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Hello everyone,
Recently many discussions have been raised about the the current proposed tax plans in the US, as well as inquires into government spending and income. I felt I should tackle this issue head on, and have written this article to help answer those questions. The intent of this is to inform everyone on taxes from the standpoint of the Federal Government, to give a history of our taxes (being around for 10 months means I know a bit of the history of our tax rates and their effects), some info about game mechanics, and some helpful insights as to whereRL economic practices do not apply to erepublik. If anyone sees any flaws in my logic or finds I have written something down in error, please correct me. If you disagree based on an unwavering belief in isolationism, a no tax system, or other RL philosophies... well, then there is no hope for you. As when you learn a new language you must find the similarities between them to help you understand, but you must also drop the differences that do not carry over and only hinder your understanding. If i forget anything, or you feel I should touch on something else. Please, let me know. In this article/post I plan on addressing Flat Tax systems, industry standards, each tax type and how it effects us, a snapshot of government expenses, the truth ofUSD circulation, building our Gold reserves, and my own personal views of where our taxes should be eventually and ideally. Be prepared, as here comes the Wall o text.

hrmm... where to start.. where to start... I fear this article will be informational, but rather scattered.

Lets begin with the Government side of things, as that will be new to most people.

The Case for Infinite USD :: Money from heaven and Gold from Hell
In light of the recent calls for budgets and expense reports. I feel I should address the issue of our money supply and what really dictates its flow. The Governmentdoesnt' need taxes so that is has USD to spend. We can continue to print USD forever if we wish to. Now most people will say to this, "Why don't you just print more USD instead of taking ours away. If you dont take my money I'll have more to spend". The simply answer is inflation, we cannot keep adding more USD to the equation, and I don't think the 10% of extra money will effect our economy much. Back on the accountability thing I agree that the government needs to be held accountable for all its expenses. The last thing we need is a person in office who feels it his duty to supply his friends with a few 1000USD because they asked for it, but then again that will only happen if people elect someone into office who truly isn't trustworthy. Don't let that happen America. By my very rough estimations we probably have around between ~500 and ~600,000USD in circulation. The government currently holds roughly ~200,000 of that. The more money in circulation, the lower the value of ourUSD is compared to the price of Gold. If everyone who holds USD now was to try to sell it our dollar would drop in value. In the same hand of the government decided to start giving out USD to everyone or dump USD on the market we would also see a drop in the value of the dollar. The War with France was a large reason for the drop in our dollars value. Nearly 100,000USD was spent during that war to supply our troops with weapons, gifts, and moving tickets. So we have established that the more USD dumped on the markets the weaker the value of our dollar is. So now we can see that the reason we have taxes established is to take more money out of the system. The higher the tax rate, the quicker our dollar will raise in value. I am happy with the 10% because it is a low to moderate income tax rate (if you think its high, just look at SK). The process of devaluing the dollar and revaluing it again is costly if done wrong, and profitable if done correctly. The value of our dollar should never have been allowed to drop as low as it did, but that was due to the worst timing between the war, changes in game mechanics, and market conditions.
Summary of this Paragraph.
More USD in Circulation = Lower Valued Dollar
Less USD in Circulation = Higher Valued Dollar
Printing more USD is possible, but leads to a lower valued dollar and inflation
Taxes are for regulating our exchange rate, not entirely for government spending.
High Taxes Means that even with large government spending, the dollar value is more stable
Lower Taxes Means our dollar value is very volatile and subject to market flooding.

Earmarks and Oil Drums :: A Snapshot of Government Spending
Since I took office 6 days ago the Federal reserve has gained ~50 GOLD through the MM and spent ~18,000 USD for funding the army. An additional ~11,000 USD was spent on a Q3 DS system for our country. So in less than a week the US spent nearly 30k USD. If this is any picture of how much USD needs to be spent every week then we start to get an idea of what the government needs, but it is not so lets break it down further. I will do this in peace time and war time.

