[USWP] Lowering the Work Tax to 8%

Day 2,689, 09:53 • Published in USA USA • by Kemal Ergenekon


Greetings fellow eAmericans,

United States Workers Party (USWP) has always been the party associated with fiscal responsibility. We possess the architects and avid supporters of every financial plan which has led our country to greatness, be it about the budget, taxation, or response to admin-induced economic changes.

Last month, our member Henry Pfeiffer Arundel had supported a decrease in the Work Tax from 12% to 10% as a result of the reserves target being met.

This month, new changes have taken place. In particular, the raw materials prices have continued to plunge despite the lack of a similar decrease in average wages. Taken together, they have serious implications for the profitability of raw materials companies that form the backbone of our economy.

Consequently, I have recently proposed a law in the congress to lower the Work Tax rate from 10% to 8%, which is also unanimously supported by my party USWP. I think this will serve the goals of helping our players, as well as keeping government revenues high at the same time. It is fiscally responsible, hence USWP supports it.

Without further ado, please find the full text of the proposal below.

Best regards,
Kemal Ergenekon
United States Workers Party
Chairman of the Economic Council



Fellow congresspeople,

I would like to bring to your attention the issue of the work tax. As you well know, I and my party USWP have been pro high taxes for the last year. This was due to (1) the insufficiency of the reserves to deter threats against our country (2) the economic conditions which allowed a high degree of taxation (high prices and full bonuses).

Last month, we have lowered the work tax rate from 12% to 10% as a result of reaching a satisfactory level of reserves. Given our current status of reserves, it was a good choice.

This month has brought two additional changes on top:

(1) Plato introduced the dictator module. At the beginning, this has tremendously increased our security concerns since theoretically an enemy could attack us with no notification, and condemn us to a fate worse than being completely invaded overnight. However, we were able to legislate a law to install the current CP as our dictator. This is going to help us in our security considerably.

(2) The prices of FRM and WRM which form the backbone of the economy of most our players as well as communes has went down. Despite this decrease, the average wage showed no signs of faltering over the past few months. This has resulted in a large amount of work tax per click, regardless of the WT rate. I will explain this in detail below.

If you recall, I had alluded to lowering the work tax due to profitability reasons if the RM prices continued to fall as early as February 10. Below are my two posts:

First post:

"Going below 12% before we hit a comfortable reserve target (in the 15-20m range) would be fiscally irresponsible.

Please see my article on the issue: http://www.erepublik.com/en/article/-uswp-fiscal-responsibility-and-eus-grand-strategy-2460427/1/20

In addition, I will also consider dropping the tax rate to 9% if WRM prices fall to 0.01 permanently."

Second post:

"That's incorrect. Rubber plantations (Q5) will still be profitable at 12%, but saltpeter mines (Q4) will not. That's why I would support a decrease in WT rate if WRM fell to 0.01.

The rest of your statements are in alignment with mine. As the game is slowly dying, the revenues will eventually fall. The savers will be rewarded, the spenders will be the losers. We should tax while we can, because in the future, there won't be any."

I think the time has come to implement this drop. Here are the price developments:

- The FRM price was previously fluctuating between 0.02 and 0.03. If you had put FRM at 0.02 per unit, you would be able to sell it within a day or two. This is not the case anymore. FRM at 0.02 is rarely purchased.

- The WRM price was even lower. Posting WRM at 0.02 was generally a fruitless endeavour. You could, on the other hand, easily sell WRM on the black market at 0.015 per unit. For a while WRM price even saw 0.03, but now it is back between 0.01 and 0.02. This is anecdotal evidence, but previously any WRM offer at price 0.01 would be bought immediately. Now, reportedly, it can take some hours at times.

Long story short, effective WRM and FRM prices are either at 0.015 or somewhat below. I expect them to fall up until they reach 0.01 eventually.

What does this mean for taxation though? It means a lot.

Most of our tax revenue comes from Work as Manager clicks from RM companies. People are still operating Q3, Q4, and Q5 RM companies. Their profitabilities are affected by the RM prices and the WT collected per WaM click.

We should care about their profitability, because:

1) Obviously, we want our population to be able to operate their existing companies.
2) If we make operation of these companies unprofitable, we lose tax revenue too.

How much should we care about each tier? That depends on how much of the revenue is being generated by what type of company. Since Q4 firms were profitable when CC was cheap with respect to gold, many communes and players dating back from the bot era of 2012 have several Q4 companies. For the rest of the lifetime of the game, Q5 firms were most profitable including today, so they constitute the rest of the existing infrastructure. Lastly, some people have Q3s either due to miscalculation of profitability, or some legacy companies from the conversion of V1 RM companies to Q3 RM companies around the time WaM was introduced to the game.

Overall I think the following breakdown is a reasonable estimate:

Q3: 5-10%
Q4: 35-40%
Q5: 50-60%

What does this mean? If we can, we want Q3s to be profitable, but we can live without them if necessary. However, if Q4 RM companies become unprofitable, both the personal income of our citizens as well as our government tax revenues would fall. We don't want that to happen.

Below, I present three tables. They show the profitablity of Q3, Q4 and Q5 RM companies given different effective RM prices (0.015, 0.0125, 0.01) and different WT rates (0%-10😵:

Effective RM Price: 0.015 (current price)


Effective RM Price: 0.0125 (could be realized soon)


Effective RM Price: 0.01 (worst case scenario - might happen in a few months)


As you can see, Q3 RM firms are already underwater at the current effective price of 0.015 at 10% WT rate. They would go be underwater with even a 9% WT rate if the prices fell down to 0.0125. And in the worst case scenario of 0.01, even a Q4 RM company could become unprofitable at 10% WT rate.

Given these numbers, I am of a mind to lower the WT rate to 8% conditional on

(1) The maintenance of our dictator law.
(2) The non-existence of a major war in which we are a target.

This would both make Q3 firms profitable again up until the worst case scenario, while making Q4 firms profitable even in the worst case scenario.

Summary: I think given our secure condition and existing reserves, it is beneficial for our country to lower the WT rate to 8%, with the unwritten assumption that it will be increased back to 10% if

(1) Our security concerns intensify.
(2) The prices go back up above 0.015.
(3) Our reserves are spent.

Please discuss.

Kemal Ergenekon,
USWP
Chairman of the Economic Council

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