The real problem with Victoria 3's economy is taxes

[Don_Quigleone]

A lot of threads have been going around talking about how construction is overpowered, or that the exponential growth curve is too steep. Many solutions are tossed around, usually around weakening construction sectors. I think this is getting the culprit wrong. The real culprit is taxes.

It's not difficult to raise taxes on ~30%+ of national income, this is highly historically inaccurate and furthermore for much of this period states simply lacked the technology or bureaucracy to collect these kinds of taxes, and even today such tax levels are only seen in social democracies. Ingame you can tax at 30%, but most countries only levied 5-10%. This is why growth rates are so massive. Instead, if you want to grow your economy, you should have to rely on your investment pool far more.

I think a system with the following qualities would be more appropriate:
1. Decouple taxes from each other. You should be able to levy different rates on different types of income independent of each other.
2. Choosing to levy a tax should impact your taxation capacity. It should be harder to tax income or dividends then land, consumption or poll taxes. Tariffs should be free and low bureaucracy countries should rely on them.
3. Changing tax rates should require a special law of some kind to pass (perhaps much faster then a standard law procedure). It should be very hard to reach really high tax rates if you're not a socialist state. Make it easier in certain situations (eg a war). Different IGs should support/oppose different taxes. Intelligentsia support all taxes, Rural folk oppose poll and land tax, Industrialists oppose dividend taxes but support poll taxes etc.
4. Allow some other ways to raise revenue, for example government monopolies (Russia had a government monopoly on alcohol, China on Salt), this would allow you to place certain industries under government shares long before you get access to planned economy. Perhaps it would require authority (like consumption tax).

By making it harder to collect large amounts of tax, it would be much more difficult for players to grow their economy exponentially.

 

[durbal]

A lot of threads have been going around talking about how construction is overpowered, or that the exponential growth curve is too steep. Many solutions are tossed around, usually around weakening construction sectors. I think this is getting the culprit wrong. The real culprit is taxes.

It's not difficult to raise taxes on ~30%+ of national income, this is highly historically inaccurate and furthermore for much of this period states simply lacked the technology or bureaucracy to collect these kinds of taxes, and even today such tax levels are only seen in social democracies. Ingame you can tax at 30%, but most countries only levied 5-10%. This is why growth rates are so massive. Instead, if you want to grow your economy, you should have to rely on your investment pool far more.

I think a system with the following qualities would be more appropriate:
1. Decouple taxes from each other. You should be able to levy different rates on different types of income independent of each other.
2. Choosing to levy a tax should impact your taxation capacity. It should be harder to tax income or dividends then land, consumption or poll taxes. Tariffs should be free and low bureaucracy countries should rely on them.
3. Changing tax rates should require a special law of some kind to pass (perhaps much faster then a standard law procedure). It should be very hard to reach really high tax rates if you're not a socialist state. Make it easier in certain situations (eg a war). Different IGs should support/oppose different taxes. Intelligentsia support all taxes, Rural folk oppose poll and land tax, Industrialists oppose dividend taxes but support poll taxes etc.
4. Allow some other ways to raise revenue, for example government monopolies (Russia had a government monopoly on alcohol, China on Salt), this would allow you to place certain industries under government shares long before you get access to planned economy. Perhaps it would require authority (like consumption tax).

By making it harder to collect large amounts of tax, it would be much more difficult for players to grow their economy exponentially.

I agree, but this essentially just means players will instead just dump everything into construction centers so that private investors can build faster. The problem remains the same: construction sectors are the only bottleneck to growth. And they make no sense and are dumby dumb.

 

[Don_Quigleone]

I agree, but this essentially just means players will instead just dump everything into construction centers so that private investors can build faster. The problem remains the same: construction sectors are the only bottleneck to growth. And they make no sense and are dumby dumb.

Not true. The investment pool can only be so big. Further, what can the investment pool be spent on other than construction? Of course you'll increase construction sectors to match your investment pool. Currently, however, most of the construction you build comes out of your own taxes. If it was more restricted to the investment pool, the growth curve would be much shallower, and economies therefore significantly smaller.

