The Joys of Taxes

[Psycho_Teddy 25]

I'd like to share something that I think a lot of people have been missing and instead blaming on "poor code from MC".  Taxes are a crucial part of CXL much moreso than SC4.  It's not like you can just leave the taxes at default and cruise on through, you need to adjust this accordingly.  This dynamic, when taken into consideration, has given me a lot more respect for the game in spite of it's many flaws.

RULES OF TAXATION:

1.) Do not talk about taxation.

2.) Do not talk about taxation.

But seriously...

1.) More Does Not Equal More: A small bump of 1 or 2% may help, but overtime this will eventually wear at your citizens' nerves.  Businesses will shut down, people will leave en masse. 

2.) Losing Money?  Lose MORE!: Oftentimes when your city's funds have the GPS co-ordinates set to the seventh circle of hades your gut reaction is to crank up those taxes.  Afterall, if the people want to play, they've got to pay, right?  Wrong.  In fact, the best option is to lower taxes to spur growth.  Perhaps the best part of this game is the fact that tax revenue is not directly correllated to population, there are other factors at stake.  Businesses do not always pay taxes based on their very existence, profitability is a large factor.  You'll notice that the lower a business's profitability is, the fewer taxes they pay.  So, not only will your population expand, but your existing businesses will reap more profit and pay more taxes.  What in-turn happens is a huge spike in revenue, albeit not immediately.

I hope this helps and can eliminate some of those "THIS GAIM SUXORZ CUZ MAH HOTELZ WONT GROW" posts that seem to be oozing out of every corner of this forum.

[Abc987 3]

Thanks for shoving some sense into Simtropolis members' faces!

Much appreciated! =)

[Psycho_Teddy 25]

Thanks. I think there is a lot of erroneous finger pointing going on that's exacerbated by the fact that there is a lot of criticism going on in opposition to this game. Yes, there are flaws. Yes, some of them are quite substantial. However, I'd like to invite everyone to keep these things in mind when considering an angry post about another "bug" that you've found:

1.) Could this problem be caused by a gameplay mechanic that I haven't investigated yet?

2.) Have I exhausted all of my troubleshooting knowledge regarding drivers, Vista/7 compatibility/etc to solve this problem on my own?

What's going on is a lot of what happens in most major high schools in America today. One kid doesn't like a band for a valid reason. People listen to dissenting kid. People starting hating band as well because it's the cool thing to do even though they secretly have the entire discography of Coldplay on their iPod. [i love Coldplay btw]. Confused, angry mob blames band for World War III. It's a snowball effect that I feel needs to be put into check.

[Psycho_Teddy 25]

What I would like to see happen with this thread is this:

1.) More people test this theory

2.) Report your results here

3.) Sticky?

I think this is a very important thing that people are missing mostly because it's not very well explained in the tuts, etc.

[0wn3d 2]

Originally posted by: Psycho_Teddy

What I would like to see happen with this thread is this:

1.) More people test this theory

2.) Report your results here

3.) Sticky?

I think this is a very important thing that people are missing mostly because it's not very well explained in the tuts, etc.quote>

Well its simply an economic rule.  I forgot what its called, but basically there is a point where you would make the most tax revenue, and increasing or decreasing taxes at the point will decrease revenu.  Decreaing taxes would decrease your revenue in the obvious way, and increasing them would cause people to have less money to spend so you wouldn't be able to tax sales and that kind of stuff as much.  So yes, taxing more isn't always better, but for a short term thing it can help keep you out of the red for just a little while you can make some more plots for things to develop and then lower taxes and hope your back in the black

[Psycho_Teddy 25]

Yeah, I knew that there was some rule to this but I can't remember for the life of me what it's called. [EDIT: Law of diminishing marginal utility!]  However, it's not something that was as prominent an issue in SC4 and I think a lot of us are stuck in that mindset.  Maybe I didn't make the main point here as important as it should be, that being:

