I tried adding ‘Labor Income Share’ simulation to the game. When Cliff introduced Unemployment to Income Tax modifier, I wondered why it would decrease the tax revenue. Automation might mean less employees and thus less income tax but that money isn’t lost. Corporations will make more profits thanks to reduced labor cost burdens. Then this will lead to more corporate tax revenue. This is where I started.
Though I had a difficulty (as you can see from my post - How to give > x1 tax revenue multiplier) and it still makes it impossible to publish this mod to the Workshop, I was able to implement what I wanted. Labor Income Share (LIS) has causes & effects as written below. For most countries, the initial value of LIS would be roughly at 50~65%. The sum of income & corporation tax revenue will be the same with the base game when LIS is at 70%. The higher the LIS becomes, the more income tax will be collected while corporation tax revenue declining (and vice versa in the case of lower LIS). In general, you are likely to lose tax revenue if LIS goes down but wouldn’t be that severe unless you are trying real hard to drag LIS down. Also, LIS tends to decrease over time since gradual progresses are made at technology & automation.
Causes (at max slider/intensity):
- workersdividend: +12%p
- CorporateExodus: +8%p
- WorkersOnBoards: +6%p
- PayrollTax: +5%p
- WorkSafetyLaw: +4%p
- MaternityLeave: +2%p
- Wages: -12.5 ~ +12.5%p
- Unemployment: +10 ~ -15%p
- competitionlaw: -2 ~ +2%p
- ForeignInvestment: -2%p
- NationalBusinessCouncil: -2%p
- PrivateSpaceProgram: -2%p
- PrivateEnergy: -2%p
- PrivateTelecoms: -2%p
- PrivateHealthcare: -2%p
- PrivateSchools: -2%p
- PrivateWater: -2%p
- PrivateRail: -2%p
- PrivatePrisons: -2%p
- TechnologicalAdvantage: -3%p
- EnterpriseInvestmentScheme: -3%p
- IndustrialAutomation: -8%p
- TaxShelters: -12%p
Effects:
- Income Tax Revenue
- Flat Income Tax Revenue
- Corporation Tax Revenue
- Trade Unionists Approval
- Self-Employed Approval
Screenshots:
Does this sound interesting? Any feedback will be welcomed.
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It does sound interesting, but how does this work exactly? How does Corporate Tax go up when workers leave and corporations potentially become smaller (will they always make more profit)? Will automation always replace the workers?
Just among the few questions I had.
Since Labor Income Share is the ratio of labor income to GDP, changes in LIS with the same GDP just mean less money is paid to workers when corporations have the same turnover. Thus it makes sense. If there’s a policy or situation leads to less output AND employment, it will decrease the GDP and corporate tax revenue will also decrease even with a fall in LIS.
Also, just to add, since it was kinda painful for me to find a balance that will keep total tax revenue the same, lower LIS (in other words, higher Capital Income Share) is likely to drag the total revenue down. I was even able to see a case where austerity efforts (like anti-union measures and privatization) failing to reduce the deficit when the GDP didn’t fall.
So, when you said that you were trying to find the balance, are there cases where austerity will lead to a lower revenue in your mod?
depends on income/corporate tax rates but austerity measures (even ones that don’t drag down the GDP) in general cause bigger drop in income tax revenue than rise in corporate tax revenue. to be fair, I’m not even sure it is possible to achieve more tax revenue at low LIS without significantly raising corp tax rate.
EDIT. you can just look at the screenshot below
have done State Rail privatization, abolishment of Minimum Wage, Labour Law revised to pro-employer, unions banned, and etc. Then a sizable surplus magically turns into a narrowly balanced budget, even without a single tax cut.
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Yeah, I guess that seems balanced, as the LIS fell, so did the surplus. But I’m not an expert here on LIS, and your grasp on economic theory is stronger than mine (especially neo-liberal, I guess). So, I’ll let you decide whether the numbers line up.
