Anarcho-NazBols wrote:On this nation, 30 minutes ago, I answered issue #24 (Budget Time: Accountants Excited) with option 4 to cut taxation, but instead taxation increased from around 73-75% to about 86%. Why?
That is a surprisingly large change, but looking at the make-up of your economy, and the income levels in your nation, I think I can see what's going on.
From the FAQ at the beginning of this thread, about why tax sometimes goes in an unexpected direction...
- Why didn't tax fall when spending was described as reducing (or why didn't it rise when spending was described as rising)?
The answer usually lies in your economic output.
The more economic output you have, the less %tax you need to support your spending.
Bear in mind that economic output is dependent on a lot of interacting factors. Sometimes an option will cause you to shrink your economy by more than you proportionally shrank your spending, causing a tax rise to support the same spending. Sometimes it won't. Often different things will happen to different nations faced with the same issue choice.
In your case, your entire legitimate economy is the government. What's more, that government spending is approximately 85% the operation of government itself, rather than just govm't owned businesses.
The option you chose did attempt to lower the tax rate (Freedom from Taxation +33.6%), but at the same time, it slashed the government itself across the board ("People need to be weaned off the government teat"). Because of your total commitment to government as the driver of the economy, this undermined your total economic output, meaning that income tax levels had to rise to support what was left.
Now, for most folks I believe that offset wouldn't be nearly as big, but you have combined the two factors above (government-based economy and cuts to the government) with some of the lowest personal income in the game. Even a small increase in raw income tax intake will therefore be a massive percentage increase. With an average income in the 6400-6800 range, something like an increase in taxes of 1000/person represents a catastrophic percentage of their gross income. For a nation experiencing a similar increase in raw tax intake, but with citizens who have incomes on the other end of the scale, such an increase would be less than one percent, and would likely be sufficiently offset by the income tax reduction to lead to an overall decrease. If your economy had some variety in it, or if your people's incomes were higher, I believe you wouldn't have seen this effect.
Good question! That is a tricky situation you've got.
