our priorities.
Vote scrabman/PrincessMedyPi on March 5th, 2009
The last article in this series was:
http://www.erepublik.com/en/article/horton-hears-a-who-monetary-policy-and-import-taxes-745703/1/all
Having already discussed the critical nature of an established, semi-static federal budget to meet national priorities as a destination, and adding to that the value of identifying the value of a balanced budget so that we do not drive past, or come up short, of that destination. The next logical discussion should be a determination of the appropriate vehicle to get us there.
Taxes
Having spent as much time in the forums and reading the media as I have in my political career, I can guarantee you that my mere mention of the word has likely resulted in a collective shudder on the internet that is pixelating Facebook pages around the world. But speak of them we must, because, once again, voters need to know where the candidates stand on such a volatile issue prior to March 5th.
There is a large contingent of passionate anti-tax advocates in our midst, from RL fiscal conservatives to RL free market advocates, additionally there is an offsetting army of RL fiscal liberals and RL protectionist arguing for tax increases, to what end most of us moderates aren’t sure, but we assume that they are trying to balance the non-existent budget as well (see part 1 for more on that). What we do know is this, making war, alliances and population growth require funding, the argument is not over this fact but again what the methodology of revenue generation will be.
Our problem is that there is an elephant in the revenue stream which governs all eRepublik taxation dynamics. Now, even conservatives know about this elephant, in fact many of them embrace the elephant, but they refuse to show why the elephant’s footprint on their theory eliminates it from the stable of possible solutions.
The elephant is a monster loophole in eRepublik game mechanics…that is, savvy General Managers through the use of the Monetary Market do not pay income taxes. So, for those that advocate for lower income taxes I have a suggestion … figure out a method to close that loophole and taxes, in theory, can effectively be slashed in half and still meet budget requirements.
Now, since businesses can effectively avoid income taxes, and, additionally, are not required to pay the value added tax on any of their raw materials, the average eUSA citizen is required (by game mechanics) to shoulder, however unfairly, the burden of the federal budget. Good, bad or indifferent, those are the economic dynamics of eRepublik.
Therefore, any discussion of taxation must begin by admitting the following acknowledgment: The eUSA citizen will need to furnish the bulk of the revenue for the budget; domestic companies will not be sharing the load unless they ignore the elephant, which admittedly would state more about their business savvy than their commitment to the eUSA prosperity.
Now that the formidable truth about who bears the revenue burden has been put to rest (the eUSA citizenry), the next question presented is, which is the better vehicle to drive to reach our destination of a balanced budget. The simplistic answer to this question is, unfortunately, another question…
How do we, as eUSA citizens, prefer to get to our destination, a balanced budget which reflects our priorities? The choices, as I see them, are the VAT (Value Added Tax ) or the Income Tax; so lets take a closer look at the advantages and disadvantages of both:
VAT
Advantages:
*Like sales tax, the VAT generates revenue from consumption.
*The tax is semi-transparent to the consumer and therefore presents limited political risk when changed.
Disadvantages:
*Since the revenue stream generated by the VAT is contingent on consumption, the level of receipt is likely to trend in unpredictable cycles.
*The VAT directly increases the cost of goods on the market and therefore may contribute to increased competition for domestic producers.
*The VAT cannot be levied on Raw Materials and therefore adds to the elephant, in that the VAT still cannot be relied upon to generate consistent revenue from companies.
Income Tax
Advantages:
*Since the revenue stream generated by the Income Tax is contingent upon daily wages, the level of receipt will maintain a predictable level of consistency.
*The income tax does not directly increase the price of goods on the market (because of the elephant), and therefore will not result in increased competition for domestic producers.
Disadvantages:
*The Income Taxes reduce the amount of earnings and therefore reduce the discretionary income of the taxpayer.
*The income tax is obvious to the consumer and therefore presents increased political risk when changed.
Now presented with the two options for revenue, and given that a budget will be established based on the consent of the eUSA taxpayer to meet OUR priorities; My preference is for the consistency and predictability of the Income Tax as the primary revenue stream to fulfill the requirements of the budget. Regardless of the level of Income Tax, the goal is to establish a revenue stream which meets our budgeted priorities consistently and with an acceptable level of predictability. At the same time, my preference for any VAT is that it remain at a consistent 1-3%, but only as an offset to the small margin of revenue unpredictability of Income Tax…but not provide a substantive escalation of the market price for domestic goods.
With all of this being said, it is important that I admit to you, that I too would love to see income taxes in the 1-5% range, however, I will not sacrifice OUR budget priorities for the sake of votes from those that detest any form of taxation based on RL experiences and yet indulge in the benefits of a stable revenue stream by a nation willing to make the right choice for progress rather than the easy choice for the status quo.
Let's move past the rancor of whether lower taxes or higher taxes are better, and focus, as a nation, on establishing the right taxes to fund our priorities.
Vote scrabman/PrincessMedyPi on March 5th, 2009
The last article in this series was:
http://www.erepublik.com/en/article/horton-hears-a-who-monetary-policy-and-import-taxes-745703/1/all
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Comments
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Now that I've read it, good article, dissapointed not to see my name in it again...lol, luck in the election. I am havinga ahrd time deciding who to vote for
good article, yet it seems like you dismiss anyone who disagrees with, as confusing rl with erep. That and I don't see how raising taxes is protectionist. It seems to me that the main argument for rock bottom taxes, is that more successful nations do it. It would be interesting to see the in game role supporters of different policies have. Do workers support low taxes, and those on the government pay roll support high?
also, cut to the chase, what should the budget be? are you not in congress now? Can you not make a budget now?