(Time to answer another round of 20 PMs... brb... bleh that only took 40 mins. woot 2 mins per PM)

PEACE Time Expenses
Purchase 3 Government Buildings at an average place of 13,000 USD in one week.
Distribution of Military Funding, stockpiling expenses (which by estimations will be more than this), etc 5,000 USD in one week.
Paying off prior debts, miscellaneous expenditures, and contractual obligations 550 USD in a week. (haven't had to do this yet, but I know they come and go)
Increasing our Gold Reserves through MM Management, 5,000 USD a week.
Total Estimated Peace time Expenses == ~23550.00 USD a week or around 100K a month.

War Time Expenses
Purchase 3 Government Buildings at an average place of 13,000 USD in one week. (it is possible to purchase 6 in one week if one wanted)
Military Funding, Pay, Weapons, Moving Tickets, Gifts. 30-70,000 USD in one week depending on the amount of battles.
Paying off prior debts, miscellaneous expenditures, and contractual obligations 550 USD in a week. (haven't had to do this yet, but I know they come and go)
Gold Spent on Battles through tanking and war expenses 300 GOLD
Total War Time Expenses == ~83,550 USD a week plus a loss of 300 GOLD. If we stayed at war this would be nearly 400,000USD in one month.

There are many factors that go into war, and I wont try to go into them at all at this time, but this should give you an idea.
Summary of the above
We spend about 3x as much per week during war then we do during peace.
Taxes are spent on
Funding the Military
Buying Hospitals and Defense Systems
Fulfilling government contracts and obligations
and Monitoring our MM.

Why do you wanna take my money? :: The case against Taxation
Some people hate taxes with a passion and feel that the government should find other ways to fund its programs than taxes. The person that comes to mind is the recently departedEmerick . Being a libertarian by nature he never agreed entirely with any government established tax plan and structure, but by the time most of you had met him his ideals has been rounded on the edges as the truth of howErep works finally sunk in. I know I have said this in the past, but there are only 2 ways to take money out of circulation in the wayerep is set up now. (if someone finds a third please share) These ways are through taxation, and through the Monetary Market.
Now we have obviously gone the Taxation route, but what about the MM path? Why haven't we gone down that road instead? Its simple. That takes Gold, lots and lots of Gold. As it stands the US is a rather poor country in terms of GOLD considering our population. If we had had a properly set up tax system 6 months ago, and had people ensuring the stability of ourMMs this probably wouldn't be the case. No one could have predicted it, but we just weren't able to keep up with the rapid rate at which we grew. Our FED does not have the funds to manipulate our markets as it had been able to do in the past. Not to mention we are a notoriously generous nation as time has suggested,lol. Now if we really had wanted to keep our our exchange rate stable and keep a nice amount of USD , all we need to do is buy it off the market by selling our reserves of GOLD. This was attempted with small amounts of Gold during Benn's administration and we were sad to see that it is entirely ineffective. Sure we have moreUSD, but not nearly enough. Emerick had suggested a MMM or a Monetary Market Manipulator who would continue to flip Gold and USD for a profit, similar to what individuals do to build up a good amount of money for themselves. This works, but not if you are trying to change the exchange rate and as such isn't helpful at this current time.
Summary of the Above Paragraph
The FED does not have enough GOLD to Manipulate the MM to fix our exchange rate.
Buying USD off the market to take it out of circulation instead of using Taxes would leave our nation with no Gold.
Once a Stable Exchange rate is established small profits can be made by the Fed in order to raise our reserve of Gold.