 

[shoebird]

This would have been a good idea before the investment pool was automated. Making the investment pool the main founder of growth, after leaving the player out of it and not given any new tools to influence the investment pool, doesn’t sound good to me. It will mean that the economic gameplay, which is one of the main parts of the game is taken out of the hands of the player. Going down that route is repeating Vic2 mistakes with some economic policies, but here is worse as we are not talking about policies coming and going with different governments, but well cemented economic laws.

 

[yurcick]

I don't really think that in-game economy grows too fast. After some essential industrial revolution techs are achieved (like steam power for mining), the growth of 3% per year (that's exponential growth of 1822% per 100 years) doesn't strike me as particularly unrealistic.
However, the taxation rate is indeed a problem, and leads to the fact that after early game the player spends in construction 95% of the active time (if we define active time as the time when player does anything at all, except idly watching). This stems from the fact that player gets tons of money from the economy and has to spend it somewhere, and there are not many other ways to spend it.

So yeah,
1) make effective taxation 3-10 times lower for non-totalitarian countries
2) make the construction industry take up a 2-5 times lower share of the economy (5%, not 25%). Raise its productivity, because the current growth speed seems adequate despite inflated costs
3) make the player-led construction share smaller, like 10% for LF, 30% for most economic types (smaller if other uses for construction are implemented, like city expansion or routine renovation for all industries)
4) add something else for the player to do

The last part sounds quite vague, but there were tons of suggestions on this forum, some of which weren't that hard to implement. My personal desire is proper housing-as-an-obstacle-to-industrialization mechanics, but any other would do too.

 

[durbal]

Not true. The investment pool can only be so big. Further, what can the investment pool be spent on other than construction? Of course you'll increase construction sectors to match your investment pool. Currently, however, most of the construction you build comes out of your own taxes. If it was more restricted to the investment pool, the growth curve would be much shallower, and economies therefore significantly smaller.

How would the construction meta change? Instead of spending state money on construction and other buildings you'd instead just spend it on construction only since pops will have more cash and use it on investment. It's not very different from how high taxes now aren't a great idea once your economy is rolling.

 

[Don_Quigleone]

How would the construction meta change? Instead of spending state money on construction and other buildings you'd instead just spend it on construction only since pops will have more cash and use it on investment. It's not very different from how high taxes now aren't a great idea once your economy is rolling.

Construction is always going to be the main thing you spend money on. It's inherent to the design. You can only spend money on 4 things:
1. Bureaucrats, depends on the institution, whether bureaucrats are worth it.
2. Military wages and goods. This depends on the geopolitical situation is. Right now you can underspend here, as the AI doesn't use strong enough armies. I expect as the AI is improved players will be forced to spend more here.
3. Welfare: obviously as a player you try to avoid this.
4. Construction: what's used to grow the economy.

What players are complaining about is the growth curve being too steep, and blame it on construction being "too good". There are too ways to flatten the growth curve, 1 is for construction to be less effective (easiest way is to just make buildings more expensive), or make money more scarce forcing the player into tougher choices when allocating funds. If taxes are harder to raise, you will have to put proportionally much more into bureaucrats and military making it very difficult to put resources towards growing the economy.

If you can raise 30% of national income as tax, and put all of that towards construction, of course that's going to attach rockets to your economic growth. That should be a natural outcome. Economies that could do that historically tended to experience rapid economic growth (like wartime economies during and after the world wars). To keep growth from running away, they should be in situations where most of their taxes are paying for bureaucrats and military.

 

[durbal]

Construction is always going to be the main thing you spend money on. It's inherent to the design. You can only spend money on 4 things:
1. Bureaucrats, depends on the institution, whether bureaucrats are worth it.
2. Military wages and goods. This depends on the geopolitical situation is. Right now you can underspend here, as the AI doesn't use strong enough armies. I expect as the AI is improved players will be forced to spend more here.
3. Welfare: obviously as a player you try to avoid this.
4. Construction: what's used to grow the economy.

