Church Times

My son, if sinners entice you,
Do not consent.
If they say, “Come with us,
Let us lie in wait to shed blood;
Let us lurk secretly for the innocent without cause;
Let us swallow them alive like Sheol,
And whole, like those who go down to the Pit;
We shall find all kinds of precious possessions,
We shall fill our houses with spoil;
Cast in your lot among us,
Let us all have one purse”—
My son, do not walk in the way with them,
Keep your foot from their path;
For their feet run to evil,
And they make haste to shed blood.
Surely, in vain the net is spread
In the sight of any bird;
But they lie in wait for their own blood,
They lurk secretly for their own lives.
So are the ways of everyone who is greedy for gain;
It takes away the life of its owners.
Proverbs 1:10-19



One of the things I really don't like is having to repeat myself. For example, earlier this year, I put out this article, just prior to the great invasion that resulting in the wiping of the eUSA, this article that laid out very clearly why a high income tax was unfair and counterproductive:

http://www.erepublik.com/en/article/it-039-s-the-economy-stupid-1-1818602/1/20

And in point of fact, the eUSA government did reduce income taxes and raised the VAT to generate revenue to support its operations. I then followed up that magisterial piece with another, entitled, “Capitalism for Commies”

http://www.erepublik.com/en/article/capitalism-for-commies-1842752/1/20

For you see, it is no longer officially good enough for you to take a job and work hard. In today's eUSA, if you want to benefit from freedom and the benefits of the market economy – you've got to be a Communist. Clear enough ? In the last few days, I've seen a number of articles talking about the increase in taxes, many of them highly critical, and since Our President believes that all eRepublik moves in cycles – here...we...go...again.



But I would not be doing my job here if we just leave it at that. For one thing, taxes have real consequences for real players, and we need to understand just what those consequences are. As I have documented in my previous articles, the circumstances that individual players face have changed, are changing, and will continue to change as this game “evolves”. I use the term “evolves” with some reluctance, because the process driving each and every change is far from random. If indeed, the changes affecting the play of the game arose naturally or spontaneously, we would have less reason to be anxious. One could simply adapt. But in fact, any adaption can be thwarted from on high. The greatest problem, as my friend Phoenix Quinn has pointed out in this magisterial piece:

http://www.erepublik.com/en/article/manifesto-of-the-anarcho-syndicalist-movement-1887592/1/20

is the tendency of many, if not most players to “buy in” to the admins' story line, the values and assumptions that eRepublik's gamifying mechanics undergird at every step of the way. But, as PQ points out much more eloquently than I ever could, it doesn't have to be that way...

Which begs the question, how does it HAVE to be ? As it stands now, there are only four things one can do with one's hard-earned resources.

1. One can consume those resources by fighting. There are of course limits to this, and the cost goes up considerably the more one fights.
2. One can consume those resources by working. Working more requires investing in the capital that enables working as a manager. Which gets us to...
3. One can save and invest in all sorts of capital: plant, storage, training facilities, the like.
4. One can give away one's resources to other players.

Now, let's consider the following scenario. For a wage earner, who only works once per day in a wage earning job, the wellness cost is basically 5 Q1 units. Let's assume the cost of a Q1 unit is .60 after taxes. Minimum subsistence wages for this level of work amount to $3.00 a day. If we add a 25% income tax on top of that, then you get to a break-even wage of $3.75. If we add training costs to the equation, this doubles to $7.50 for a benefit of 20 wellness. Now, many of our commune managers, myself included, offer a minimal salary in this range – for my part, it went to $5.00 a couple of months ago, up from $1.45. When we look at the labor market, one still sees wages on offer in the $150-165 dollar per day range, and the system reports the AVERAGE wage at $91 per day. For a top end worker making $1050 a week, the tax burden is $262.50, leaving $784.50 after taxes. For the imaginary average worker, we are talking about $637 gross, less $159.25, leaving $477.75. This individual
has about $445 (rounded down) to afford weapons and food to fight, or to work harder, or to buy additional production resources.

So there are four points to be understood here:

1. It is certainly possible to offer minimal wages that cover basic needs without incurring an exhorbitant tax penalty.
2. For those who choose to use the in-game compensation mechanism, the tax burden falls most on those who are compensated at a higher rate of pay through this means.
3. Most workers will not be severely harmed by higher income tax rates.
4. The administrators can change the equations whenever and however they wish for their own devices.

