Taxes, the Imperium, and You!

[JupiterIndustries]

I haven’t read the entire thread yet, so I may be repeating some earlier points, but I’ve given this topic some thought in the past and here’s my take.

In an economy backed by fiat-currency, the value of money is based primarily on the stability and authority of the issuing state rather than on any physical commodity. As long as the Imperium remains intact, Imperial Credits can continue to function as a universal medium of exchange. However, they are not redeemable for gold, silver, fancy baubles, etc. The value of credits rests solely on the continued existence and legitimacy of the Imperium. From the issuer’s perspective, fiat currency is effectively “worthless” in the sense that the state can create it at will and is not constrained by supply in the same way private users are.

Taxes in such a system are not about “paying for” state activity and are instead about regulating the money supply. Since the state can always issue more currency, its true financial power lies in controlling fiscal and monetary policy. Taxes are key because they create supplier side demand for the currency which creates a mandate on those using it, not because the government needs it to pay for things.

If the government significantly increases currency issuance without corresponding increases in taxation or other stabilizing measures, inflation results: because there is more money circulating without a matching increase in goods and services, leading to higher prices due to increased demand for the same supply.

However, the scale of the economy matters. A vast interstellar economy like the Imperium has can absorb much greater spending before experiencing severe inflationary pressure compared to a planetary super power. This enormous economic capacity is what allows the Imperium to undertake massive megaprojects without the destabilizing effects of hyperinflation.

Another key factor is that since the Imperium generally does not manage local planetary economies; its concern is primarily interstellar infrastructure, trade routes, and security. Local economic fluctuations only become relevant when they threaten interstellar trade. This allows the Imperium to focus its fiscal power on maintaining and expanding interstellar trade networks, which obviously rebalances the economic budget in favour of a military industrial complex that can continue to sustain such an economy.

The Imperium also has the leverage that this creates to levy taxes or duties on specific regions or trade activities to help balance the system. Again, these taxes do not “fund” specific projects (since we don't pay for things with tax directly); they simply serve as a tool to regulate currency circulation and maintain economic stability, nothing more.

 

[JupiterIndustries]

I should note as well, this doesn't factor in unscrupulous tax collectors and local nobility (or the financial/economic equivalent of funny ore in hills causing problems). One of the major threats is obviously people taking too much out of local and regional monetary supply and damaging the economy severely, but that is one of the dangers of such a feudalistic system. There are obviously controls that could be put in place from an overarching standpoint that could maintain financial stability, but the nature of communication limitations in Charted Space would obviously cause issues in enforcing this.

 

[JupiterIndustries]

We are the Imperium, we do not exert any control over your world at all. All of our influence ends at the Starport fence.

It just so happens that we are blocking all soybeans from crossing that border for the next eight months. It has nothing to do with you refusing to garrison Imperial Marines in the city. Far from it. There is simply no way to thoroughly inspect all of those shipments in time before they spoil. I am sure you understand.

"The Pact of Misenum was a treaty to end the naval blockade of the Italian Peninsula during the war between the Second Triumvirate and Sextus Pompey. Signed in 39 BC, the triumvirs allowed Sextus Pompeius to retain his control of Sicily and Sardinia and also granted him control of Corsica and the Peloponnese. They also promised him a future augurate and consulship for 33 BC. In exchange, Pompeius agreed to end his blockade of Italy, supply Rome with grain and halt his piracy."

Pact of Misenum - Wikipedia

en.wikipedia.org

 

[Condottiere]

Blockading the grain supplies from the colonies to the city of Rome, was an existential crisis, considering their Late Republic and Imperial welfare programmes.

It's a weakness of Mediterraneanization, much, as I suspect, was the Late Bronze Age collapse.

 

[actionman]

the Late Bronze Age collapse.

+1 for using Late Bronze Age Collapse in a sentence!

 

[actionman]

I should note as well, this doesn't factor in unscrupulous tax collectors and local nobility (or the financial/economic equivalent of funny ore in hills causing problems). One of the major threats is obviously people taking too much out of local and regional monetary supply and damaging the economy severely, but that is one of the dangers of such a feudalistic system. There are obviously controls that could be put in place from an overarching standpoint that could maintain financial stability, but the nature of communication limitations in Charted Space would obviously cause issues in enforcing this.