Your Killing my ____ Company! :: Why our Taxes arn't hurting your company
Although I do plan on writing an exhaustive guide to running a company, this will not be it. I"m sure when that comes out it will be about as long as this article is. Let me just run over a few points with you to make a few things clear. First things first. If you own a RM company in a region with Medium productivity, you are in for a rough life. If you do not have another company inFG and are looking for some pricey vertical integration, get out now. It is just not worth it, you will never be able to become competitive. If you RM company is in a Low productivity region, take all yourusd out of it now, and change its name to "useless". With a .01 multiplier penalty you are effectively making 20X less than someone at a high productivity region. Another tip for RM companies is to upgrade quality as soon as possible, the higher the quality the more stability and the more profit. Just so everyone knows the USA has NO High Productivity regions in Iron and Diamonds, so we will Always need to import those, other than that everyone should start RM companies in High regions. Now if you are working in aFG company you dont have to worry about Regional Productivity ratings, but you do need to make sure you arn't overpaying your employees. If you do that you will never be able to stay in business. You need to get the employees productivity to start. There are plenty of calculators out there, and I have one hosted by KT that everyone is free to use, ((HERE)). Once that is established you need to subtract the amountRMs cost for that employee to work one day. Once you have done that you have that employees fair and break even pay amount. Pay him more than that and you are losing money. Just remember that if your employees have low wellness to PM them ask them about buying her Q food, give them a few gifts, or give them enoughUSD to buy high Q food for a few days, then you will actually be able to raise their pay with their raised productivity. One last note about companies is that every industry has its own business cycle, and some are much harder to run than others. Make sure you do the proper market research before starting a company, and if the market is flooded, or in a spell of low demand,dont do into business there.
Summary of the Above Paragraph
Only operate a RM company in a Region of High Productivity unless you are attempting vertical integration or have a lot of USD as back up.
Never own a RM company in a low productivity region
Upgrade as soon as possible
Productivity is always a factor in establishing pay
Dont forget to look at the RM Cost when paying employees in FG companies.
Do your Research before starting a company.
Check market conditions, and make sure you have a large amount of USD to fall back on.


(Brief intermission for dinner.... 2 hours later... alright that was longer than expected, but back to work. We still got a lot of ground to cover)

Now we have finished the government side of things. Lets see what taxes are for a typical consumer. A new citizen who has been playing for 2 weeks faithfully. By this point he is working at a Q2 job and is making 7.90 a day. He can afford some Q2 food, but he normally mixes it up with Q1 because of the price. Because of the income tax he loses .79 per day or 5.53 a week. Sometimes he wishes he could save that extra 5.53 a week, but if he had it would ultimately go towards buying more Q2 food. Fast forward 2 more weeks and he is now working at that same Q2 company and he is making 13USD a day losing 1.30 out of each pay check. He can now afford Q2/Q3 food and has money left over to save. The point is not everyone will be in the ideal financial situation from the get go. I wasn't able to afford to train for the first 2 months oferep and it took me over a month to get my wellness up in the 90s when we used the old formula. We have countless ways for citizens to increase their wellness and get involved. The fact alone thaterep gives out hard worker medals makes up for the low wage when you start off. Work every day and you got 5 GOLD, thats pretty nice as at that rate in 2 months you could easily afford a cheap Q3 house.
Summary of the Above Paragraph
You dont always start off on top. I.E. any other game.

Death and Taxes :: In Erep it is easier to conquer death then a lack of taxes
Now the bulk of this is going to be directed at Taxes and what we can do on them. I think i've summed up all we need to know before hand above. Now we too outline each tax. What it does. Who it effects. Then after that we get down to some ideas and tax theories.

(Break, time to do atlantis stuff, and do an irc check up.... omg 90 mins. well i had to send a lot of PMs)

The Dreaded Paycheck Thief :: Income Tax
You cannot escape it, and you cannot hide. This tax will hit every worker where it hurts most. Their daily paycheck. This tax also effects General Managers in two distinct ways. One direct, and one indirect. The Direct way it effectsGMs is through company profit collection. Whenever a company takes USD or GOLD from a company through the collection/invest screen it is taxed according to the income tax for that level. Most GMs who know a little about the MM can easily take it out through there and avoid the MM, but it times when speed is needed they may forget and just get the money out asap. During the battle for Limousin I sold all my weapons and needed the money in the company to buy more weapons for myself 😃 I decided just to take it out directly as time was an issue, and I lost roughly 190USD which was a little sad, but its how the game works.
The indirect way income tax effects is through the demand and supply of labor relative to their operating costs. If an income tax is substantially higher than another equivalent industry. The workers will realize that they can get a higher pay at another company without increasing quality. In order to keep their employees theseGMs will need to raise the pay of their employees equal to that of the income which could end up driving the company out of business.
This effect that income tax has on pay distribution between industries and GMs has been used in the past to equal pay in high profit companies. In the past our gifts, food, and moving markets suffered a lack of supply asGMs couldn't pay the same salaries as Housing and Weapons. Because of their higher demand they were able to charge a higher price and make much more. That fact remains true today when you notice that an average Q5 weapon costs ~1 gold to produce and can sell for 3 gold or more. This factor should always be taken into account when devising any type of Tax policy. It should also be noted that Income tax is a steady tax for taking money out of circulation and into the treasury, as people work everyday.
Summary of the Above Paragraph
Income Tax effects every day workers by taking X% out of their paycheck each day
Income Tax effects GMs Directly and Indirectly
It takes X% of all the USD and GOLD that they withdraw from the company page
This can be avoided through the use of the MM
If import taxes are not equal it will cause employees to leave an industry and seek another.
This effect can be used to equal a disproportionate demand for workers in a certain industry.

