taxes influence on economy, GDP

[Chris30]

cheers, anybody figured out how taxes exactly influence other factors in the game? I currently have only some guesses for what taxes are other than increasing the demand for products and increasing GDP when lowering taxes and the opposite when you increase taxes.

So far i followed just a tip out of the forums, zeroed out unemployment, property and pension taxes and it seems to lower emmigration a bit more than lowering other taxes on the long term and of course there is a higher demand and GDP increases. Are there other things they affect?

The other taxes except the salary one i equalize always to the same percentage at a height dependend what i intend to do. Setting high taxes to make up for high exports and/or more social spendings and/or preparing for war, Low taxes for less to no exports and a greater immigration and less social spendings. Since i havent played very long games so far(no longer than 3 years) im not sure what effects have only high corporate taxes and leaving other taxes low, or doing the same with small business taxes and leaving the other low. It feels the effects are all the same. Are richer people decreasing or leaving the country when i increase taxes for higher income, or are they only leaving if i set corporate taxes high? Wheres the magical limit to turn things into bad, 35 %?
Someone said leaving the salary tax at 25 % is very good, but why? I do lot more money if i increase those taxes and export more stuff.
Last but not least im very interested if someone master it to generate a high income only with self sufficience and public revenue without any export income. I tried setting domestic prices for water, timber and agri to 20 % and oil, consum and electricity at around 50-100 %, low taxes(salary 25, last three taxes 0, the rest 15 %). I even reduced production ie disabled or demolished factories to equalize production to demand, but i stil dont do as much money as i would do with exports, most of the time with a rate of 1/10(low taxes self sufficient/high taxes exports). Is that GDP independed, the higher the gdp the higher the profit? Played so far only with countries max 30000 GDP and max 80 mil people, maybe the national income surplus without exports is population dependend, have to test.
Any ideas?

edit: i have found 1 note to taxes in the manual:
"Although all taxes obviously affect the overall revenue of your region, they also have subtle effects on varoius aspects of your economy. One such example: lowering corporate tax rates will stimulate additional corporate growth, and encourage the possible development of business sectors".

Tell us the other 'subtle effects' please

[mrgenie]

Well I noticed, when I change taxes, i change DEMAND/COST/INCOME immediatly

changing the tax system completely increases/decreases demand the next day already, just GDP/production costs etc changes over the months/years..

But yeah, how to get a profitable self-sufficient economy that can live without exports is THE Question..
No matter what I'm trying, I can only run decend income through exports..Everything else(although all my production is below marketprices) is hopeless, i can make a few million positive, but not billions like normal governments seem to do

Also, i read you need to get better supply levels to lower your costs.

Can't second that. I had absolutely NO barracks, airfields, ports, supply depots, and to test it, i just placed 30supply depots throughout my land. Cost didn't change 1 single penny.

also some people said they got higher production with better supplies.

I build those supply depots everywhere. my production didn't change, neither for any raw materials nor for any fabricated stuff like customer goods or industry goods..nothing changed by placing supply depots everywhere..maybe units be supplied faster(didn't check that, since im puzzling about the economics to play this game, warfare is easy, since the AI is mega dumb) but the economics to play this game are very puzzling

[mrgenie]

I just figured out something:

lower sales tax = higher domestic sales. From 50% tax down to 25% my domestic sales increase more then i lose out of tax income. down to 15% I make huge profits with domestic sales, but my demand increases like crazy!

So I think, i gotta figure out, how much i can reduce taxes, to boost my sales, but without making demand higher then my land can produce(since then i have to import, which is costly)

[Czin]

Lowering corporate taxation does seem to lower unemployment in the games that i have played. Decreased corporate taxes allow businesses to hire more workers due to increased marginal revenue for each worker. I know for a fact that in real life lowering corporate taxes does get more people employed because corporations have more money at their disposal for research to increase efficiency or to hire more laborers. Similarly, I have deduced that raising such taxes will increase unemployment because in response to rising costs corporations must lay off certain workers.

