Why do socialists like the payroll tax?

I have some reasons to think it should be otherwise, kinda just curious as to what prompted the inclusion of the effect in the first place?

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Yeah I wondered about this too. It decreases Wages.

And it penalizes employers for hiring people. This means the employee hires less people making the employee work harder and socialists and even trade unionists don’t like that. It leads to more automation as well. Both don’t like unemployment.

Because it is core to how the welfare state works. This is especially prevalent in France. The welfare state is not just about redistributing income between rich and poor. It is also about redistributing income between workers and non-workers (children, those living with disabilities and the unemployed) and across the lifecycle to stabilize consumption and living standards (child benefits, pensions, etc).

Most of these kinds of benefits can only be financed by payroll taxes, ex; social security.

Source: Am a socialist and love payroll taxes

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Can only be financed by payroll taxes? According to whom, exactly?

The incidence of payroll taxes is on people who make their money from labour- is that something socialists like? Increasing the capital share of income? Effectively creating a flat tax on income from labour? Discouraging employment?

I don’t understand why you’d like a tax that is so unapologetically bad for workers (and bad in general). I’m not sure your reasoning should be taken as a reference for socialist thinking at large.

Socialists are neutral on sales tax and dislike graduate tax according to game.

And yeah its effectively income tax before you get that income from employer.

Denmark, Australia and Iceland aren’t hiding it and just tax income :stuck_out_tongue:
I think this one just should annoy everyone.

By the way that tax slider uses default instead of tax one.

Income tax (in Australia) is on all “taxable income”, which also includes capital gains for example.

Google Frances Perkins and look at the original arguments behind the unveiling of social security as part of the New Deal

It’s useful to think of them not as taxes. It’s not general revenue. It’s deferred income being paid into a pension you get later in life. It’s premiums going into a national insurance program for unemployment that you will get if you lose you job. Etc.

Nordic countries also have on average a 25% VAT on consumption and I think that is good also. Taxes are what we pay to live in a civilized society with a robust safety net.

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Sure. There’s other taxes though.
One possibility, which currently isn’t in the game at all, is land value tax (Wikipedia).
That seems to me to be a tax Socialists might like.

I think this one basically comes down to marketing, and implementation. In theory everyone hates taxes, but socialists know that they are required to fund the state and redistribute income. A payroll tax is often split between the employer and the employee, so you could argue that its a way to force the employer to set aside money (via the state) to pay for the employees retirement.

Of course, if you peek behind the curtain, that just means the employer will pay lower wages, and the money is rare;y ring-fenced for pensions anyway, but thats certainly the perception in some circles.

I suspect some people would say, if stopped in the street that they would rather payroll tax went up than sales tax, because they can directly see sales tax on their weekly shopping but a payroll tax is kinda hidden.

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I realize that’s probably too complicated and difficult to correctly model, but in that case it’d kinda make sense if it depended on education. Very high education would make people more informedly selective towards taxes

To add to that, the Nordics (Denmark excepted) boast high payroll taxes for the exact reasons you laid out. Social democrats realized it’s one of many taxes used to fund their enormous welfare states. Sweden at its peak with socialist policy in the 70s and early 80s neared 40% at one point, and they continue to be around 31-32% today. Socialists in the game seem to be social democrats in the historical sense, those that stemmed from original socialist movements. Payroll taxes were one of many adopted across social democracys, to me it makes sense to support it at least from that standpoint.

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Nice profile pic :wink:

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I’m pretty sure everyone knows they’re required to fund the state.

Sure, but it’s not really useful for me to think of them like that, because both in the game and in the country I live in, that’s not how the welfare state is funded- general revenue goes in, general expenditure goes out. They are in every sense taxes, and even regardless of how they are used, they have the same (extremely dodgy) incidence.

Admittedly in Australia, we do have a levy specifically for healthcare insurance, but it comes from income tax instead of payroll taxes.

If support stems from the sales pitch/superficial accounting stuff rather than what the tax does, it makes sense (I’m not going to pretend every person has a proper understanding of the policies they support)- but that’s only if the player is actually funding a welfare state with the money. Which definitely isn’t guaranteed. Socialists already like welfare policies- it seems like double counting to say they also like paying payroll taxes (regardless of what its funding).

There is something of an economic right/left divide between a leaner tax/welfare state and a broader one. The latter does tend to require higher and less progressive taxes simply because they’re required to raise the requisite level of revenue.

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its amazing the extent to which many people have no idea how tax/government spending works. Not that many people seem to understand marginal tax rates, for example, and often think someone ‘paying tax at the top rate’ pays that rate for all their income.
Obviously most democracy players are more are of this stuff, because its a self selecting group :smiley:


Here in Canada all payroll taxes, for pensions and unemployment are placed in special accounts that can’t or generally aren’t touched by government for general revenues. The UI account has been raided a couple times but that has not come without a great deal of controversy.

It would be cool to specify not just what taxes and policies are there, but also which taxes account for paying for which policies. That would make the game way more complicated though.

However, payroll tax as savings account for pensions does kinda make sense. Effectively that’s then just a reduction of current income in order to fund your income after work, and there can be interest on it, so if interest rates are fairly high but not insane, pensions could be quite decent, actually paying out more than what the payroll tax took away over the years.

Maybe one way to model that in the abstract would be a state savings policy?
It’d be two things:

  • How much tax money is put into a savings account (rather than going towards any policy)
  • How riskily is that saved money parked (just with interest, or is it also used for investments on the stock market etc. - high risk means you get pretty massive returns on investment, but you also risk massively negative events which could suddenly wipe out large chunks of the parked money, triggering some sort of crisis)

Having this policy in place could either directly boost your income, or it could reduce cost of some policies such as pensions. Not entirely sure where else this kind of thing would make sense.

The later would also affect what happens if you have reserves. Currently those just sit there without any benefit. There ought to be a benefit to Reserves.

Apparently LVT has no economic inefficiencies, so it is presumed to please everyone except the most hardcore of capitalists.