What players are complaining about is the growth curve being too steep, and blame it on construction being "too good". There are too ways to flatten the growth curve, 1 is for construction to be less effective (easiest way is to just make buildings more expensive), or make money more scarce forcing the player into tougher choices when allocating funds. If taxes are harder to raise, you will have to put proportionally much more into bureaucrats and military making it very difficult to put resources towards growing the economy.

If you can raise 30% of national income as tax, and put all of that towards construction, of course that's going to attach rockets to your economic growth. That should be a natural outcome. Economies that could do that historically tended to experience rapid economic growth (like wartime economies during and after the world wars). To keep growth from running away, they should be in situations where most of their taxes are paying for bureaucrats and military.

A lot of reasons countries didn't industrialize/modernize were not because of a lack of money. Think about that.

 

[Tolomeidb2]

A lot of threads have been going around talking about how construction is overpowered, or that the exponential growth curve is too steep. Many solutions are tossed around, usually around weakening construction sectors. I think this is getting the culprit wrong. The real culprit is taxes.

It's not difficult to raise taxes on ~30%+ of national income, this is highly historically inaccurate and furthermore for much of this period states simply lacked the technology or bureaucracy to collect these kinds of taxes, and even today such tax levels are only seen in social democracies. Ingame you can tax at 30%, but most countries only levied 5-10%. This is why growth rates are so massive. Instead, if you want to grow your economy, you should have to rely on your investment pool far more.

I think a system with the following qualities would be more appropriate:
1. Decouple taxes from each other. You should be able to levy different rates on different types of income independent of each other.
2. Choosing to levy a tax should impact your taxation capacity. It should be harder to tax income or dividends then land, consumption or poll taxes. Tariffs should be free and low bureaucracy countries should rely on them.
3. Changing tax rates should require a special law of some kind to pass (perhaps much faster then a standard law procedure). It should be very hard to reach really high tax rates if you're not a socialist state. Make it easier in certain situations (eg a war). Different IGs should support/oppose different taxes. Intelligentsia support all taxes, Rural folk oppose poll and land tax, Industrialists oppose dividend taxes but support poll taxes etc.
4. Allow some other ways to raise revenue, for example government monopolies (Russia had a government monopoly on alcohol, China on Salt), this would allow you to place certain industries under government shares long before you get access to planned economy. Perhaps it would require authority (like consumption tax).

By making it harder to collect large amounts of tax, it would be much more difficult for players to grow their economy exponentially.

As a big fan of laissez faire ingame, I can tell you that the exponential growth doesn't need much state input mid and late game. The economy just grows exponentially by itself once you have achieved the right conditions.

Great ideas otherwise imho, but i don't see them changing the exponential growth issue.

 

[Znikii]

The problem you are talking about could also be solved from other direction imo. Cut the minting (icrease money sinks could work as well, but might be to frustrating and unfun) and impelemnt recession. I have no bloody idea how to do recession/economic downturn tho.... anyone got any ideas?

 

[jmlongue]

The problem you are talking about could also be solved from other direction imo. Cut the minting (icrease money sinks could work as well, but might be to frustrating and unfun) and impelemnt recession. I have no bloody idea how to do recession/economic downturn tho.... anyone got any ideas?

"Organic" recessions need 2 things - banking and/or pop sentiment, both of which are currently unmodelled.

To have banks and financial crises would fill a big realism gap in the game but I can see why they haven't done it yet, it's a lot of added complexity and especially since a big part of financial crises is uncertainty and imperfect information, modelling that in a game where the player is an all-knowing God that can steer things along is... tricky.

Modelling recessions via a pop sentiment system might be the easier way to go. Have a "bullishness" variable attached to each pop that should be highly contagious. Pops spending should vary with how bullish they feel about the economy (this prob also needs a pop savings system). Capitalists stop investing when they're not feeling bullish. So if a recession scare starts spreading through the economy, investments dry up, pop spending falls across the board, industries start going in the red and firing people as the domestic demand for their goods dries up, and thus we initiate the recessionary spiral.

