Taxes and the Economy

Being in lockdown, with little to do and bored with updating my wiki – I took a shower.  Did you know that showers are one of the best places for thinking, ever?  My campaign system incorporates taxes – and I had a rough idea of how they, and the economy, worked – but by the time I came out of the shower, I had it all sussed out.  Now I need to write it down before I forget.

There are only three different taxes – and they are very straight forward.

Ordinary Taxes

Ordinary Taxes are the main taxes that everyone pays, it goes to the Council or Lord who ‘owns’ the settlement and is used to help expand and maintain the settlement.  It is based on the economic value of the main businesses in the settlement and is currently set at 20% of the economy.  However, it doesn’t come directly from the settlements businesses – but to understand that, you need to understand the three tier economy.

Primary Economy

The Primary Economy consists of the main businesses in town that are run by the PCs or significant NPCs.  If it contributes Economy, Loyalty, Stability, Defence or Magic Items  – it is a main business and part of the primary economy.

Example:  An inn contributes +3Economy and +1Loyalty to a settlement,  and is always part of the primary economy.  It directly employs waiting staff, bar staff, cooks, housekeeping staff, stable staff etc.  It rents rooms, sells food and drink and may have other facilities (such as meeting rooms) as well.  But it hardly pays any taxes – directly.

Secondary Economy

The secondary economy represents those businesses that directly service the Primary Economy.  It is generally run by the middle classes and less important NPCs, and includes craftsmen, professionals and the moderately wealthy.  There are many more people involved in the Secondary Economy that there are in the primary economy.

Example:  the Hotel buys meat from a butcher, veg from the market, crockery from the potter, beer from the brewery, wine from the wine merchant …  The inn needs cutlery, pots, pans, bed linen, laundry services and many other items.  The Commoners need somewhere to live, so the Secondary Economy includes tenements and other rented facilities owned by, and providing an income for, the minor aristocrats and lesser NPCs of the town.  All those members of the Secondary Economy have to pay taxes and fees, and they pass those costs on to the Primary economy, as part of the cost of doing the job.

Tertiary Economy

This consist of the commoners who supply the Secondary Economy.  The brewery needs barley and grains, the butcher needs animals, and the market needs eggs and vegetables.  Somewhere along the line someone has supplied metal to a smith or tinker, material to a seamstress and carried wine to the wine-merchant.  It consists of farm labourers, porters, teamsters, cleaners, spinners, weavers, woodcutters, quarrymen, apprentices, servants – and all sorts of other low skilled commoners. And there are more people involved in the Tertiary Economy than in the Secondary.  These guys all have to pay taxes and fees as well – and these get passed on as well. 

The Effect

The economy is like an iceberg – you only ever see the top 10%,  but there is much more going on underneath.  So while ‘Ordinary Tax’ is based on the economic value of the businesses in a settlement, the money doesn’t actually come from the business itself – it comes from all the people who are involved in the business or servicing it via the Secondary or Tertiary economies.

Nor does it come in the form of income or corporation tax – those are much too difficult to police.  Instead, there are fees for using the market, property taxes, fees for passing through the gates – every one finishes up paying bits of tax, according to their station. However, those costs finish up reflected in the prices that the Inn above charge. 

It is important to remember that these taxes are assessed in BPs – which are an indeterminate mix of cash, goods and services.  So some commoners might pay in labour (sweeping streets, painting bridges, carting refuse).  Some members of the middle classes might pay in a goods or services – a supply of torches, or perhaps pens, ink or maybe even paper or a signwriter might ‘refresh’ some of the town’s signs each year.  There are many options – including coins. 

Simple Tax

This is the tax that is paid to the overlord to help grow and maintain the region / province, country or empire.  Rather than being a set percentage, Henry of Midmarch collects Road Tax – this comes in the shape of road tolls and settlement income raised from goods entering or leaving a settlement.  To keep it simple, Henry collects all the income generated by Roads or Highways within the Campaign System Rules.  He does not claim the income generated by canals.

However, a different game could use a different way of collecting this tax.

Development Tax

A Development Tax, is a fee paid when you are granted permission to build or develop something. 

Settlements of all sorts are required to keep Economy, Loyalty and Stability in balance, if they don’t bad things start to happen in their town.  Investors and business-folks are mainly interested in developments with an Economic benefit for them.  To balance that, the council has to add points of Loyalty and Stability to their town – they can either do this out of their tax money, or they can ask the investor for a contribution towards expenses. 

In Midmarch this has settled at roughly 0.5bp per every point of unbalanced economy –  the town has to find another 0.5bp from its own resources to keep the balance.  This is a discretionary tax – it is normally lower for ‘friends’ and higher for ‘strangers’.   Religious building don’t add to the Economy but do add Loyalty and Stability – so they are often encouraged, tax-free, to help balance economic developments. 

It happens on a provincial level too.  Henry of Midmarch claims the right to charge a fee every time someone wants to settle a hex.  He has a sliding scale of fees for his followers – first hex free, next six hexes taxed at 1bp per hex, 2bp per hex beyond that.  It is higher for strangers.  The right to settle at Tazleford was bought by an elf, who paid for it in a heady mix of gems, jewellery and magic items.  That was three or four times the cost that Henry would have charged one of his favourites.   Indeed, he has been known to give hexes away free to people who have done him a service.

Extra taxes

I have described a full tax system here – however a monarch can charge whatever taxes they think are appropriate.  In England / Britain we have had taxes on the number and size of windows, taxes to fund ship building, or special taxes to support an army.  Not to mention import and export duties on all sorts of items – at one point merchants had to pay a tax to be able to export wool that had been produced in England.

As a DM, you should be prepared to throw in strange taxes if it suits you.  As a player, you should expect them …

Posted in House Rules, World Building.

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