Fear the Foreigners!! :: Import Tax
Probably the most misunderstood tax of them all. At first it seems straight forward, but there are always myths that need to be debunked so we can see things clearly. Import tax adds X% to the final price of any goods sold in the US from a foreign company. The question many people ask is, "Why dont we have 99% on everything? Imports? We dont need no stinking Imports!" Well, although the US is a beast in terms of how much we can and do produce. It does not mean that entire isolationism is the way to go. In Beta Isolationism worked very well for us, and we had it for a long time, but things have changed in V1. The admins purposefully reworked the economy to ensure and develop a Global economy. They were trying to encourage countries to work together through the use and management of their raw materials. I can bet this didn't turn out the way the admins had planned, but sure has added an intriguing factor to running a company inErepublik . Now the US has a High productivity in every RM with the exception of Iron and Diamonds. That means that we cannot produce gifts and weapons as cheap as the rest of the world unless we import with a low low low tax rate. Conversely there is no reason for us to import any other RM as we can sell ours cheaper than they can. The ideal setting and purpose for any Import tax is to ensure domestic companies do not charge too much for their goods and to protect our markets. This works on a few basic economic, and supply and demand principles. If we have too few companies in an industry they will be able to charge more for their goods as the competition is slim. With a lower import tax foreignGMs will be encouraged to send their goods into that market and will begin to compete for a profit. This will cause the prices to drop to a break even level asGMs compete with the foreign company. Because Foreign GMs are Taxed twice for their goods A Foreign Company will never be able to undercut a Domestic Company and make a profit 90% of the time. The other side of an Import tax is to protect our domestic companies, when profit margins are slim and there is a lot of competition in a certain industry the last thing we need is a low import tax as the foreign company could flood the market even more causing companies to collapse and go out of business if they cannot compete with a more established company from overseas.Thats Import Tax. Now one last myth. A Lower Income Tax does not mean that foreign competitors will simply appear in the market. They still need to buy an export license which will be a considerable investment and they need to be sure that they can make a profit. Import rates should vary with demand for a certain industry. In the past economic council members were assigned to monitor a particular industry for demand and supply changes and would then advise the president as to the changes that should be made (in Beta only the President could change taxes, he could also change them 15 times in one day if he wished,lol) Perhaps this should be looked into again.
Summary of the Above Paragraph
Import Tax Protects our weaker Domestic Companies from foreign competitors.
Import Tax helps our citizens by supplying them with cheaper goods because of more competition.
A Lower income tax does not mean competition will just appear on the market.
In a moderate Import Tax climate, 90% of the time a foreign company cannot run a Domestic company out of business if they have been running their company correctly.
To be the most effective, Import Taxes should change with market conditions


VATS VATs and More Vats :: Value Added Tax
The Value added tax is the oddball of the group. The Vat tax is not a reliable source of income for the government as it depends on the economy being in a status of high demand. Vat tax applies X% to the final good of any product sold in the US. It has been called "The Domestic Import Tax" as it is effectively the same thing. This tax is easier on normal citizens then it is onGMs, but it hits them both. Citizens dont really know they are paying this tax, and probably would never notice it unless otherwise informed, but the tax will effect the bottom line price of the goods they buy. Because the Vat tax makes all goods sold by a GM X% higher than they had originally posted it for,GMs are left with two options. The post it X% lower to equal out the Vat tax and sell it for the same price they had planned to or they raise the price X% and thus make the same amount of profit off of the goods sold. I'm not a huge fan of this tax as I really can't find any good application for it. There reallyarn't too many times when the economy and government would benefit from these taxes being on certain industries. In essence the government could discourage someone from buying a certain product because of this, but there really is no reason to ever do that.
Summary of the Above Paragraph
VAT Tax adds X% to the final price of all goods.
Citizens pay more for the same products
GMs either charge more and receive the same amount of profit
or they charge less and receive a much lowered amount of profit.