In SC4, businesses paid taxes only based on population, as did residents and industry.  In CXL, they take into account the performance of that business (profit) when calculating taxes due.  So, in SC4, if you bumped taxes too much and business left, it was a slow return to grace, as the only revenue boost you'd get from lowering taxes again was from reclaiming the deserters.  What I'm saying here is that it's a quicker payoff in that lowering taxes in CXL will:

A.) Repopulate vacant business. (return to original tax revenue)

B.) Make struggling business more profitable (return to original tax revenue)

C.) Spur growth of new business (grow tax revenue beyond original rate)

D.) Make new business more profitable. (grow tax revenue beyond original rate)

In SC4, the only advantages were:

A.) Repopulate vacant business (return to original revenue)

B.) Spur growth of new business (grow tax revenue beyond original)

So, you see here that there are (at least) two additional benefits over SC4 in decreasing tax revenue, so the bounceback is more pronounced and beneficial.  Leaving the high taxes the same in CXL will not only stifle growth and vacate factories, any new businesses that come into town will not pay as much tax as a healthy, happy business would under a lower tax rate.  In SC4, new businesses that arose in spite of the tax hike would pay a decided rate (ie - this office will pay out $10 for every 1% in taxes), but in CXL it's more dynamic.  CXL says, you pay 20% of what you make based on your surroundings and environment.  SC4 says you pay $x if you can survive the tax rate and don't vacate. 

I can only best explain it this way:

A business in SC4 has 140 employees and pays a tax of $100 at 10% of their income ($1000/month).  This is a fixed rate that does not change, even if they lose employees, can't find resources, etc.  So long as they're in business, the city makes $100 off of them every month. 

A business in CXL has 140 employees and pays a tax of $100 at 10% of their income ($1000/turn) under ideal conditions.  If the company cannot find enough qualified workers (let's say 120 employees are now at the company), fuel, hotels, etc, they may not necessarily close, but they'll experience a decrease in profit and only have to pay the government $75 because their income has decreased to $750 per turn.

So, not only has the city lost $100 per month for every company that has vacated, but the ones that were able to survive are running less efficient and costing the city even more money.  Let's say a different office of the same type as mentioned in the CXL example closes in addition to the problems that the first office is experiencing (due to a tax hike).  In SC4, the city would have lost only $100 since only one office closed, but in CXL, the city is losing $125 because one business closed and another is losing money.

I hope this isn't too confusing and makes sense, I tried to explain it as well as I could.

[jap88 0]

Originally posted by: 0wn3d

Well its simply an economic rule.  I forgot what its called, but basically there is a point where you would make the most tax revenue, and increasing or decreasing taxes at the point will decrease revenu.  Decreaing taxes would decrease your revenue in the obvious way, and increasing them would cause people to have less money to spend so you wouldn't be able to tax sales and that kind of stuff as much.  So yes, taxing more isn't always better, but for a short term thing it can help keep you out of the red for just a little while you can make some more plots for things to develop and then lower taxes and hope your back in the black

quote>

As someone going for a minor in Economics, I feel I have to say something here.

There are many theories regarding an optimal point of taxation (the most basic one being The Laffer Curve, which shows an inverted parabola).  In practice, it is much more difficult to ac tually estimate where that point is.  (In the real world, progressive taxes changes everything and allows for even better optimization, but games use a flat tax.) 

Now, the idea would appear to work if all you really have is office space, high-tech industry, shops, and hotels.  None of them seem to operate maximally at most points.  However, if you have a city that is reasonably heavy on industry, especially manufacturing, it may not make sense to lower taxes at all.  As far as I've seen, manufacturing and heavy industry still function at 100% at the preset corporate tax rate of 25%.

In fact, if we talk about real life, lowering taxes only creates profitability in that they retain more of their original profit.  The only way in which they will generate more revenue for the government in terms of taxes is if they expand their revenue base.  But I don't quite see how they would do that in CXL.  Of course, I don't suspect MC would understand that idea either.