Thoughts:

Since the Imperium is an absolute monarchy, it would be fully within the Emperor's power to do something drastic, like command a special tax on all nobles of a certain rank, or fiefholders, or megacorporations, or on anyone else causing a problem. It would go something along the lines of the appropriate Imperial ministries advising the Emperor that particular people or organizations were hoarding Imperial credits to the point where it's causing a problem, and then the Emperor and his advisors crafting a decree that would levy a tax on these people or organizations. Imperial emissaries would talk to the individuals involved or whoever and tell them something like "the Emperor has chosen you to provide a most luxurious gift to Princess Iphigenia for her birthday. As the Crown Princess of the Imperium, previous honorees have provided gifts of not less than such and such value. It is a great honor, bestowed only upon the most deserving." Depending on how the ref runs his TU, Princess Iphigenia might say, "Thanks, Dad!" or the money might be deposited in the Princess' Trust and used for various projects (enabling the Imperial government to transfer funds allocated to those projects to whatever it wants).

Or, it could be something like giving a fief to someone else, or even simply requiring the presence of a noble and the entirety of his household to present themselves at his court in person. Travel and lodging expenses would force them to spend money, and the Emperor could order them to go home and come back, go home and come back, until the offending noble is impoverished.

Fiat currency doesn't have to create the problems we see irl. Currency backed by commodities prevents the problems because governments can't create the commodities on a whim, but fiat currency managed competently can serve well.

Imperial law may stipulate that all Imperial taxes, fees, fines, levies, tariffs, and so on must be paid in Imperial Credits, creating demand. No paying your taxes in local planetary scrip, anola skins, Vargr scrimshaw rounds, or slam poetry performances.

I doubt Imperial Credits are interest bearing notes, and I suspect the Imperium probably has a treasury rather than a central bank.

I wonder what the Imperium's stance on usury is. It might allow usury when lending to non-Imperial entities as an economic weapon, but deny it within the Imperium to prevent hoarding Imperial Credits to the point where it creates a problem.

 

[JupiterIndustries]

It would go something along the lines of the appropriate Imperial ministries advising the Emperor that particular people or organizations were hoarding Imperial credits to the point where it's causing a problem

Yep. Again, something with Roman parallels:

Sulla's proscription - Wikipedia

en.wikipedia.org

 

[MarcusIII]

In an economy backed by fiat-currency, the value of money is based primarily on the stability and authority of the issuing state rather than on any physical commodity.

No, it's value is based primarily by the currency being able to be used to buy stuff almost anywhere and the regulation of the currency so that it is issued to match production therefore not causing inflation or deflation.

 

[JupiterIndustries]

No, it's value is based primarily by the currency being able to be used to buy stuff almost anywhere and the regulation of the currency so that it is issued to match production therefore not causing inflation or deflation.

That view is too simplistic. If you offer someone a paid off ship, they would have their own "value" of what that might be worth that might not involve credits. What of other interstellar states with their own currencies? Ubiquity by itself means little.

Also, how does the Imperium regulate the currency? Taxation. At the end of the day, no matter where it is, if at the end of the day there is a money sink in some form, then that is achieving part of the end goal that is being sought here by extracting excess money from the economy.

In a hypothetical situation where the Imperium no longer exists (rebellion era?), how much is an Imperial credit worth when the issuer of the currency no longer exists to back it?

Even with such a central authority, the inherent limitations of interstellar comms mean that what you're stating in terms of managing production is next to impossible over reasonable timeframes

In any case, you cannot regulate something with no centralised authority, whether that be a absolute monarch (as posited by @actionman) or a central bank. Such a situation becomes what cryptocurrency is now, something backed by itself with no central regulating authority.

Of course, this can function, but you're more likely to see a reversion to barter rather than usage of the currency since the fluctuations in how the currency will be valued locally will vary widely between different areas of use, or people will switch to alternative currencies from neighbouring or new powers to fill the gap.

Indeed, it is more likely to expect that powers adopt a new currency in continuity with the old to maintain stability, but the manner in which those continuing powers would regulate the currency will vary based on local economic circumstances and ideological necessity. They will still be backing it though, so just being able to use such a thing to buy things with provides no value in itself, the taxes those new powers would demand for using it would.

 

[Condottiere]

1. ALL DEBTS, PUBLIC AND PRIVATE

2. Though, mostly public.

3. You know, taxation with representation.

 

[MarcusIII]

That view is too simplistic.

No it isn't. Taxation isn't how currency issuance is regulated. You are light years off the mark from how currency is handled. If you study the issuance of US currency from 1800 to present in EXTREME detail you will discover how it is done both correctly and incorrectly.

 

[phavoc]

That view is too simplistic. If you offer someone a paid off ship, they would have their own "value" of what that might be worth that might not involve credits. What of other interstellar states with their own currencies? Ubiquity by itself means little.

Also, how does the Imperium regulate the currency? Taxation. At the end of the day, no matter where it is, if at the end of the day there is a money sink in some form, then that is achieving part of the end goal that is being sought here by extracting excess money from the economy.

