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I bet everyone is excited that they have to pay 50% more income tax after the Senate recently voted to increase income taxes to 15% from 10%.

So why did the Senate raise income taxes?

Everyone pays tax (well except for some GMs 😒 but I will assume everyone is a law abiding citizen for the sake of this discussion) so increasing income tax is not a fun thing to do and the decision is taken very seriously. Taxes are one of several ways the government gets the revenue needed to pay for public expenditure. The vast majority of expenditure relates to military and foreign affairs related matters.

In the February budget total tax revenue is estimated at $AUD95,000 while expenditure for the same month is estimated to be $AUD156,000 (and this doesn't even include the costs of Mutual Protection Pacts and EDEN membership (another 900+ gold).

So when taxes are not enough, the government can supplement its income by trading on the money market selling gold when the Gold/AUD rate is high e.g. over 52.5AUD/gold, and by buying gold with AUDs when the the exchange rate is lower e.g. 50/AUD, Doing this provides stability to the market and profit to Australian Treasury.

Finally there is printing money. How can the government just print paper and then use that to pay for its purchases? In eRep (and in real life) the government has the power to issue currency which has the effect of becoming legallly enforceable tender for the payment of commercial transactions. The very fact that it has been issued by the Government means the money is good. This is known as fiat money. Paper in itself is worth virtually nothing, but then when printed with the Government's symbol and marked legal tender worthless paper all of a sudden becomes very valuable.

So can't the government just keep printing this money forever? We should be paying zero tax, and use the "free" money!!

It's not as simple as that, if too much currency is printed, then money traders and businesses know what the government is up to. The Government flooding the market with issued currency makes everyone nervous because they know there will be more and more paper coming online every month and so in expectation of the ever growing amounts of paper currency, traders and GMs and employees factor this into their business plans and charge more AUD for their goods or services or labour.

Also gold becomes more expensive because whilst the Government can print all the AUD it wants, it still has to buy units of gold from private individuals (shame you can't use printed AUDs with admin) and if there is too many AUDs going around then gold sellers will want more AUDs to let go of their gold. And for Mutual Protection Pacts and EDEN, gold is the only acceptable method of payment, AUD is not accepted.

In January the Australian Government printed $AUD 88,000. In February the Government is planning to print $145,000 - that's a 64% increase in printed money. So Government needs to be careful with the amount it spends because this has a direct result on taxes.

As a senator, I care about Australia's reputation in the international community. We don't want to be considered a banana republic that simply prints its away its problems, at the expense of those people who have been saving their AUD wages or business sales only to have exchange rates go up as the AUD becomes worth less. That is why I voted to support the income tax increase.

In the future, if the government sees fit to lower its expenditure I will gladly support lower income taxes again but nothing in life is free. To buy things you need real wealth behind you. If the Australian Government just keeps printing more and more currency every month to pay all its bills, other countries and investors will see us as a joke and our army will become powerless - as no one will value our Aussie Dollar and want more AUD for every weapon the Government wants to buy.

Military strength and economic strength are directly related to each other. If we spend all our gold printing AUDs, then when it comes the time to pay for our MPPS and EDEN no one will sell us gold back because the money market is swimming in AUD the government has issued investors won't want any more.

It's complex subject but this a basic insight into how government pays its bills.

infin
Senator for Queensland