Why Tariffs"
An examination of the effects of ad velorum taxes on imported goods
Social Unity Party of Rhydin Official
There has recently been a great deal of controversy surrounding the Social Unity Party of Rhydin's intent, upon election, to levy taxes on the import of goods from other nations. People are concerned about this. Will that make goods more expensive" Will people will lose their jobs" These questions are understandable; never in the history of Rhydin has such a plan been made. This pamphlet ought to answer your concerns about what exactly we are planning to do, what we hope it will accomplish, and what the consequences would be.
Q: What is an ad velorum tariff" A: An ad velorum tariff is a tax placed on imported goods. Everyone who brings a finished good from another nation and sells it to someone here - be it a bag of flour, an iron tool, or even an industrial machine like a cotton engine - will have to pay a tax of 8 percent of the cost of the product. For example, if somebody sells you 10 pounds of apples from Thalassia and you pay 25 silver crowns, he would have to give two of those silver crowns to the government.
Q: So if he's only getting 23 silvers for 25 silvers worth of stuff, why would he ever sell here" A: Because he would raise the price to 27 silvers, so as to keep the same amount of income from the sale.
Q: But nobody would buy his apples. I mean, an apple is an apple is an apple, and if 10 pounds of them usually costs 25 silvers but this foreigner's costs 27, why would he even come to do business here" A: Because everybody else's prices will increase, too - though not quite as much. Most likely by four or five percent.
Q: Wait a minute, wait a minute. So everything gets more expensive" How could this possibly be a good idea" A: There are two reasons, the long reason and the short reason. The short reason is simple - this is a way for the government to gain revenue without imposing a complicated income tax structure. It would be easy to understand and easy to enforce, and it would give the government the money that it needs to strengthen the Watch and improve the city's public education. It would also encourage industrial self-reliance, which is useful in case of international crises - if another nation gets in trouble, it won't affect us as much.
Q: Alright, fair enough. So what?s the long reason" A: The long reason has to do with something called the velocity of money. Imagine that you have 100 spare silver crowns. You go out and buy yourself, say, some new clothes. Now you've spent 100 crowns on something you wanted, and your tailor has the 100 crowns. He saves 10 of them and spends the rest on coffee. He's now richer in terms of real things by 90 crowns, and the coffee seller is 90 crowns richer. He saves 10 percent of that, and spends the other 81 crowns. The next person spends 73, and then 66, and then 60, and then 54, and so on. By the time the last person doesn't even have a whole silver crown, there have been 45 transactions, with a total value of 992 silver crowns. Think about it! All that money has been generated by the first expenditure.
Q: Well, that's cool, but what does that have to do with tariffs" A: By raising the price of foreign goods, we increase the demand for native goods. If any of those 45 people had spent their money on a foreign good, then the profits of that sale would have vanished out of the system, and all that money would be rattling around far away from our community - and the chance that you or anybody you know would get a piece of it is slim to nil.
Q: So how specifically are you justifying putting up tariffs" A: A tax on foreign goods will lead to their prices increasing. This will increase the demand for native goods, since their prices will be lower than competing foreign goods. This will mean higher sales and thus higher profits for local producers and business owners, which means that local workers will have room to negotiate higher wages. Higher wages means more money to spend on goods - and while prices will go up, income will increase faster due to the increased capital in the system. The math checks out. This all means that the growth rate of the economy will increase. And the money which is spent on foreign goods will partially flow into the hands of the government, which can then spend it on things like salaries, facilities, and equipment for the Watch, construction of roads and bridges, and the entire apparatus of public education - which, again, is better for everyone.
Q: Who wouldn't benefit from the tariffs" A: Importers of foreign goods won't benefit, for obvious reasons. Other than that, literally everybody here would benefit due to the increased flow of capital. Not only will Rhydin be a much more attractive market for its own goods, but we will be able to do increased business as a vendor to foreign nations, this increasing our mutual wealth even more.
So now you know! Now that you see what tariffs will do for our society, it's time to make the decision - is this really something Rhydin can afford to miss out on?
Remember: Only Anastas Iskandorj and the SUPR will protect local businesses, ensure the growth of local capital, and improve public welfare!
