National Tax Rate

The National Tax Rate is the rate at which a nation's government collects money from economic output.

Tax Effects
Tax rate and economic output are inversely proportional in a city. Increasing the tax rate decreases the incentives of citizens to produce economic output. The result is that government revenue is a Laffer curve dependent on the tax rate, all else held constant.

Maximizing Economic Output
To maximize economic output, the ideal tax rate is 0%. When economic agents receive 100% of the benefits from participating in economic activity, they produce the most economic output. However, because the tax rate is 0%, the government does not earn any revenue.

Optimal Tax Rate
In general, a nation will want to set the tax rate so that the government earns as much revenue as possible. This intermediate rate is given by the formula:"Tax Rate = (1/4) * Productivity"For a given productivity level in a city. When setting a national tax rate for cities of varying productivity levels, the amount of economic output in each city must be taken into consideration, with a weighted average of output taken into consideration to determine the optimal national tax rate.