I’m okay with less tax revenue from lower LIS since this has started from Cliff’s idea of ‘the higher unemployment, the less income tax revenue.’ Just not sure how balanced it would be. I’m not intending to kill budget balancing measures in the game where you can’t increase your debt indefinitely relying on future growth. Also, the US has the lowest LIS at start so they might become considerably harder to play.
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But as we noticed earlier, in game, debt is partially decoupled from future growth as gdp has a limit.
That’s what I mean. This game practically forces players to achieve budget balance because of it.
Now I’m playing the US mission with LIS enabled. I’ve noticed that just a 5%p decrease in LIS led to $20Bn loss in the total tax revenue.
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I guess Cliff doesn’t want players to have the easy way out by collecting ever more debt.
So, now that you have a $20 billion reduction in tax revenue, will automation make up for it?
That $20Bn drop in the tax revenue is actually $48Bn loss of Income Tax revenue & $27Bn gain of Corporation Tax revenue. Plus to that, I’m yet to face automation so I guess I’m gonna lose even more unless I take some steps to raise Labor Income Share or raise Corporation Tax rate.
This feels like a gameplay trap.
I expected LIS to add some financial pressure on 2nd/3rd+ terms. It’s just a bit earlier than I thought. Maybe I should add more inertia to its causes.
1 Like
Some initial fiscal stats with LIS mod enabled at standard difficulty (100%):
US
|
US |
LIS = 47% |
|
Base |
Modded |
| Total Tax Revenue |
$ 804.34 Bn |
$ 735.76 Bn |
| Income Tax Revenue |
$ 408.96 Bn |
$ 293.95 Bn |
| Corp. Tax Revenue |
$ 62.15 Bn |
$ 108.66 Bn |
| Payroll Tax Revenue |
$ 219.32 Bn |
$ 219.32 Bn |
| Sales Tax Revenue |
$ 37.34 Bn |
$ 37.40 Bn |
| Other Revenues |
$ 76.57 Bn |
$ 76.43 Bn |
| Total Expenditure |
$ 901.58 Bn |
$ 902.25 Bn |
| Deficit |
$ 97.24 Bn |
$ 166.49 Bn |
| Tax/GDP Ratio |
12.50% |
11.44% |
| Income Tax/GDP |
6.36% |
4.57% |
| Corporate Tax/GDP |
0.97% |
1.69% |
| Payroll Tax/GDP |
3.41% |
3.41% |
| Sales Tax/GDP |
0.58% |
0.58% |
| Debt/GDP Ratio |
96.07% |
|
| Deficit/GDP Ratio |
1.51% |
2.59% |
| Rate of Debt Increase |
1.57% |
2.69% |
UK
|
UK |
LIS = 55% |
|
Base |
Modded |
| Total Tax Revenue |
£ 130.43 Bn |
£ 126.85 Bn |
| Income Tax Revenue |
£ 51.19 Bn |
£ 42.65 Bn |
| Corp. Tax Revenue |
£ 10.52 Bn |
£ 15.53 Bn |
| Payroll Tax Revenue |
£ 27.33 Bn |
£ 27.33 Bn |
| Sales Tax Revenue |
£ 22.52 Bn |
£ 22.52 Bn |
| Other Revenues |
£ 18.87 Bn |
£ 18.82 Bn |
| Total Expenditure |