With regards to taxation, I have tried to use it as a way to control inflation, not just for revenue. Lower income taxes increases demand for normal goods which leads to a larger rate of inflation and quantity demanded. Increasing taxes for low and high income persons leads to less money for them to be able to spend on products. Consequently, the rate of inflation declines as does quantity demanded.

These are some of the "subtle effects" that I have found to be true in somewhat limited testing where there could be lurking variables impacting the results, but I know to be true in elementary supply and demand models of economics. Whether or not the game actually simulates this can only definitively be confirmed by the developers. Sadly, I have no idea what influence the pension tax or some of the others has on one's economy, I can only guess.

This game is an admirable achievment in the small genre of complex strategy games without a doubt, but it is unfortunate that the developers could not spell out the effects of each type of taxation in the manual like they did with social spending.

[mrgenie]

I agree that the manual is poor on explaining effects of the tax settings as well as the spending..

I'd love to see the formulas they've based the system on..for real world economy i can get the formulas out of the economical books..but do they apply to the game? probably not..

so request to the devs: put some formulas in the wiki please

[mrgenie]

I was wondering, since the economical thing is the biggest problem in my game..

I'm making 2,700,000M
1,500,000 goes into production
600,000 into social services
600,000 into research
military around 400,000(inclusive maintainance and production etc)
some few more millions go here and there..

I can't seem to make any surplusses with my nation...Only by trade I can safe money..

isn't there someone out there that can publish his exact tax/social spending settings to run profitable,and both keep inflation and unemployment within healthy numbers?

anyone who has a nation running for several years and has a stable economy making surplusses, would you be so kind to publish all your tax-% as well as social-%?

maybe even a savegame? So i can compare with mine figuring out what I'm missing?
I got most supply levels now up to 90% or more, but my production costs haven't changed nothing by going from supply around 50 to 90%..didn't change a thing..at least not visible in numbers shown by the ministers..

I have absolutely no clue what I'm doing wrong..only thing I can think of:"keeping a small army which is not capable of defending my land..or not research anything at all"

that's not an option of course..and thus far I can survive by simply selling customer goods for 60,000 to cope with my negative own economy..but there should be a way to make profits based simply on my own economy...Sorry asking personal settings, but I'm completely lost..I have no idea how to make a healthy economy :(

[Eclipse]

It is possible to go in surplus, you just have to be patient. Try to crash social spending, it usualy works (keep health and infrastructure at maximum, social assistance and enviroment low and rest is on average). Research 1 topic at the time and cut research cost, as you dont have to have all researched in 1-2 years, and research all cost reducing techs when possible, it realy helps. Military and industrial complexes are money takers so try to build economy arround town or city, and if you have to build them try to utilise them up to maximum potential. Military complex should be filled only with land/air/sea fabrication and try to have few centers that create units, more is not needed as docks, supply depots, and airports can be built in towns. Keep taxes low and raise, consumer, electricity and petroleum domestic costs to the maximum. Army should be small with bulk of it artilery units and AA guns, and infantry to conquer area, transports should be reserved to sea because air units eat lot of money. And don't forget this game is intended for patient players that can endure 50-100 ingame years if you want this tactic to work or you could conquer territory soon and tweak economy later. Point is to make 1 dollar progression per day, have all on demand and keep population rising fast so that your economy can handle that.

[Chris30]

hi mrgenie, in my current games i found out that EVERY kind of overproduction is for the main part counter-productive, especially for the products where u need alota facilities first to accomplish your people`s demand and second to get profits on the WM out of them. Following this theory you can get a healthy economy whilst demolishing/disabling so many facilities till you hit the demand of your people, EXCEPT for the high quality goods. This is much more effective than setting your overall production to demand or whatever and let the mass of factories still work, the magic words are demolish/disabling. Industry + military i disabled only to get them back in times where u need em, consumer goods i always use as THE money machine, since they need much less facilities to meet the demand + gain a nice profite than other facilities.
Lowering the amount of facilities means money, let for example nuclear power or even fusion do your energy work instead of petroleum(arghhh) or coal plants. They have a much less need of buildings than petro and coal.