[masochist 111]

Hahaha...I'd listen to Psycho_Teddy. I have to...he's my next-door neighbor .

And I've seen his city. Whatever he does, it works.

[SimBurger 0]

Originally posted by: Psycho_Teddy

What I would like to see happen with this thread is this:

3.) Sticky?quote>

Please no.   There's already 52,327 stickies in this forum.  Way too many already. 

Besides, your post contains one simple concept.  Lower taxes to stimulate growth.   Doesn't need an entire sticky thread dedicated to it.   Could probably even fit well in a list of other common sense tips.

SimBurger

[Psycho_Teddy 25]

Originally posted by: jap88

Originally posted by: 0wn3d

Well its simply an economic rule.  I forgot what its called, but basically there is a point where you would make the most tax revenue, and increasing or decreasing taxes at the point will decrease revenu.  Decreaing taxes would decrease your revenue in the obvious way, and increasing them would cause people to have less money to spend so you wouldn't be able to tax sales and that kind of stuff as much.  So yes, taxing more isn't always better, but for a short term thing it can help keep you out of the red for just a little while you can make some more plots for things to develop and then lower taxes and hope your back in the black

quote>

As someone going for a minor in Economics, I feel I have to say something here.

There are many theories regarding an optimal point of taxation (the most basic one being The Laffer Curve, which shows an inverted parabola).  In practice, it is much more difficult to ac tually estimate where that point is.  (In the real world, progressive taxes changes everything and allows for even better optimization, but games use a flat tax.) 

Now, the idea would appear to work if all you really have is office space, high-tech industry, shops, and hotels.  None of them seem to operate maximally at most points.  However, if you have a city that is reasonably heavy on industry, especially manufacturing, it may not make sense to lower taxes at all.  As far as I've seen, manufacturing and heavy industry still function at 100% at the preset corporate tax rate of 25%.

In fact, if we talk about real life, lowering taxes only creates profitability in that they retain more of their original profit.  The only way in which they will generate more revenue for the government in terms of taxes is if they expand their revenue base.  But I don't quite see how they would do that in CXL.  Of course, I don't suspect MC would understand that idea either.

quote>

I totally understand where you're coming from.  And the input is much appreciated. 

I think you're right, MC may not have incorporated actual economic principles on their drawing board, but I think that their approach is definitely a step in the right direction.  My article is stricly focused on the game mechanics at hand, however.  This engine is not at all an accurate representation of real-world economics, because you're right about this idea failing in the real world.  I'm just basing my arguments on observations from what I've seen in-game.  This isn't just speculation and hypothesizing.  Everytime I'm in a pinch I cringe, turn down the tax meter, and things get better.  It makes logical sense on paper, I guess but then again so do a lot of things.  Thank you very much for the insight though.

Masochist wrote:

Hahaha...I'd listen to Psycho_Teddy. I have to...he's my next-door neighbor .

And I've seen his city. Whatever he does, it works.

quote>

Haha thank you!  I'll have to have a stroll around your town after this post is done. :-P  Another great feature of this game that's taken for granted!

[Psycho_Teddy 25]

Originally posted by: SimBurger

Originally posted by: Psycho_Teddy

What I would like to see happen with this thread is this:

3.) Sticky?quote>

Please no.   There's already 52,327 stickies in this forum.  Way too many already. 

Besides, your post contains one simple concept.  Lower taxes to stimulate growth.   Doesn't need an entire sticky thread dedicated to it.   Could probably even fit well in a list of other common sense tips.

SimBurgerquote>

You're totally right, this would be better suited as a blurb in the common sense tips thingy.

[PyroMancer 0]

Originally posted by: jap88

In fact, if we talk about real life, lowering taxes only creates profitability in that they retain more of their original profit.  The only way in which they will generate more revenue for the government in terms of taxes is if they expand their revenue base.  But I don't quite see how they would do that in CXL.  Of course, I don't suspect MC would understand that idea either.

quote>

Actually your wrong about this. Taxes do effect the profitability of businesses beyond simply how much they take at a 1 to 1 ratio like you suggest. You said you were currently minoring in Econ so not sure if you've gotten this far.