£ 157.00 Bn |
£ 157.01 Bn |
| Deficit |
£ 26.57 Bn |
£ 30.16 Bn |
| Tax/GDP Ratio |
31.24% |
30.38% |
| Income Tax/GDP |
12.26% |
10.22% |
| Corporate Tax/GDP |
2.52% |
3.72% |
| Payroll Tax/GDP |
6.55% |
6.55% |
| Sales Tax/GDP |
5.39% |
5.39% |
| Debt/GDP Ratio |
107.78% |
|
| Deficit/GDP Ratio |
6.36% |
7.22% |
| Rate of Debt Increase |
5.90% |
6.70% |
Japan
|
Japan |
LIS = 64% |
|
Base |
Modded |
| Total Tax Revenue |
¥ 35.79 Tn |
¥ 35.83 Tn |
| Income Tax Revenue |
¥ 14.90 Tn |
¥ 14.26 Tn |
| Corp. Tax Revenue |
¥ 3.68 Tn |
¥ 4.39 Tn |
| Payroll Tax Revenue |
¥ 6.91 Tn |
¥ 6.91 Tn |
| Sales Tax Revenue |
¥ 6.03 Tn |
¥ 6.03 Tn |
| Other Revenues |
¥ 4.27 Tn |
¥ 4.24 Tn |
| Total Expenditure |
¥ 59.27 Tn |
¥ 59.28 Tn |
| Deficit |
¥ 23.48 Tn |
¥ 23.45 Tn |
| Tax/GDP Ratio |
31.12% |
31.15% |
| Income Tax/GDP |
12.96% |
12.40% |
| Corporate Tax/GDP |
3.20% |
3.82% |
| Payroll Tax/GDP |
6.01% |
6.01% |
| Sales Tax/GDP |
5.24% |
5.24% |
| Debt/GDP Ratio |
288.66% |
|
| Deficit/GDP Ratio |
20.42% |
20.39% |
| Rate of Debt Increase |
7.07% |
7.06% |
France
|
France |
LIS = 66% |
|
Base |
Modded |
| Total Tax Revenue |
€ 129.29 Bn |
€ 129.25 Bn |
| Income Tax Revenue |
€ 40.73 Bn |
€ 40.48 Bn |
| Corp. Tax Revenue |
€ 13.30 Bn |
€ 14.45 Bn |
| Payroll Tax Revenue |
€ 36.18 Bn |
€ 36.18 Bn |
| Sales Tax Revenue |
€ 18.99 Bn |
€ 18.54 Bn |
| Other Revenues |
€ 20.09 Bn |
€ 19.60 Bn |
| Total Expenditure |
€ 157.37 Bn |
€ 157.26 Bn |
| Deficit |
€ 28.08 Bn |
€ 28.01 Bn |
| Tax/GDP Ratio |
24.28% |
24.27% |
| Income Tax/GDP |
7.65% |
7.60% |
| Corporate Tax/GDP |
2.50% |
2.71% |
| Payroll Tax/GDP |
6.79% |
6.79% |
| Sales Tax/GDP |
3.57% |
3.48% |
| Debt/GDP Ratio |
114.55% |
|
| Deficit/GDP Ratio |
5.27% |
5.26% |
| Rate of Debt Increase |
4.60% |
4.59% |
Canada
|
Canada |
LIS = 59% |
|
Base |
Modded |
| Total Tax Revenue |
$ 68.42 Bn |
$ 66.73 Bn |
| Income Tax Revenue |
$ 38.15 Bn |
$ 33.94 Bn |
| Corp. Tax Revenue |
$ 7.56 Bn |
$ 10.09 Bn |
| Payroll Tax Revenue |
$ 4.28 Bn |
$ 4.28 Bn |
| Sales Tax Revenue |
$ 7.76 Bn |
$ 7.77 Bn |
| Other Revenues |
$ 10.67 Bn |
$ 10.65 Bn |
| Total Expenditure |
$ 74.95 Bn |
$ 74.99 Bn |
| Deficit |
$ 6.53 Bn |
$ 8.26 Bn |
| Tax/GDP Ratio |
21.89% |
21.35% |
| Income Tax/GDP |
12.21% |
10.86% |
| Corporate Tax/GDP |
2.42% |
3.23% |
| Payroll Tax/GDP |
1.37% |
1.37% |
| Sales Tax/GDP |
2.48% |
2.49% |
| Debt/GDP Ratio |
86.40% |
|
| Deficit/GDP Ratio |
2.09% |
2.64% |
| Rate of Debt Increase |
2.42% |
3.06% |
Australia
|
Australia |
LIS = 63% |
|
Base |
Modded |
| Total Tax Revenue |
$ 70.95 Bn |
$ 70.38 Bn |
| Income Tax Revenue |
$ 34.64 Bn |
$ 32.21 Bn |
| Corp. Tax Revenue |