But then again, under a competent player it's unlikely to have 1930s style recessions. Look at the 2008 fiasco vs the rapid Covid recovery to see how much a different government response to a recessionary pressure can change the outcome.

 

[Sbrubbles]

Modelling recessions via a pop sentiment system might be the easier way to go. Have a "bullishness" variable attached to each pop that should be highly contagious. Pops spending should vary with how bullish they feel about the economy (this prob also needs a pop savings system). Capitalists stop investing when they're not feeling bullish. So if a recession scare starts spreading through the economy, investments dry up, pop spending falls across the board, industries start going in the red and firing people as the domestic demand for their goods dries up, and thus we initiate the recessionary spiral.

"Pop spending falls across the board" would require there be some sort of "savings" mechanic. As it stands, if capitalists stop investing (which I interpret as "lower % of their profits go to investment pool"), these funds would just be redirected towards goods. A lot of industries would actually benefit from this, but most importantly, the industry that would suffer the most from lack of investment (construction industry) is state-owned, so it doesn't matter.

 

[SacremPyrobolum]

Yeah, always felt weird how you could just change taxation levels at a whim while your actual method of taxation had to be passed as a law.

 

[Znikii]

"Pop spending falls across the board" would require there be some sort of "savings" mechanic. As it stands, if capitalists stop investing (which I interpret as "lower % of their profits go to investment pool"), these funds would just be redirected towards goods. A lot of industries would actually benefit from this, but most importantly, the industry that would suffer the most from lack of investment (construction industry) is state-owned, so it doesn't matter.

That's a fine start. I would also during the crisis slap some modifiers on:
1) values of wants/consumption priorities the pops have (e.g. during crisis pops would be less willing to buy luxury items and more likely to buy more staple goods&intoxicants).
2) -x% on government&military wages depending on severity/duration of the crisis
3) faster wage decreases and slower wage increases
4) faster pop demotion and slower pop promotion
5) lower trade route competitiveness
6) factories laying off workers sooner
7) faster goods price fluctuations & penalties for shortages would ramp up quicker
8) faster and sooner pop support for radical political parties (stronger communist & fascist enfranchisement)

All this could be done via Journal entries. For example (all obviously numbers are up to balance) every nation would have 1% chance per year of triggering an Economic recession. Prolonged wars, enemy occupation, low government legitimacy, high turmoil in incorporated states, high minting from goldmines would all, a high number of embargoes, and loss of big trade partner,... would all increase the yearly likelihood of triggering the event.
When the event triggers the recession would start. The base, default duration of the crisis would be 5 years. During which you would get at random different events where you could choose between different options for how you handle the crisis. Action taken in those events could influence the duration of the whole crisis, the severity of some or all of the modifiers listed above or have some other effects (eg. decrease the duration of the crisis for the cost of higher government spending or increasing the severity of negative modifiers mentioned; shortening the duration of the crisis alongside buff toward minting&private investment efficiency at the cost of high malues toward certain IG opinions; shortening the duration of crisis at the cost of authority/beurocracy/influence; etc etc etc)....

 

[Blackpony]

I just find it weird how easy actual taxing stuff is in the simulation. It's like everyone readily hands over money to the burocrats. This is true for many games, but V3 is the most in depth simulation.
Some governments are even today very much struggling with tax evasion and radicals due to taxes (in game terms).
Early Prussia for example was able to challenge bigger countries, due to superior taxation system (not the type of tax, the collection/Realisation of taxes).
Just spamming more burocrats and tax more things might be part of taxation, but its not everything.
Creating "taxation efficency" and tie it close to sth like authority, legitimacy and loyalists/ radicals would go a long way and reduce tax income to historic levels.
Try to tax someone very rich and ideological opposed with an illegimate government should just not work.

 

[shoebird]

Creating "taxation efficency" and tie it close to sth like authority, legitimacy and loyalists/ radicals would go a long way and reduce tax income to historic levels.

Doesn’t turmoil reduce taxation already? Regarding authority, it is tied to taxes through consumption taxes. Making taxes more dependent on taxation would be strange, as you have less authority as you enact more modern laws, while taxation should increases as you modernize.