Whew... that was a lot, alright taxes are over. Time To go into Theory 😃

Our Savior the across the board tax rate :: The Devil incarnate the across the board tax rate
I am not sure if we will ever agree on the exact numbers for taxes, but that is life. There is a reason we have different political parties with different view points. Idont expect socialists to agree to a 5% tax rate, and I dont expect Libertarians to agree to a 50% tax rate. However, we can make sense and deal with what we have. Hopefully we can put aside the majority of ourRL philosophies, our egos, and past dealings aside to work out what is best for the entire nation as a whole. I will admit I only thought this article needed to be done after the recent articles by a certain congressmen and the blind following he received. I am aiming for anamerica where Logic and numerical reasoning will prevail over fear mongering and petty propaganda. Now at this part in the discussion I will not be 100% sure on everything and as such will be making a lot of assumptions. So feel free to correct me ifi'm wrong. Currently the majority of congress seems to be siding with the proposal made in this thread.
http://erepublikusa.com/forums/index.php?topic=1177.0
This proposal gives us a moderate 10% income tax in every industry, along with a moderate import tax of 15% in every industry with the exception of Diamonds and Iron. This also establishes a 5% Vat in all Man industries, 0% in RM, and 3% on construction. This proposal has had my approval because it is a good start, but I will speak more on that later. The reasoning behind the across the board tax is that it is fair for every industry. This tax plan is established to give the government the funds it needs while allowing the free market to act as if these taxes didn't exist because they are all equal. No industry has an advantage above another. The 10% income tax rate is neither too low, nor is it too high. Idont believe I would be to quick to approve of a 15% tax across the board because that would start to hurt our newer citizens, but it would still be acceptable. Conversely a 7% or less tax rate makes such a small impact that it would only be effective in a very long time frame. Slightly too long when the scope of the average player is taken into account. Now I am not in full agreement of this tax plan, but those who oppose this are not forming their own reasons, but rather are just in disagreement. I will address their issues and then give you my proposal.
The opposition to this has said things such as, "Why is the income tax so high? I believe it should start off low and slowly grow as time goes on." To answer people that say this I have to ask them a similar question. When do you believe we should 'start'? TheeUS has been around 14 months, and I think a 10% tax rate after those 14 months is a fairly slow climb. We cannot base our judgments around the confines of our time inerepublik . The longer you have been around the more history you have to base all your decisions on, but you must always remember unless you arePearlswine or Korbin , that people have come before you. So what may seem sudden to you is a long time in coming for others. Secondly 10% income is also not high, we could go up another 40% from there to reach the highest we can go. I would consider 10% moderate, not low, but not high either.
Another, "These tax rates appeal only to the rich! hurting the everyday citizen who is struggling to survive." This is frankly a ridiculous statement. As I said above, if someone works consistently they will be able to afford any food that they need until their skill goes up more. I think what we all need to realize is youdont have to gain wellness every day, and the higher levels of wellness 80+ are only allowed to be reached with help or with a higher level/income. That is the way the admins have set up the formula. A newbie may lose 3 wellness per day and only be able to afford Q1 food, but eventually that Q1 food will be actually giving him 3 wellness.
Still another complains that the lower import tax rate is going to hurt out companies.
Verily I say unto thee that an import tax rate of this amount will not run any companies out of business for all the reasons I listed above.
There are probably 100 other complaints, but those stuck out to me. Let us move on to my ideal tax system and close this very lengthy article out.
Summary of the Above Paragraph
The moderate tax rates of the Flat income tax system allows the government to garner enough taxes to meet its needs without hurting our citizens.
The moderate import tax allows our industries to remain competitive, but also wont let our Domestic Companies go out of business

The Pros and Cons of a Flat Rate Across the Board Tax Policy Vs the Industry by Industry Tax Policy

Across the Board Flat Tax Rate
PRO :Faster, Easier, and "Safer" to establish
CON :Unequal pay/profit distribution in industries because of Market Conditions

Industry by Industry Tax Rate
PRO :More Accurate and better market control
CON :Risk of inaccurate analysis and Much more time and work Intensive.

