taxes

[Migrenia]

I am just curious. Since the taxing system is this game seems absurd, with some nations going literally over 100% tax rate, and a lot of temporary programs that lead to a permanent tax increase, I am theorizing that the tax rate for nations is an overestimation of each nation's tax rate. What do you guys think? Is the tax rate number used by the WA accurate? And if not, what do you believe is the ratio between the WA's tax rate and the tax rate that would be present in a realistic nation? Since my overall Government spending is only about 30% of the GDP, but my tax rate is as much as 64%, I am thinking that the actual tax rate is about half of the WA estimated tax rate. Is that correct? Maybe the ratio actually varies depending on what policies are used, but I wanna know what you guys think.

[Merconitonitopia]

The World Census data is supposed to be accurate.
As for tax rates above 100 percent: that is for tie-breaking purposes. Compare with how values for industries or government departments can fall below zero (which doesn't make too much sense if taken literally). Note that even if your tax rate on the graph is one billion percent, it will always display as 100 percent on your nation's write-up, which implies that 100 percent is the hard limit in 'real' values.

That said, the discrepancy between tax rates and government spending is a glaring flaw that has bothered me ever since they renovated the economy graph (that and that transfer payments are not excluded from G in GDP; in the real world, there tends to be a big difference between total gov't spending and G). The result is that you get nations with enormous surpluses or deficits, which somehow have no economic consequences (hyperinflation, anyone?). One of the more amusing examples of this is Bright Angel. Tax rate: 100 percent; government spending: 7.7 percent. Their gov't presumably has an enormous Scrooge McDuck vault (although its just a little bit less ridiculous when you consider that their economy is two-thirds black market).

[The Free Joy State]

We are aware that taxation is a limitation with our system, solely reflecting income tax.

This is explained more in our Unusual Effects Thread OP, under "Why didn't tax / unemployment / black market do what I expected it to?":

The tax model of the game is very simplistic, and it basically abstracts all spending as income tax and doesn't take into account any idea of government borrowing, deficit spending or tax from sources other than income tax.

That gives us limited tools for simulation.

Corporation tax is rolled into business subsidisation, with lowering of corporate tax representing an effective business subsidisation, and a shifting of tax burden onto the income taxpayer.

Sales tax and VAT, meanwhile, move income tax inversely, as raising more revenue from these forms of taxation decreases the burden on income tax, and vice versa.

This isn't entirely satisfactory, of course, as it means that the descriptions of "Freedom From Taxation" on the graphs aren't accurate, but it's reflective of how the game engine is written and of the simulation's limitations. It basically isn't possible to have burden of taxation and income tax move in opposite directions, as in the simulation all measured tax = income tax.

[Drongonia]

my overall Government spending is only about 30% of the GDP, but my tax rate is as much as 64%

Well the government's spending-to-GDP ratio is pretty irrelavent in this situation since the government doesn't spend out of the GDP, it spends out of its revenue, from taxes and other endeavours.

Also, the Taxation stat is likely the median income tax burden, even if you have a flat tax rate. Even if your flat tax was set at 25%, for example, you could give out tax credits, rebates etc etc that change the average (usually downwards) so it's not 100% infallible when you compare it to how a tax system is actually run - in my mind at least.

If you want your taxation to go down, just spend less money.

[The Free Joy State]

And as Merconitonitopia said, if you change the policies for things like sales/VAT/corporate tax, it does take the "Taxation" down, but still negatively affects the "Freedom from Taxation" stat.

Hi, IE here: as I said -- in the post right above yours -- Sales Tax, VAT and Corporation Tax are not part of Taxation. Thanks.

[Drongonia]

Hi, IE here: as I said -- in the post right above yours -- Sales Tax, VAT and Corporation Tax are not part of Taxation. Thanks.

Sorry, didn't see your post as I had left the posting page open for a while. Edited

[Merconitonitopia]

Also, the Taxation stat is likely the median income tax burden, even if you have a flat tax rate.

The world census does say that the taxation stat is supposed to be an average. '[T]he World Census used averages to rank the world’s most taxing governments.'
That said, I don't think this reflects how taxation actually plays out in the game.

I was inclined to suggest that tax rate is an aggregate as a proportion of total GDP/income, and this determines budget censuses (education, healthcare, etc.). However, upon examining my nation's stats, I'm not sure if that's true. I suspect that this impression is true, but it doesn't work quite as you would expect.
My nation has a 100 percent tax rate and spends 33 percent of the gov't budget on defense. In order to find my defense budget (per capita), a naive approach, throwing away the government spending as a percent of GDP stat on the gov't/economy pages (which doesn't appear to be corroborated in censuses), would be to multiply my average income by *0.33. This would yield a value of 133,638.04. In reality, my defense forces census is 101,279.59, which explodes that approach.
But it also isn't true that your gov't budget censuses are related to the government spending as a percent of GDP. Mine is 28.2 percent. Multiplying that by 0.33, we would then find that my defense budget should be a mere 9.31 percent of GDP. But as we have seen, it is far higher than that.
My suspicion is that gov't spending as reflected in the budget censuses is taken as an aggregate of GDP scaling with the effective tax rate, but not in the way it 'should.' Perhaps there are other factors muddling things up.

[Migrenia]

Wow this got more responses than I thought. Thanks for the input guys. I think I am going to go with the averaged out theory and just assume that my average tax rate is skewed to the left. That makes the most sense.