The economic concept of Monetary Viscosity effects how health the economy is. What this has to do with is how quickly money "turns over" in an economy. And quiet simply it goes like this. You buy something for $100 so now that person/company had $100 dollar. They then maybe put $10 in savings, $10 in taxes, and spend the remaining $80. Now this new person/company has $80 and they put $8 in savings, $8 in taxes, and spend the remaining $64. This cycle continues until at last you reach the end of a predetermined period, say a year.

So in the end that original $100 dollars generated $244 dollars worth of economic activity just from it's first 3 cycles. This principle is very important to tourist towns as it's how a few visitors help generate large amounts of business and growth far beyond what they actually pay out.

Well in RL since companies automatically take withholdings for taxes that means that is money you don't have for the rest of the year to help generate further economic activity for the rest of the year. But also since the effect is cumulative the larger the tax the more is pulled out of the economy at each cycle thus further hindering growth at an ever increasing rate.

Of course in most econ classes they simply use spending and saving in their examples to not over complicate it for new econ students. And they talk about how the savings rate lowers how much activity the original amount generates but this applies to taxes as well as the % people set aside for savings. And back when Japan had it's econ crisis several years ago they traced the problem in part to the savings rate. As most Japanese has rather large sums of money in their accounts even though times were tough and work was hard to find. Their were of course other issues but it was a contributing factor.

Anyhow I've drifted off topic a little. The reason this Monetary Viscosity effects how profitable the business is comes from the fact that more economic activity is generated. So the business has a better chance to earn more money. The problem I think a lot of people have with econ is they see it like a giant pie. In that if someone has more I have less, and that for someone else to gain say $1 more then someone else must loss/giveup $1.

But this is not really the case as by it's very nature the principle of Monetary Viscosity shows us the economy is a very fluid thing and depending on how fast things flow through the system along with how much is taken out at each point we can actually increase and decrease the size of that imaginary "pie". Thus it is actually possible to make it so everybody wins/gains which some people find as very hard to understand and grasp.

[Kredit 0]

I've skipped most of the Economy 101 above and would like to reply to the OP

Yes, indeed, taxes are very important. Especially if businesses are at the edge of protitability, a bit too much tax will drive them bankrupt, whereas a bit less tax might just be the little boost they need, which means they start making a good profit, so you get more tax (15% of 1000 is a lot more than 17% of 100 (or even 0)).

This is actually one of the things I like about this game. It's not just X of this and Y of that need Z of that and Thingy should be at n%... it seems to all be interdependent, which means it can be a puzzle to figure out what's wrong, but it's a good puzzle.

Still have a few things happening that I can't place atm, which I'm trying to work out. Offices and Hotels seem to randomly drop to 37% satisfaction, bad reputation because of bankruptcy problems. And a bit later, while nothing's changed, they are fine again...

High-tech is also weird, they tend to go bankrupt even when all seems to be fine (all resource needs met, good traffic flow, no polution, enough workers, no overproduction...), but I'm starting to think they're just like elites: Buggers to please

[Psycho_Teddy 25]

Originally posted by: Kredit

I've skipped most of the Economy 101 above and would like to reply to the OP

Yes, indeed, taxes are very important. Especially if businesses are at the edge of protitability, a bit too much tax will drive them bankrupt, whereas a bit less tax might just be the little boost they need, which means they start making a good profit, so you get more tax (15% of 1000 is a lot more than 17% of 100 (or even 0)).

This is actually one of the things I like about this game. It's not just X of this and Y of that need Z of that and Thingy should be at n%... it seems to all be interdependent, which means it can be a puzzle to figure out what's wrong, but it's a good puzzle.

