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Taxes are a powerful force. In this world, taxes are the only way alliances can physically impose policy on their members without expelling them. Alliances have the power, if they so choose, to seize all net income and all resource production from every member, forever. That is an incredible power, but of course alliances hardly ever use the vast power afforded to them. The question is what can we learn about alliances from taxes? I will argue that just about everything one needs to know about philosophy of an alliance can be gleamed from just two sources: what tax rates the alliance sets and how it uses the resources and money gained from these taxes. Let's start with the two most extreme cases. Consider a hypothetical alliance, let's call it the ABC Alliance. The ABC Alliance has no taxes at all. In this alliance, nations keep all of what they make and produce. There are a few important implications of this policy. For one, the alliance has no source of income outside of donations and thus will not have much in the way of reserves. It also means that the alliance trusts its members ... a lot, given that the alliance believes all its members will ensure they have resources and cash for war and rebuilding. If they don't, there is no net for them to fall back on, no aid will be arriving. This may seem like a terrible strategy, but actually while it's very extreme and would not likely be widely adopted, it could work well for neutral alliances. Neutral alliances would not experience the strain of war often, if ever, so there is not as much of a need to have alliance reserves. Those alliances would probably benefit from allowing their members to keep what they make, and if members do need aid, it could be arranged via members donating money or resources to one another. Of course, this scheme could easily lead to problems if the alliance's estimation of its members' competence is not entirely accurate and large-scale economic hardship, possibly brought by war, comes to claim another victim. Let's consider a second hypothetical alliance called the DEF Alliance. The DEF Alliance has maximum taxes, that is to say they charge a 100% cash rate and a 100% resource rate, seizing all net income and all production for the alliance. As you can probably tell, if the ABC Alliance is libertarian, the DEF Alliance is communist. In this world, it is actually possible for an alliance to be functionally communist, not just ideologically so. The DEF Alliance would use this large income to provide massive amounts of aid to its members. The effective tax rate (df. how much a given nation pays, proportional to its income, over a given period of time considering any income returned via aid and other such mechanisms where nothing is offered in exchange for said returned income) in this alliance is actually not very high at all for most nations as income is returned in the form of aid. If it wasn't, the alliance simply would not develop at all. The alliance simply controls the entire economy and centrally plans all development as it decides who will receive aid, when, for what, and how much. This could theoretically be more efficient if those making these decisions are better at doing so than individual members, but it is also likely to be inefficient. All income is essentially being put through several more steps before it gets spent and each time it does so there is the potential for inefficiencies. More steps before income is spent mean more chances for these inefficiencies to develop. In between the two extremes of ABC and DEF is the vast middle ground. The two hypothetical alliances described above are the two ends of a spectrum on which all alliances fall. It is likely that the distribution of alliances along this spectrum follows a bell curve skewed toward ABC; this is due to a combination of members' ability to vote with their feet and their likely desire not to pay very high taxes so as to be allowed to develop their nation how they see fit. Ultimately, every alliance reaches a compromise in which the members are satisfied they have what they want and the alliance is satisfied it has what it wants, this compromise largely defines where that alliance falls on the spectrum. In making this compromise, alliances are saying a lot about themselves. Higher taxes are associated with more centrally planned economies; the higher the tax rates, the more centrally planned an alliance's economy is; these alliances are likely to have a more collectivistic culture as all resources and incomes are turned over to society, in the form of the alliance, for the benefit of all. Lower taxes are associated with individualism over collectivism (everyone makes what they make, more or less, and does it with it as they so choose, largely regardless of how that affects others), less central planning and more nation-directed development. No point of the spectrum is the "correct" way to do things as at any given point, there is at least one way to make it work. Higher taxes mean lots of aid, at lower to mid tax levels loans are likely to be a more effective solution, and at very low levels individuals will have to save up for development on their own. In all three of these cases, the alliance can develop, doesn't mean it will, but it can, so no level precludes the possibility of development. What the levels, these points on the spectrum, do do is tell us what an alliance believes given how it conducts its affairs. Taxes are fundamental to who an alliance is.

A good post. Rose current has a 20% tax rate (which I think is considered high?), but we provide grants for cities 1 to 5, have a loan program etc. As a lefty myself, if I had full control of an alliance and had membership support, I would never go 100% due to the bureaucracy and the time required for a centrally planned economy. My personal leaning would be more around the 40-60% mark + a 75% resource tax, with full resource grants for all improvements and projects, grants for most cities, commerce grants etc. I'm pretty biased to reducing inequality in an alliance, which makes sense from a military standpoint as everyone is in the same tier and can cover each other. Indeed, taxes can tell us so much

A very well thought out and written blog post. Thanks for the good read.