Some detailed informaiton about my last game with taxes etc.: (russia)
- they overproduce nearly all, so i followed these steps from the beginning:
1. Lock all your ministers
2. Set all productivity do demand.
3. disable export for anything
4. Taxes: Unemployment, property, pension to 0
5. Taxes: Sales 25%, all the top taxes to ~50 %
6. Disable all military production centers(land, air, naval)
7. Social spendings: Infrastructure, health care highest rate. Social assistance 0 - 50 %, the rest to 100 %(demand)
8. Inland price markers: Water, timber, agri 30-40 %, oil, electricity, consum 200 %.
9. Start demolishing overproducing oil, ore, coal and petroleum power facilities to reach demand. For oil kill the oil derricks first, since they higher your oil production cost. The same goes for petro power/production price/buildings needed.
10. modernisize

explanation:
1. u can do hopefully better

2. only for the beginning to lower the effect of massive inflation increasing vs massive decreasing of unemployment(most countries got ~11% unemployment when game starts). Later you can overproduce just consum goods to make some extra cash.

3. higher exports means especially at the beginning too fast inflation growth. Only if you need money to avoid bancruptcy sell only one day a mass of goods, then stop it again. If unemployment and inflation are levelled of, you can start to export continuesly. Then you can adjust unemployment/inflation rate with the production slider of consum goods.

4. Since i set the other taxes high, this measure is to keep my people happy, lower emmigrants and more richer people.

5. Once again to lower the impact of radical inflation boost and have a decent income from the beginning.

6. To save money and one more inflation impact

7. Social spendings creates too many jobs, so lowering at least the most expensive one is very important. For the rest i think you know whats going on.

8. To lower the amount of facilities. i dont remember exactly but with russia i could demolish nearly 60-70 oil fields, 100 ore mines, 200 petroleum power plants etc to meet the demand.

9. as 8, its simply to lower production costs, have more free unemployments available and a lower inflation.

10. go from petro to coal energy, or even if money available to nuclear energy. Fusion is economically the best choise, since the buildings for uran will drop. Focus @ consum goods, but be carefull even here u can overproduce and be counterproductive to your economy. Keep industry to demand or better disabling, but dont demolish any industry buildings since there are times you need them, ie building fusion power .

GDP growth i made best experience with +2 to +3 $ per day, if inflation grows, lower the GDP to -0 to -2. In some days inflation will jump back.
I made very nice experience with this tactic and lota money without exporting, i could even do full research from day one. The GDP will fall rapidly at the beginning, but in some days/weeks it will more equalize and you can adjust it via export and taxes.
Btw this tac needs alot of work especially when u play russia with hundreds of factories .
Later in game while you have massivly reduced the costs you can easy lower taxes, make a nice inland profit + exporting alot.

[mrgenie]

Thank you both!!! Chris, you did an awesome detailed explanation..I've set all stuff as you suggested, and will now let the game run a year or so on fastest speed..see what happens..first days I'm going into a massive deflation of 6% I guess the game is readjusting to your settings now..so I gotta wait..about buildings demolishing..I have on power an overproduction of maybe 300%, but I set them all to demand 100%, shouldn't that reduce the production cost automatically if 2/3 powerplants are idled anyway?

I mean, a building just standing around shouldn't cost a thing normally, does it?

and fusion, gee, i suddenly have that in my build list..never noticed it..I was just selling 3 or 4 million consumer goods each time the price went up to 60.000 and with the cash i made i was funding 14 research facilities and simply researching everything(didn't even check what i was researching) It's a habbit from Civilization IV, just research everything you can as fast as possible...Guess this is not the way to go in SR2020..

So i'll dismantle my research facilities for the first, dismantle my overproduction..and with your taxes and social settings I'll just gotta wait some months for the game to readjust my chaos management

Guess there's more to this game then simply conquer and expand..

---------------- ADD 1 ----------------
after 6months..my deflation has been reduced to 1.4%(deflation = minus inflation)
my goods needed to serve my people have been cut down to 25% of what they demanded before(think I can throw away almost all facilities now hehe)
my income has grown from -60.000M to 244.000M/year(without exports)

Guess this is going into the right direction ))))

---------------- ADD 2 ----------------
Chris, you should write this in the wiki as a detailed way to start with!

