NationStates Jolt Archive

A. Logic

Premise 1.) When people spend money, businesses are enriched.
Premise 2.) When businesses are enriched, they can expand, creating new jobs and/or improve the conditions of existing workers, such as pay raises.
Premise 3.) When employees' pay rises, they can spend more money.
Premise 4.) When the government lays excessive taxes, they punish and deter the achievement of these persons.
Premise 5.) When the government lays excessive taxes, it leaves people with less money to spend.

Conclusion) When people spend money, the economy improves, causing people to earn more money, which they spend, further enriching the economy. When the government lays excessive taxes, this growth cycle is deterred. When the government cuts taxes, the resulting economic surge makes up for revenue lost through the cuts.

Thus, cutting taxes enriches all involved.

B. Enactment
With the passage of this resolution,
1.) all United Nations members will introduce flat income tax rates.
2.) United Nations members with income tax rates between 30% and 45% will cut income taxes by 5%.
3.) United Nations members with income tax rates between 46% and 65% will cut income taxes by 20%.
4.) United Nations members with income tax rates between 66% and 80% will cut income taxes by 40%.
5.) United Nations members with income tax rates above 80% will cut income taxes by 50%.

-The Royal and Ancient Golf Club of Paxania

There is a few problems with your premises.

Premise 1.) When people spend money, businesses are enriched.

This is true, but when governments spend money, businesses are also enriched. The more taxes governments charge, the more money they can spend on businesses. You haven't shown that government spending is a greater simulus than individual spending.

Premise 2.) When businesses are enriched, they can expand, creating new jobs and/or improve the conditions of existing workers, such as pay raises.

Businesses are run on the profit motive. In otherwords, they try to maximise profit. Businesses will not create more jobs and give pay rises if they have more money to spend. The will only create more jobs and give pay rises if doing so will gain them more profit, and they will do so regardless of whether they are currently making a profit or loss.

Premise 3.) When employees' pay rises, they can spend more money.

This is true, to a certain extent, but not always to the same degree. There is a thing in economics called the Marginal Propensity to Consume (MPC). Take for example someone earning $20000 a year. Now lets say that person earnt one extra dollar, and they spent 60c of it. That means they have a MPC of 0.6. Now, if you give someone living on the poverty line an extra dollar, they are likely to spend almost all of it, (as in, to get some food), so they have an MPC of 1. The extremely rich, on the other hand, have a very low MPC, and a more likely to save their extra dollar than spend it, hence have an MPC close to 0. Giving pay rises to the rich, who are unlikely to spend those pay rises, is unlikely to stimulate consumption and the economy. In fact, depending on the makeup of your economy, the rich often spend that extra money they have on expensive imports, contributing to the current account deficit.

Premise 4.) When the government lays excessive taxes, they punish and deter the achievement of these persons.
Premise 5.) When the government lays excessive taxes, it leaves people with less money to spend.

It depends as discussed above. When the government lays taxes on the rich, it doesn't affect consumption as much as when the government lays taxes on the poor. Reducing the disposable income of the poor rather than the rich can arguably lead to crime as an alternative income source, which does more harm to the economy than good.


B. Enactment
With the passage of this resolution,
1.) all United Nations members will introduce flat income tax rates.


Flat taxes take money from the poor at instead of the rich, and every dollar taken from the poor instead of the rich means less money spent in the economy, and less stimulus for the economy. The point of progressive taxes it to take more money out of the hands of people who don't need it as much, and hence more unlikely to spend it. This, combined with society security, which is giving money to people who are likely to immediately spend it, stimulates consumption and the economy.

I will take the Real Life example of Japan. Japan traditionally has had a mentality of families supporting people in old age or unemployment, and hence has had a lack of social security. Unfortuantly, this has led to a mentality of excessive saving, due to people "saving for a rainy day" and not spending their money on consumption. And has more people saved their money, the economy started to look bleak, and more people started saving even more money in case they lost their jobs due to the lack of consumption in the economy. So consumption slowed further, people started saving even more, and the vicious cycle continued. Australia, on the other hand, has had social security for a while, and people are less afraid of spending their money as a result. Progressive taxes, which reduce the tax burden on those more likely to spend their money, and a social security mentality has ironically lead to record low unemployment rates due to continued consumption and stimulus even through a global economic downturn.

Ah, the good old 'universalise tax rates' proposal. It's been a while since we've seen one of these.

Frankly, your logic is flawed and your proposal is nonsense. You do not have our support.

Mathieu Vergniaud
Deputy Speaker to the United Nations

Apart from the other comments here, which are very valid, this proposal would require a change in game mechanics. Tax rates in NS nations are not controlled directly, but rather by the choice in daily issues. There is no certainty when choosing a daily issue by how much your nations tax rate will either increase or decrease.

Respectfully
Lydia Cornwall, UN Ambassador
Office of UN Relations
HM Government of Telidia

This plan would take away a lot of the impact that your decisions have on your economy and would take away from the overall feel of the game as it stands today.

-The Royal and Ancient Golf Club of Paxania

I could not agree more with what you state in the first 5 points;

However, there are nations that find usefull ways to spend tax money, to benefit their people.

The issue should not be dealt with by UN.

Each nation has souvereignty on how they tax, how high the taxes are and what they do with the money.

You do it your way, let others do it their way.

By the way: have you seen what being a UN member does with your taxes?

I left UN and reduced mine back down to 1%. They dropped from 40-45% when I was a member.

All that centralised political nonsense the UN is made up of is costing you your growing economy, my friend.

I rest my case.

Kudos to Independent Kamia for saying everything I wanted to say much better than I would've said it.

Introducing a flat income tax would shift the tax burden to the middle and lower classes, who typically are the ones powering the economy by buying stuff. Your proposal is likely to have the opposite effect than that intended.

That is besides the fact that even I consider this a huge overstepping of UN authority and the game mechanics wall you'd run into.

We propose that an exemption, as there are always tax exemption in any good tax laws, is made for all Nations starting with 'B'.

Yours Neutrally,
Bahgum