Sunday, February 27, 2011

How to Tax Effectively


ChicagoWiz has a great post up about taxation. I think one of the problems we have in RPGs as a whole with respect to the taxation issue is the assumption that free trade is the best outcome. The problem with free trade is that it assumes a lot of things that don't exist. As a result, the theory only works partially and things get awry without some controls. I don't want to really get into an economics debate, let me just say that I have a degree in International Economics and you are going to have a rough road arguing against me. So here is the challenge, you can debate the economics of it with me if you can point to a single great power that became great through free trade. What you will find is that when they were becoming great powers, they were mercantilists. Once they got up to the great power level, suddenly free trade became a great idea. Think about what that little quirk of history has to say about the virtues of free trade and get back to me.

Anyway, my point is that we go into an RPG with the free trade assumption. Thus players think that they should not be excessively taxed for trading in goods and services. Furthermore, we go in with the "invisible taxation" assumption that occurs when the tax is already calculated in the cost of goods and in your paycheck. If you had to pay your sales or income taxes all at once, instead of piecemeal throughout the year, you can bet that your view of taxation would change a wee bit. Further, a large percentage of us are Americans and thus looking through the rosy colored glasses of being a nation founded by tax dodgers.

There is a lot of complaining in ChicagoWiz's comments that illustrate my point. People don't like paying taxes, especially taxes on stuff they "found".

How do we deal with this without insisting people change their behavior?

For starters, try to make the taxation unavoidable. Do not tax things that can be dodged. Sales tax is a great example of that which cannot be avoided. The merchant MUST charge the sales tax. The customer MUST pay it. There is no way to get around it, apart from basically using force against the merchant. So every time an adventurer goes to buy something, charge "the King's fifth" or something. The sword might cost 25 gold pieces, but the merchant needs to collect 30 gold pieces from you to pay the King his due.

Choose things that adventurers need, but most people don't. Levy excise taxes on these goods. The King needs another 20% on weapons for example. That sword is now getting up to 35 gold in price. Charge tolls to use public goods like bridges, roads, gates, etc. Charge a tax to enjoy the marketplace within the peace of the town walls and with the security of the King's guards to make sure you are treated fairly. Shouldn't you help pay for the walls and soldiers that keep the marketplace safe? Ding! Another tax!

Any time the party passes a political boundary, charge them a tariff on anything they are carrying in bulk (ex. the 20 short swords they collected off the fallen undead). Of course, tax any property that they end up buying or receiving. Tax any currency conversions. Demand military service from the PCs unless they pay Scutage. Have the church lean on them for Tithes. Maybe outsource it so that you are sending tax farmers after them, rather than the King's men. This creates an extra layer of moral complexity.

As you can see, there are a lot more options than the gate guard saying "hey, you need to pay a tax on that". When you are designing a location as a GM, you should be putting thought into how the ruler is paying for everything. Avoid modern concepts like income taxes and VAT. Those are not appropriate for a medieval time period. Focus on taxes like those I outlined above. Try to come up with a system that will take about 30% of their income back out of the system. That is a fairly light burden by real world standards, but they will probably still complain.

Just remind them, render unto Caesar..... you know the rest!

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