Only they will make sure that tomorrow belongs to everybody!
There has recently been a great deal of controversy surrounding the Social Unity Party of Rhydin's intent, upon election, to levy taxes on the import of goods from other nations. People are concerned about this. Will that make goods more expensive" Will people will lose their jobs" These questions are understandable; never in the history of Rhydin has such a plan been made. This pamphlet ought to answer your concerns about what exactly we are planning to do, what we hope it will accomplish, and what the consequences would be.
Q: What is an ad velorum tariff" A: An ad velorum tariff is a tax placed on imported goods. Everyone who brings a finished good from another nation and sells it to someone here - be it a bag of flour, an iron tool, or even an industrial machine like a cotton engine - will have to pay a tax of 8 percent of the cost of the product. For example, if somebody sells you 10 pounds of apples from Thalassia and you pay 25 silver crowns, he would have to give two of those silver crowns to the government.
Q: So if he's only getting 23 silvers for 25 silvers worth of stuff, why would he ever sell here" A: Because he would raise the price to 27 silvers, so as to keep the same amount of income from the sale.
Q: But nobody would buy his apples. I mean, an apple is an apple is an apple, and if 10 pounds of them usually costs 25 silvers but this foreigner's costs 27, why would he even come to do business here" A: Because everybody else's prices will increase, too - though not quite as much. Most likely by four or five percent.
Q: Wait a minute, wait a minute. So everything gets more expensive" How could this possibly be a good idea" A: There are two reasons, the long reason and the short reason. The short reason is simple - this is a way for the government to gain revenue without imposing a complicated income tax structure. It would be easy to understand and easy to enforce, and it would give the government the money that it needs to strengthen the Watch and improve the city's public education. It would also encourage industrial self-reliance, which is useful in case of international crises - if another nation gets in trouble, it won't affect us as much.
Q: Alright, fair enough. So what?s the long reason" A: The long reason has to do with something called the velocity of money. Imagine that you have 100 spare silver crowns. You go out and buy yourself, say, some new clothes. Now you've spent 100 crowns on something you wanted, and your tailor has the 100 crowns. He saves 10 of them and spends the rest on coffee. He's now richer in terms of real things by 90 crowns, and the coffee seller is 90 crowns richer. He saves 10 percent of that, and spends the other 81 crowns. The next person spends 73, and then 66, and then 60, and then 54, and so on. By the time the last person doesn't even have a whole silver crown, there have been 45 transactions, with a total value of 992 silver crowns. Think about it! All that money has been generated by the first expenditure.
Q: Well, that's cool, but what does that have to do with tariffs" A: By raising the price of foreign goods, we increase the demand for native goods. If any of those 45 people had spent their money on a foreign good, then the profits of that sale would have vanished out of the system, and all that money would be rattling around far away from our community - and the chance that you or anybody you know would get a piece of it is slim to nil.
Q: So how specifically are you justifying putting up tariffs" A: A tax on foreign goods will lead to their prices increasing. This will increase the demand for native goods, since their prices will be lower than competing foreign goods. This will mean higher sales and thus higher profits for local producers and business owners, which means that local workers will have room to negotiate higher wages. Higher wages means more money to spend on goods - and while prices will go up, income will increase faster due to the increased capital in the system. The math checks out. This all means that the growth rate of the economy will increase. And the money which is spent on foreign goods will partially flow into the hands of the government, which can then spend it on things like salaries, facilities, and equipment for the Watch, construction of roads and bridges, and the entire apparatus of public education - which, again, is better for everyone.
Q: Who wouldn't benefit from the tariffs" A: Importers of foreign goods won't benefit, for obvious reasons. Other than that, literally everybody here would benefit due to the increased flow of capital. Not only will Rhydin be a much more attractive market for its own goods, but we will be able to do increased business as a vendor to foreign nations, this increasing our mutual wealth even more.
So now you know! Now that you see what tariffs will do for our society, it's time to make the decision - is this really something Rhydin can afford to miss out on?
Remember: Only Anastas Iskandorj and the SUPR will protect local businesses, ensure the growth of local capital, and improve public welfare!
Only they will make sure that tomorrow belongs to everybody!