@Ryan I didn't see you comment on part 1 of this article so maybe you missed it.
http://www.erepublik.com/en/article/horton-hears-a-who-monetary-policy-and-import-taxes-745703/1/all
The reason why other nations can do rock bottom taxes and win has more to do with fake GOLD coming into their economy either through buying it or glitching it (lest we forget the glitch that resulted in tons of fake GOLD a few months ago).
As for my budget, I haven't had time to work on it yet and Congress certainly hasn't shown any interest in it up to this point. It's one of the various things that I hope to do that has never been tried before in eRep. Come hell or high water I will certainly get some budget submitted before my term as President is up and then it will be up to Congress to either accept it or reject it.
Quick comment, is it fair or proper to speak about taxes if you have not outlined spending. Granted I think everyone would agree with a balanced budget with something of a cushion. And I might argue with the exact source of revenue, but to me that is all academic without spending proposals. I am right now working on something that will address it...I will see how quick I can get the spreadsheet done.
Great Article Scrab!
Scrabby Pi '09!
@Alphameg3 Quick comment...
If you want to hear about where tax dollars are going (a face I myself am trying to find), you really need to go read the infrastructure threads and this threa😛
http://eusforum.com/index.php/topic,752.0.html
Thank you scrabman for another great article about eUSA economy. I personally do not see why 20% for income tax is bad (for a little bit). Also, think about what you want your government to give you? High quality DS and Hs. Free weapons for our soldiers. The list goes on and on. These things don't just appear out of thin air.
I will end with thanking scrabman for, once again, teaching us something about eUSA economy.
@Scrabman Only Indo really exploited the glitched gold to my knoledge (maybe a little biased 😁, Spain, Romania etc just have a much older player base, which would have a greater amount of 'free' gold (levels etc).
I might be missing something, but I do not see why Congress does not require the Pres to list on google spreadsheet, every penny he spends...and every penny that comes in...and if that is too much for him, they should hire a treasurer and a second auditor to keep track of the money. How can ANYONE succeed even in a game if you do not know income and costs?
@Aplpha
This is something that I have often thought as the President tends to ask Congress for a large blank check whenever he wants it and then we never hear where it went. That is a practice that I plan to change as President. In RL the real power of Congress comes from the power of the purse strings. We don't have that balance here when the President can get any money he asks for with no explanation of where it went other than "for the war."
Dragonknight* Spains media was actually shutdown during the purge of the fake gold due to the people banned there. They where threatening to do everything they could to destroy the game. So even if they didnt have fake gold I cant say I have much respect left for them after those comments.
Since company owners are avoiding taxes we simply leave them out of assistance programs since they arent contributing equally, atleast most of them arent. If we continue under whats above too many people will open a buisness because its the only way to have a tax free income, or atleast low tax income.
I want to know why the admins havent done anything about this since its apparently been around forever.
Good article Scrabman. I could not believe the eUSA does not have a budget! VAT maybe more unpredictable but it does have the advantage of being applied equally to imported goods and domestic goods.
To reasonably discuss taxation a starting budget is a must, given that I still think an income tax of 10% (low enough more people may pay) and a VAT of 15% will produce more revenue than an income tax of 25% and a VAT of 1%.
I look forward to seeing your budget proposal.
Good stuff, I appreciate you outlining where you would like to take us when in office. Voted.
I have not been in the game long, so here is my uncertainty.
IRL, when a totally irresponsible government without a clue spends, say, a trillion dollars on almost nothing stimulative but payback to campaign supporters, taxes eventually have to go up to pay for the insanity. Those taxes take money away from businesses, citizens... basically everyone except campaign supporters. This reduces the ability for almost everyone to buy any of the things they need or want for everyday living, which of course further reduces the $ businesses have to make more product, or pay their employees.
In the game, though, there seems to be very, very little to spend money on except weapons, food, and companies (I know there are other things, like houses, but these are not continuing expenses after the purchase - something I wish was the case IRL). So if you crank my taxes up, I may not have as much to spend on food, war, or a company. I could stay in the eUSA at that point, but I risk having to buy lower quality food, or cutting back on employment in an owned company, either by wages or jobs themselves. Maybe, if I am not getting ahead as much any more, I decide it is time to move on to a country that will not hurt me so much (oh, say, Indonesia) - particularly if I am importing a now severely taxed raw material.
So, I recognize there are strong differences between RL economy and in-game (though not entirely, yet), but if you raise taxes in-game, and I can not buy what I need or want, does it not make sense that I would move to where my money remains mine?
I know how to program out the money market loophole for businesses, Not that I want it gone. I don't know if you have the programmer's ear. I have thought for a while that the game should know about cheating so that the game can allow us through working to find cheating. That has little to do with presidential powers though.
I am one of those real life conservatives and I am coming to see that it is not high taxes in this game that hurts people. If the government does not spend what it takes in then we can simply buy the same amount with less dollars. It is instead goverment spending that diverts resourses from the players. As a real life conservative, goverments spending is taxation. Here and real life this must be true. I think what we find here is that this universal truism is made evident by the game's hard currency nature and the fluxuations in spending not seen in real life.
You might as well be honest about taxes and just tax income of workers. Honest and dishonest businesses will have to compete for workers with no advantage to cheating.
I find no fault in your statements other than you being a moderate, mainly because I don't like the word.