$ 8.57 Bn |
$ 10.47 Bn |
| Payroll Tax Revenue |
$ 17.36 Bn |
$ 17.36 Bn |
| Sales Tax Revenue |
$ 6.17 Bn |
$ 6.18 Bn |
| Other Revenues |
$ 4.21 Bn |
$ 4.16 Bn |
| Total Expenditure |
$ 83.88 Bn |
$ 83.89 Bn |
| Deficit |
$ 12.93 Bn |
$ 13.51 Bn |
| Tax/GDP Ratio |
14.63% |
14.51% |
| Income Tax/GDP |
7.14% |
6.64% |
| Corporate Tax/GDP |
1.77% |
2.16% |
| Payroll Tax/GDP |
3.58% |
3.58% |
| Sales Tax/GDP |
1.27% |
1.27% |
| Debt/GDP Ratio |
29.54% |
|
| Deficit/GDP Ratio |
2.67% |
2.79% |
| Rate of Debt Increase |
9.02% |
9.43% |
Spain
|
Spain |
LIS = 68% |
|
Base |
Modded |
| Total Tax Revenue |
€ 63.37 Bn |
€ 64.33 Bn |
| Income Tax Revenue |
€ 24.67 Bn |
€ 25.11 Bn |
| Corp. Tax Revenue |
€ 5.71 Bn |
€ 5.97 Bn |
| Payroll Tax Revenue |
€ 17.37 Bn |
€ 17.37 Bn |
| Sales Tax Revenue |
€ 10.33 Bn |
€ 10.30 Bn |
| Other Revenues |
€ 5.29 Bn |
€ 5.58 Bn |
| Total Expenditure |
€ 73.54 Bn |
€ 73.53 Bn |
| Deficit |
€ 10.17 Bn |
€ 9.20 Bn |
| Tax/GDP Ratio |
16.57% |
16.82% |
| Income Tax/GDP |
6.45% |
6.56% |
| Corporate Tax/GDP |
1.49% |
1.56% |
| Payroll Tax/GDP |
4.54% |
4.54% |
| Sales Tax/GDP |
2.70% |
2.69% |
| Debt/GDP Ratio |
86.93% |
|
| Deficit/GDP Ratio |
2.66% |
2.41% |
| Rate of Debt Increase |
3.06% |
2.77% |
Germany
|
Germany |
LIS = 67% |
|
Base |
Modded |
| Total Tax Revenue |
€ 205.57 Bn |
€ 207.75 Bn |
| Income Tax Revenue |
€ 80.63 Bn |
€ 81.48 Bn |
| Corp. Tax Revenue |
€ 21.92 Bn |
€ 23.45 Bn |
| Payroll Tax Revenue |
€ 32.68 Bn |
€ 32.68 Bn |
| Sales Tax Revenue |
€ 32.98 Bn |
€ 32.94 Bn |
| Other Revenues |
€ 37.36 Bn |
€ 37.20 Bn |
| Total Expenditure |
€ 229.67 Bn |
€ 229.62 Bn |
| Deficit |
€ 24.10 Bn |
€ 21.87 Bn |
| Tax/GDP Ratio |
31.38% |
31.72% |
| Income Tax/GDP |
12.31% |
12.44% |
| Corporate Tax/GDP |
3.35% |
3.58% |
| Payroll Tax/GDP |
4.99% |
4.99% |
| Sales Tax/GDP |
5.04% |
5.03% |
| Debt/GDP Ratio |
74.81% |
|
| Deficit/GDP Ratio |
3.68% |
3.34% |
| Rate of Debt Increase |
4.92% |
4.46% |
Italy
|
Italy |
LIS = 69% |
|
Base |
Modded |
| Total Tax Revenue |
€ 60.75 Bn |
€ 61.16 Bn |
| Income Tax Revenue |
€ 26.78 Bn |
€ 27.10 Bn |
| Corp. Tax Revenue |
€ 5.38 Bn |
€ 5.54 Bn |
| Payroll Tax Revenue |
€ 9.00 Bn |
€ 9.00 Bn |
| Sales Tax Revenue |
€ 11.39 Bn |
€ 11.38 Bn |
| Other Revenues |
€ 8.20 Bn |
€ 8.14 Bn |
| Total Expenditure |
€ 90.29 Bn |
€ 90.27 Bn |
| Deficit |
€ 29.54 Bn |
€ 29.11 Bn |
| Tax/GDP Ratio |
11.57% |
11.65% |
| Income Tax/GDP |
5.10% |
5.16% |
| Corporate Tax/GDP |
1.02% |
1.06% |
| Payroll Tax/GDP |
1.71% |
1.71% |
| Sales Tax/GDP |
2.17% |
2.17% |
| Debt/GDP Ratio |
126.67% |
|
| Deficit/GDP Ratio |
5.63% |
5.54% |
| Rate of Debt Increase |
4.44% |
4.38% |