My Person Ideal System
As I said the flat tax rate that has been proposed is a great start to what we need. However, I am not the hugest fan of a flat tax system. I feel we have gone to a good place, but we should move on from here. I have not done all the research yet myself so I really cannot propose new numbers for you, but I will tell you how I feel it should be done.
Established -0- Tax
Once all industries have been set at a flat tax rate (such as the 10😵 the government(congress/economic council) should then evaluate the markets of each industry. The general demand cycle, profit margins, average productivity, average wellness, average skill, and average salary. This is also a good time to see exactly how much we are producing in each industry as opposed to another. Once these numbers have been established for each industry a more complete set of taxes can be set up. We see that in food the profit margins are 3% and supply is shrinking as employees leave to go to other industries (such as weapons) andGMs go out of business. The tax rates could be adjusted to give food a -4% income tax or 6%. Conversely if it is found that we are extremely over supplied in moving tickets the income tax can be raised +3% to 13% to discourage any further growth in that industry. This is the ideal system, but obviously it takes a lot of babysitting.
Importing the needed
I feel that we in the US are equipped to produce more goods faster than 80% of the countries out there any day of the week, and we are. Then why would we need imports? Well, after seasons of high demand our markets will be depleted and we cannot allow that to happen. Again as with income tax if we use a constant monitoring system of our markets we can make the needed adjustments overnight. In this we would keep the 15% import rate to keep foreign companies interested and raise and lower depending on our domestic supply.
VATing us out of 2nd
My personal opinion would be to eliminate VAT tax on all industries with the exception of the 5% on weapons, and a 1% on food. Weapons are the most purchased item during war and some of that money needs to make its way back to the government to ensure stability. The 1% on food is because food needs to be purchased at all times and that will steadily bring in money just as the income tax does, but it does not need to be any higher as the price of food determines labor costs. The reason I would eliminate all other Vats is because there is no reason we should want or need artificially higher priced goods. Because markets don’t compete against each other in terms of product demand. (I.E. No one decides to buy a gun instead of a gift to get wellness, and no one buys a house to move.) With the exception of High Quality food and gifts. Pearlswine had this to say on that.
To add something, Gifts are a competitor to high quality food.

I currently own a Q4 house. I work at a Q4 company and train for 5 points of wellness loss a day.

I like to keep my wellness at 100 so wellness from food / houses are halved.

I have a couple options available to me:

Q5 food and 0.5 gift (every other day 99.5) Cost: 27.3 + 3.39/2 = 29

Q4 food and 1 gift: Cost: 14.64 + 3.39 = 18.03

Q2 food and 2 gift: Cost: 4.20 + 3.39 * 2 = 10.98

Q1 food and 2.5 gifts (every other day 99.5) Cost: 1.59 + 3.39*2.5 = 10.06

Unless you have a wellness in the 20's high quality food will almost never beat gifts. This would makes gifts a fairly steady source of income if you put a VAT on them.


I am sure I did not cover everything, and as such I feel I will write another one of these eventually. If you read this whole thing, hopefully you are wiser and know a bit more about whats going on. Hopefully I was able to impart some type of knowledge. I was going to pack a bunch of other news into this article about the state of our affairs at this moment, but that will wait until tomorrow. During this term it has already become obvious that I will not be able to write the amount of articles needed in the time frame they are needed. To remedy this situation I will be using my Press Secretary Uncle Sam, my Minister of Foreign Affairs ( or Secretary of State) Benn Dover, and the ever lovely VP PrincessMedyPi to write articles that are of importance to our nation. Thank all again for taking the time to read this. Please speak you mind no matter what it is.
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- Justinious -
President of the USA