Now let's look at the company owner's side of the equation. Company owners who must pay wages to hire workers are in a world of hurt – unless their managers are outfitted and willing to generate sufficient management labor to make up the balance between the exhorbitant wages they are paying to attract workers, and the ever-shrinking profit margins they attempt to maintain, in order to generate capital. This is not a pretty sight. Let's take the simplest possible example. Let's assume that the wage earner is working for himself, working for his own company. Let's say that our owner-employee only works in a Q1 factory, and generates 160 Q1 units a day, valued at .60, with a food resource price of .30 , and a fairly attractive margin of .30 a unit. The cost to produce the food raw materials is $48 per day, yielding an income of $96 per day. The break-even wage is $48 – at a 25% income tax rate, the owner-employee will clear $36 per day. I'll leave it to the reader to determine how active this individual can, in fact, be – and what the long term growth pattern looks like.

Needless to say that the evidence shows that employers are now paying a 100-200% premium on wages, and that an increase in the income tax only squeezes them harder. For some time now, we of the SFP persuasion have been pointing out that this an untenable situation. And here is why:

Commune managers have quite a different challenge. I won't go into the intricacies of military communes. Suffice it to say that even if we were largely operating in a barter system, where food and weapons were rationed out, the numbers I quoted above still hold. The reason the large military communes want and get government subsidies is that it really does cost money to generate the equity needed to compensate workers at or near prevailing market rates. If you convert the daily dole to dollars, it becomes clear whether the commune can live on its own resources, or must be propped up – from an outside source. I will cite my own situation as a point of comparison.

Over time, we have built up a commune that has 5 Q1 production units, a single Q1 weapons raw material production unit, 3 Q1, 1 Q3 and 1 Q4 food raw materials production units. With 2 commune workers, our collective daily output (in today's constrained productivity) is 1120 Q1 food units, 175 weapons raw materials (which we sell) and 536 food raw materials (which we consume internally in the food production cycle). The wellness cost of each days production then, is 13 x 5 = 65 Q1 units at .60 a unit or $39 per day. If you've been paying attention, raw materials cost (over and above internal production capacity) is 1150-536 = 614 X .30 = $184.20 a day. Total production cost therefore runs in the neighborhood of $225 per day. Now, lets do the numbers. At a selling price of .60 Q1 food and .30 weapons raw materials, our commune will earn $672 minus $67.20 (in sales taxes) = $604.60 per day in Q1 food sales plus 175 X .30 = $52.20 in weapons raw material sales. This comes out to $431.60 per day in net income - over $3000 per week.

I won't go into the details of how this money is appoportioned, but keep in mind that this is a commune, and our intention is not to amass capital for its own sake. More importantly, under the current productivity formula, if we were to compensate our two commune workers based on prevailing labor rates, it would look something like this

Weekly wages $35 (minus taxes, would be $26.25
Commune bonus $1025
Total compensation $2120

This leaves something like $900 available to grow the commune, reward investors, all the things a growing and healthy firm should do. But what if one hires a third employee ? Clearly, in order to compensate that person at the same high level, one would need to expand the production base and to work as a manager somewhere between 25% and 33% more. The bottom line is that company owners and managers are on a carousel that they can't get off. Often times, they are competing with their own workers, who are also working their own plants on the side, It is hard to see how even a large scale commune can afford to hire more workers at a rapid pace.

So this gives us perhaps a broader and better perspective from which to consider the impact of tax policy, and in particular, the income tax. By taking money away from productive, efficient companies and their workers, what the eUSA government is doing, in effect, is to extend a subsidy to less productive, less efficient companies and workers. It is assumed that these resources will be deployed as a cash reserve to be deployed in the nation's defense – but if that is the case, and the money just sits in the treasury, then the capital needed for managers to invest in that all-important capital base – in order to be able to expand production and hire more employees without losing money – this money will simply go to waste. If on the other hand, we assume that the money is going out to support militias, it can only be spent in one of two ways”

1. To enable militia fighters to consume food and weapons at higher rates.

2. To enable those communes to expand their internal production base.

In either case, this looks like favoritism, smells like favoritism and tastes like favoritism. Golly gee, maybe it IS favoritism !! This would be less of a problem if the old organization structures had not been abolished by the admins, but the fact is that whenever the eUSA government does this sort of thing, it takes a risk that its investments will literally get up and walk away – somewhere else on the eRepublik map.

Now, what I find most interesting is not that our traditional elitist thieves have gotten behind this – such people never saw a new citizen or a small businessman that they didn't want to bilk. What I find curious is how our “establishment left” - the Jude Connors and Pigs-in-Zen and Civil Anarchies of our nation have closed ranks with the fascist crooks and capitalist robber barons who stand to benefit from these measures. And blaming it all on the great ONE enemy, now operating within our borders is no excuse...where were these guys when the eUSA could have made peace with eSpain ? Was it really necessary to wipe that nation off the map ? What was the point of continuing to the point where the cycle of vengeance was engaged yet again ? In what respect were these wise policies by these old and supposedly wise men ? As we see old animosities and old hatreds and old problems rise up again, you can remember that I told you so. Regrettably, more than once.