 

[Znikii]

Doesn’t turmoil reduce taxation already? Regarding authority, it is tied to taxes through consumption taxes. Making taxes more dependent on taxation would be strange, as you have less authority as you enact more modern laws, while taxation should increases as you modernize.

Maybe an easy solution: Only members of powerful IG that are also unhappy get a slightly reduced tax burden.
Also leaders (either military or political) with certain traits could further modify the effectiveness of taxation of their respective groups (e.g. Bandit: -2% tax efficiency, Loyal: +2%,...).

 

[Blackpony]

Doesn’t turmoil reduce taxation already?

Turmoil produces tax waste, simulating tax collectors running into (open) violence and not being able to collect taxes. Thats why police can reduce turmoil and tax collectors can stay safe. In my opinion this is different from people evading taxes in peacefull times, but it indeed is hitting the same nail in a way.

Regarding authority, it is tied to taxes through consumption taxes

Consumption tax represents the state enforcing their share on buying certain goods, because people do not want to do it otherwise.
It is the the one tax model thats kind of realistic and its one of the worst (lawwise) ingame.
Two questions come to mind:
Why does a state need authority to get taxes from pops buying certain goods, but not for all the types of taxation, especially the big ones, hard hitting powerful and influential pops ?
In many modern countries consumption taxes are a thing. Why is it working in modern, non autocratic societies ?

Both Questions indicate that some form of force, power or potential civil contract is needed, besides the pure ability to just get the tax money home to the capitol.

Having a system to simulate a certain type of tax realisation via brute force (military dictatorship), loyality/patriotism or social
obligation has the potential to better simulate historical taxation, give incentives to shape the society and country accordingly and most important make the taxed pops actually matter.

For example: Per capita tax was often combined with voting lists in early democratic states. People basically paid for their ability to actively vote. It was partly motivated by getting money, partly by discriminating poor pops.

 

[shoebird]

Why does a state need authority to get taxes from pops buying certain goods, but not for all the types of taxation, especially the big ones, hard hitting powerful and influential pops ?

That’s a good question. Gameplay I guess. Authority is a strange capacity.

In many modern countries consumption taxes are a thing. Why is it working in modern, non autocratic societies ?

The same reason why taxes work in any society. I don’t think that the problem with taxes historically was the lack of power by the state or a social contract. It came from the inability to know what should be taxes. For instance taxing goods crossing a border or bridge was always easy, because you saw the goods directly. But how do you tax income? Today is “easy”, because people put their money in banks and are fixed salaries and computers. But in the past was not so easy. That’s something that Vic2 simulated with this taxation efficiency being tied also to technologies, and Vic3 tries to simulate with more advanced tax laws.

Having a system to simulate a certain type of tax realisation via brute force (military dictatorship), loyality/patriotism or social
obligation has the potential to better simulate historical taxation, give incentives to shape the society and country accordingly and most important make the taxed pops actually matter.

I don’t think dictatorships have an easier time getting money from taxes that democratic governments. Also don’t think loyalty/patriotism is a factor for that. Rooms full of bureaucrats or computers, and good data is what matters.

For example: Per capita tax was often combined with voting lists in early democratic states. People basically paid for their ability to actively vote. It was partly motivated by getting money, partly by discriminating poor pops.

That is another way to know what to tax. Having people declaring what they earn (or a minimum amount of money) so they can get something in return.

Edit. The last sentence wasn’t finished.

 

[Don_Quigleone]

I think one thing that's interesting in game is that, historically, the easiest taxes to collect were consumption taxes, state monopolies and tariffs. Tariffs remain easy to collect (though the rate in game is quite low). State monopolies don't exist in game, while consumption taxes are actually one of the hardest taxes to collect, as it requires authority. Meanwhile, if you can pass the law, dividend taxation is perfectly simple to collect, whereas at all periods in history it has been among the hardest (as it's essentially the game's stand in for wealth taxes).

It should be the case that players are forced to depend on the cruder forms of taxation (like consumption and tariffs) for much of the game.