[Chris30]

Thank you both!!! Chris, you did an awesome detailed explanation..I've set all stuff as you suggested, and will now let the game run a year or so on fastest speed..see what happens..first days I'm going into a massive deflation of 6% I guess the game is readjusting to your settings now..so I gotta wait..

yea deflation and/or constant low inflation rocks and keeps production cost at an acceptable level related to slow growing GDP.

about buildings demolishing..I have on power an overproduction of maybe 300%, but I set them all to demand 100%, shouldn't that reduce the production cost automatically if 2/3 powerplants are idled anyway?

I mean, a building just standing around shouldn't cost a thing normally, does it?

true if you set 300 % overproduction to 100 % demand u reduce costs, but after a lot of tests its much more economically efficient if you reduce the production capacity to demand by demolishing/disabling those factories instead of using only the capacity slider. The mass of factories seem to have a "weight" on your economy independend if you let them work at 50 % or 100 % capacity. Further the capacity slide for electricity applies to ALL your plants ie theres no way to hide the most expensive petrol plants from other ones, means you cant decrease the production cost per MWH this way.

See this one example, following fictional situation:
- your actual GDP growth is +2 $ day
- ~constant inflation rate
- people`s demand for power 100,000,000 mwh
- your max production capacity for power is 300,000,000 mwh and is set to demand
- u have room left

here you will see the weight of facilities in the game:
- u demolish so many power plants ie 91 petro plants that u equal production to demand, your max production capacity is now equal to demand.
- see the results after demolishing those plants and producing 1:1 compared to producing 1:3 power @ demand with max capacity 300,000,000
1. you lower the production cost per MWH
2. you lower the production cost as a whole
2. you lower the need for petroleum and other resources for your electrical power industry, therefore u can disable oil fields and/or import less oil and continue to improve your economy while lowering oil output or other resources needed for a reduced industry.
3. your GDP will decrease what means u can invest in lesser taxes to become peoples general or invest quality goods + higher export rates at stable inflation/unemployment. Therefore theres much more room for research and military training etc.
4. more inflation/unemployment stability.
ye hmm i think thats it. I cant say for sure that its working like this, i hope you get similar results.

and fusion, gee, i suddenly have that in my build list..never noticed it..I was just selling 3 or 4 million consumer goods each time the price went up to 60.000 and with the cash i made i was funding 14 research facilities and simply researching everything(didn't even check what i was researching) It's a habbit from Civilization IV, just research everything you can as fast as possible...Guess this is not the way to go in SR2020..

Did so before but i have at time through holidays too much spare time to continue in doing so, love to see how to get a vital economy working in sr2020 instead of pumping billions of trade $ into my country without watching the economic possibilities.

So i'll dismantle my research facilities for the first, dismantle my overproduction..and with your taxes and social settings I'll just gotta wait some months for the game to readjust my chaos management

nah research u dont need to cap dependend on your economically strenght, GDP and population.

---------------- ADD 1 ----------------
after 6months..my deflation has been reduced to 1.4%(deflation = minus inflation)
my goods needed to serve my people have been cut down to 25% of what they demanded before(think I can throw away almost all facilities now hehe)
my income has grown from -60.000M to 244.000M/year(without exports)

Guess this is going into the right direction ))))

---------------- ADD 2 ----------------
Chris, you should write this in the wiki as a detailed way to start with!

sounds good , but dunno if its really true what im saying. if it comes to the case i need someone to bring it into freaky english since im not a native speaking english man.

[Eclipse]

One simple question that is related to the cost. If you overproduce, and you set on demand, is production lowered as a percentage from all production buildings or it uses only from the facilities that have low production cost (coal power plant) or that use no resources (power other)?

[mrgenie]

as far as i can tell from my observations, it seems that the when you need 80% of your max capability, you simply produce 80% with all facilities..meaning, those with high cost/unit will produce 80% as well as those with low cost/unit will produce just 80%.

so the average cost should be the same...that's from my observations, but only the devs can tell if that's true