Still have a few things happening that I can't place atm, which I'm trying to work out. Offices and Hotels seem to randomly drop to 37% satisfaction, bad reputation because of bankruptcy problems. And a bit later, while nothing's changed, they are fine again...

High-tech is also weird, they tend to go bankrupt even when all seems to be fine (all resource needs met, good traffic flow, no polution, enough workers, no overproduction...), but I'm starting to think they're just like elites: Buggers to please quote>

Yes, and I am by no means giving my stamp of perfection for this game.  Their are some major flaws with regards to satisfaction levels in the higher wealth levels.  This is something that needs to be addressed immediately if MC expects to maintain any sort of client base with PO.  I have my laundry list too but most will find that it's a lot shorter than most other's because I've taken the time to analyze the problems I've come across and have realized that some of the "problems" I was running across were due to gameplay mechanics that I hadn't foreseen, particularly with respect to business development and abandonment issues.  Using this strategy I've made a relatively successful city "Gander Valley" on Prospero, and have been able to enjoy the game for what it is now.  If you want to take a look at it, feel free.  My layout is a bit weird but It's working.

As for the economics, I appreciate the input but I think the discussion is going beyond the scope of this thread.  Please try to stay on topic with regards to the game itself.  Thanks guys.

[EDIT]: I moved an industrial district in Gander Valley and my entire economy collapsed.  Poor planning on my part.  had to scrap it.  lol

[jap88 0]

Originally posted by: PyroMancer

Originally posted by: jap88

In fact, if we talk about real life, lowering taxes only creates profitability in that they retain more of their original profit.  The only way in which they will generate more revenue for the government in terms of taxes is if they expand their revenue base.  But I don't quite see how they would do that in CXL.  Of course, I don't suspect MC would understand that idea either.

quote>

Actually your wrong about this. Taxes do effect the profitability of businesses beyond simply how much they take at a 1 to 1 ratio like you suggest. You said you were currently minoring in Econ so not sure if you've gotten this far.

The economic concept of Monetary Viscosity effects how health the economy is. What this has to do with is how quickly money "turns over" in an economy. And quiet simply it goes like this. You buy something for $100 so now that person/company had $100 dollar. They then maybe put $10 in savings, $10 in taxes, and spend the remaining $80. Now this new person/company has $80 and they put $8 in savings, $8 in taxes, and spend the remaining $64. This cycle continues until at last you reach the end of a predetermined period, say a year.

So in the end that original $100 dollars generated $244 dollars worth of economic activity just from it's first 3 cycles. This principle is very important to tourist towns as it's how a few visitors help generate large amounts of business and growth far beyond what they actually pay out.

Well in RL since companies automatically take withholdings for taxes that means that is money you don't have for the rest of the year to help generate further economic activity for the rest of the year. But also since the effect is cumulative the larger the tax the more is pulled out of the economy at each cycle thus further hindering growth at an ever increasing rate.

Of course in most econ classes they simply use spending and saving in their examples to not over complicate it for new econ students. And they talk about how the savings rate lowers how much activity the original amount generates but this applies to taxes as well as the % people set aside for savings. And back when Japan had it's econ crisis several years ago they traced the problem in part to the savings rate. As most Japanese has rather large sums of money in their accounts even though times were tough and work was hard to find. Their were of course other issues but it was a contributing factor.

Anyhow I've drifted off topic a little. The reason this Monetary Viscosity effects how profitable the business is comes from the fact that more economic activity is generated. So the business has a better chance to earn more money. The problem I think a lot of people have with econ is they see it like a giant pie. In that if someone has more I have less, and that for someone else to gain say $1 more then someone else must loss/giveup $1.

But this is not really the case as by it's very nature the principle of Monetary Viscosity shows us the economy is a very fluid thing and depending on how fast things flow through the system along with how much is taken out at each point we can actually increase and decrease the size of that imaginary "pie". Thus it is actually possible to make it so everybody wins/gains which some people find as very hard to understand and grasp.

quote>

Yes, I skipped over that for two reasons.