Korea
|
Korea |
LIS = 55% |
|
Base |
Modded |
| Total Tax Revenue |
₩ 132.26 Tn |
₩ 127.35 Tn |
| Income Tax Revenue |
₩ 67.02 Tn |
₩ 55.78 Tn |
| Corp. Tax Revenue |
₩ 13.23 Tn |
₩ 19.57 Tn |
| Payroll Tax Revenue |
₩ 26.53 Tn |
₩ 26.53 Tn |
| Sales Tax Revenue |
₩ 9.12 Tn |
₩ 9.12 Tn |
| Other Revenues |
₩ 16.36 Tn |
₩ 16.35 Tn |
| Total Expenditure |
₩ 155.81 Tn |
₩ 155.79 Tn |
| Deficit |
₩ 23.55 Tn |
₩ 28.44 Tn |
| Tax/GDP Ratio |
25.53% |
24.58% |
| Income Tax/GDP |
12.93% |
10.77% |
| Corporate Tax/GDP |
2.55% |
3.78% |
| Payroll Tax/GDP |
5.12% |
5.12% |
| Sales Tax/GDP |
1.76% |
1.76% |
| Debt/GDP Ratio |
36.43% |
|
| Deficit/GDP Ratio |
4.54% |
5.49% |
| Rate of Debt Increase |
12.48% |
15.07% |
+plots regarding the LIS
In general - you lose tax revenues as the Labor Income Share falls. I think it is safe to assume that your tax revenues will drop by 2% when the LIS falls by 5%p.
Want to expand this mod beyond just tax modification but not sure where to start.
1 Like
Why is there such a huge difference for the US, a £4 billion difference for the UK, but such small differences for other countries?
|
Labor Income Share |
Corporate Tax Rate (slider) |
| US |
47% |
15% |
| UK |
55% |
19% |
| Japan |
64% |
25% |
| France |
66% |
31% |
| Canada |
59% |
22% |
| Australia |
63% |
28% |
| Spain |
68% |
22% |
| Germany |
67% |
27% |
| Italy |
69% |
23% |
| Korea |
55% |
21% |
They have low LIS (mostly as a result of low wage) and corporate tax rate. So they lose a lot of revenue from income tax when their corporate tax rates aren’t high enough to compensate that loss.
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So, what deficiency were you trying to solve in game with LIS? What was too easy that required the implementation of it?
As mentioned above, this started from my thought that why unemployment from automation will only reduce income tax revenue when it will boost corporate profits. But I did engrave some of my gripes that pro-labor measures such as work safety law, maternity leave, and others that exist to boost wage are kinda useless, which felt like a waste of game contents.
I have done something similar to my previous mod, where trade unions will take actions if the government tries to take away specific policies (such as state pension, maternity leave, minimum wage, work safety law) or significantly deteriorate some of their rights (labour law, union ban, retirement age). It’s just way too easy to ignore the workers & unions, to the extent that real life governments are looking stupid and inept. I don’t believe that such pro-labor policies are there just because politicians are so compassionate.