In a hypothetical situation where the Imperium no longer exists (rebellion era?), how much is an Imperial credit worth when the issuer of the currency no longer exists to back it?

Even with such a central authority, the inherent limitations of interstellar comms mean that what you're stating in terms of managing production is next to impossible over reasonable timeframes

In any case, you cannot regulate something with no centralised authority, whether that be a absolute monarch (as posited by @actionman) or a central bank. Such a situation becomes what cryptocurrency is now, something backed by itself with no central regulating authority.

Of course, this can function, but you're more likely to see a reversion to barter rather than usage of the currency since the fluctuations in how the currency will be valued locally will vary widely between different areas of use, or people will switch to alternative currencies from neighbouring or new powers to fill the gap.

Indeed, it is more likely to expect that powers adopt a new currency in continuity with the old to maintain stability, but the manner in which those continuing powers would regulate the currency will vary based on local economic circumstances and ideological necessity. They will still be backing it though, so just being able to use such a thing to buy things with provides no value in itself, the taxes those new powers would demand for using it would.

I think the closest historical comparison would be either the British Empire, or the Spanish empire - the early sail-only versions of these. The reasons is that time is a factor in economic ripples. Something the size of the Imperium where it takes about a year for news to travel quickly from one end to another is something we do not factor into economic modeling. For well over a century information has traveled quickly around the world - basically since the invention of the telegraph. That information has to be factored into an economy that is built upon business and is potentially subject to great rises/falling due to panic trading and greed.

I don't think the Imperial economic model has been adequately explained or defined at a level that would permit a reasonable fact(ish) based discussion. Trade tariffs and port fees don't seem to be enough to pay for the many things that the Imperium is stated it pays for. So there have to be additional sources of revenue coming in - but we have very little data on how these revenues are apportioned across the Imperium. Some of the models provided in the books that discuss how many credits would be available for local defense (and force levels) don't necessarily jive with common sense and what we already understand of economics (both past and present) already implemented at one point or another by humans somewhere.

The pure size of the Imperium and the fact that some sectors are far wealthier than others means that inflationary pressure is different, and that a centralized bank is next to impossible other than imposing relative guidelines for each sector to follow. The US Fed is somewhat comparable, though they are able to meet regularly and make decisions in real time. The current Chinese local governments/federal government would be somewhat similar to the Imperium in that localities have a great responsibility for many things - including raising revenue where taxation isn't one of their main sources.

Feudal economies aren't, I think, terribly helpful as all currency was literal - meaning you had the gold in hand that you collected via taxes or else borrowed, and then the local governing structure spent it. Referencing Spain we see inflationary pressure coming from vast inputs of actual currency as a result of gold, silver and other treasures being brought back from the new world. Modern industrialized societies have all abandoned the gold standard since societies have found it easier to deal with the economy by having a faith-based backing of a nations currency. This has its' own set of issues, however it does appear to be superior to the gold standard (i.e. where you could turn in your paper currency for actual gold/silver). Once an economy grows to a certain size it generally becomes impossible to provide that sort of thing. Using a bucket of other commodities has a fundamental flaw - if the supply/demand of these changes then the bucket is either empty or overflowing, which really screws up things if you are basing your economy on it.

I'd think an entity the size of the Imperium, with all it's complexities and such, would ultimately have to be some sort of mish-mash of a feudal system combined with a federal one. The central government can only set policies at the Imperial level. Sectors would take that and add to it, and also potentially work with their neighboring sectors, and then subsectors would take that and build upon it for their local systems. Finally system governments take all of that and either ignore it or use some/parts of it. Since worlds are nominally indepenent you get more of what the US was like with its early states acting as a confederation before the federal model was implmented. Central governments have their flaws, but they also have their strengths.

TL;DR - crap, who knows?

 

[JupiterIndustries]

No it isn't. Taxation isn't how currency issuance is regulated. You are light years off the mark from how currency is handled. If you study the issuance of US currency from 1800 to present in EXTREME detail you will discover how it is done both correctly and incorrectly.

I am not saying taxation governs currency issuance, I am saying it governs the currency in circulation.

Again, in a hypothetical situation where the US did not exist anymore, who would use dollars? See Fallout as an example. As soon as any polity develops enough of a power base to start issuance of its own currency people gravitate towards that. (NCR Dollars)

Also, talking about currency issuance at a time when it was goods backed (the gold standard) is a completely different discussion.

If you want to enlighten us as to why my assessment is wrong then fine, I am willing to be shown the error of my ways, but I don't see the argument you are making.

 

[Condottiere]

What's the point of an empire?

Filling a (power) vacuum.

 

[actionman]

representation

Bwahahahahahahahahhaaaa!