One, it gets confusing.  But two, and more important to the conversation here, is that business within game have a maximum profitability based on what type they are (manufacturing, offices, etc.) that is is impossible for them to surpass. (Perhaps they modeled MR=MC, eh?)  Even though there is higher viscosity, if all your business are limited in profitability by the program AND are unable to expand their business, you're only going to see so much effect. 

And, as I said earlier, if you have other businesses that are 100% profitable at a higher tax rate, and pull in much more money than offices do, you may be better off leaving the tax rate as is.

High-tech is also weird, they tend to go bankrupt even when all seems to be fine (all resource needs met, good traffic flow, no polution, enough workers, no overproduction...), but I'm starting to think they're just like elites: Buggers to pleasequote>

High-tech is a bit of a bugger to please.  You have to bring down your tax rate quite significantly in order to make them 100%  profitable.

Also, I tried lowering my taxes a bit.  It seemed to work fine for High-tech and offices and increased their profitability.  But it wasn't enough to make up for my loss from manufacturing.  I could try an office-only city, but then I'd have to import high-tech and all my industry...*sigh*

[gadge75 0]

I'm not currently on a machine where I can check this, but there are 2 sliders for taxes, correct? So we're talking about reducing the taxes on citizens while leaving industry taxes alone thus allowing the population to spend more within said industry and increasing their profitability thus dropping more cash into our pockets, yes? We're not talking a wholesale reduction in both tax categories, (I'm assuming)

[Palpatine001 57]

Yay teddy for a breath of fresh air into how the game really works

Taxation from the 5 days Ive played Cities XL is just one of the many things you now have to deal with in your city.

This game is no longer just city building, this is city building and MANAGING on a quite quite intensive level.

From experience (and a bit of academic know how) Teddy's bit on tax is right for the game at least.

HEY TEDDY, want to work together on putting a simple guide on playing XL and PO mode?

[Psycho_Teddy 25]

Originally posted by: Palpatine001

Yay teddy for a breath of fresh air into how the game really works

Taxation from the 5 days Ive played Cities XL is just one of the many things you now have to deal with in your city.

This game is no longer just city building, this is city building and MANAGING on a quite quite intensive level.

From experience (and a bit of academic know how) Teddy's bit on tax is right for the game at least.

HEY TEDDY, want to work together on putting a simple guide on playing XL and PO mode?quote>

Yes!  I would love to collaborate with someone on a PO guide!  I will start a thread somewhere to get this project started.  Maybe it can go in the Omnibus when complete.

Originally posted by: gadge75

I'm not currently on a machine where I can check this, but there are 2 sliders for taxes, correct? So we're talking about reducing the taxes on citizens while leaving industry taxes alone thus allowing the population to spend more within said industry and increasing their profitability thus dropping more cash into our pockets, yes? We're not talking a wholesale reduction in both tax categories, (I'm assuming)

quote>

Well it works on either front, really, but it's best to spread tax reductions out as you said, "wholesale".  If you don't adjust both in co-ordination with one another (say, you lower biz tax 5% but leave res tax where it was), you can run into a situation where business re-populates and grows, but your residents don't return, leaving vacant jobs all over the place, reducing businesses' profitability, making them fail all over again.  It is possible to compensate for this just by zoning more residential areas, but it can become very messy very quickly.  I guess it would be a rule of thumb to keep both tax levels within 5% of each other to avoid catastrophe.

[Palpatine001 57]

Teddy start a private thread and you and I can work on it

[JanYpe 17]

Originally posted by: swat-medic

i have read this thread.quote>

So have I, and it deserves a ducky: ^(tax-free)

And as interesting as the discussion is, let's try to limit this thread to the in-game taxes . 

[Psycho_Teddy 25]

Originally posted by: Palpatine001

Teddy start a private thread and you and I can work on it quote>

I seem to be unable to find a way to start one.  Any way you could do it?