National Budget

Each country maintains a federal budget that tracks revenue, spending, debt, and surplus. The budget updates continuously as corporations earn profits, players pay taxes, and legislation creates new spending obligations. Understanding the budget is essential for economic policymaking.

Revenue Sources

The federal budget collects revenue from several streams:

Domestic vs. foreign corporate tax: A US-headquartered corporation operating a sector in Germany pays Germany's foreign corporate tax rate on those profits. A German-headquartered corporation operating in Germany pays Germany's domestic rate. Both rates are set independently by legislation in each country.

Tax revenue scales with the tax base — the actual economic activity being taxed. Higher GDP, more corporate profits, and rising wages all expand the tax base, generating more revenue even at the same rates.

Spending Categories

Budget spending includes:

• By category: Discretionary spending buckets defined by enacted legislation
• State grants: Federal transfers to states
• Debt interest: Annual coupon payments on all outstanding sovereign bonds

Legislation that passes as law with a budget cost adds a permanent ongoing expenditure. The budget panel displays all active enacted laws with their cost models (₳X per person, Y% of GDP, etc.).

Surplus and Deficit

Spending already includes debt interest, so it is not subtracted again. A positive surplus improves the national financial position over time. A negative surplus (deficit) means the government is spending more than it earns.

The debt-to-GDP ratio is the key solvency metric:

A sovereign credit rating from AAA to B reflects this ratio and affects borrowing costs:

National Debt

The debt structure tracks:

• Principal: Total outstanding sovereign bond debt
• Interest rate: Weighted average coupon on all active bonds
• Debt ceiling: Set by legislation; raising it requires a bill

When the country runs a deficit, it issues sovereign bonds each quarter to cover the gap (see Sovereign Bonds for the mechanics). High debt has economic consequences for corporations:

The Fiscal Year

The game runs on a 48-turn year (1 turn = 1 game week). The fiscal year processing occurs at turn 40 (October) and captures an annual budget snapshot:

• Revenue, spending, tax rates, and debt are frozen into a historical record
• The snapshot is used for year-over-year comparisons in the budget panel
• Fiscal year snapshots include all enacted laws active at that moment
• Tax bases grow annually based on economic factors (GDP growth, wage growth, trade growth)
• Corporate profit tax bases grow faster than wages (GDP + 1% capital returns premium)

Debt Ceiling Crisis (US Only)

When total sovereign debt principal exceeds the statutory debt ceiling, a crisis is triggered at fiscal year close. The crisis state is set to active but there is no automatic resolution path currently wired — it must be resolved by legislative action to raise the ceiling or eliminate the underlying deficit.

The crisis flag does not independently block sovereign bond issuance or apply additional penalties beyond those already imposed by the credit rating tiers. The real economic consequences of high debt — corporate margin penalties and public-trust penalties — are driven by the debt-to-GDP ratio and apply automatically every fiscal year, regardless of whether the statutory ceiling has been breached.

IMF Bailout Austerity

When a country is under an IMF sovereign bailout (imfSovereignBailoutActive: true), an automatic austerity cap applies during fiscal year processing. If spending exceeds revenue, all spending categories — including discretionary outlays, state grants, and debt interest — are scaled down proportionally to match revenue. The surplus is forced to zero (no deficit allowed while under IMF supervision).

State Budgets

Every state has its own budget alongside the federal budget. State revenue sources:

• State income tax
• State sales tax
• State domestic and foreign corporate tax
• Property tax
• Federal grants

State grants flow from the federal budget to state budgets each fiscal year. In the US, formula-grant programs (Medicaid, Highway Trust Fund, Education Block Grants, SNAP) are calculated and distributed automatically at fiscal year close. In the UK and Japan, regional grants are recalculated every turn through enacted legislation.

Each state budget also tracks an accumulated balance — the running total of surplus/deficit over time — which grows or shrinks with each fiscal year.

How Policy Affects the Budget

Bills that pass into law create permanent budget entries:

• Tax rate bills change the percentage collected on each revenue category, adjusting total revenue immediately
• Spending bills add to the ongoing expenditure, reducing surplus
• Subsidy bills create +15% corporate margin bonuses but add to spending
• Tariff bills generate tariff revenue but cause foreign corporations to face margin penalties

The budget shows the full list of enacted laws with their fiscal impact, so you can trace exactly which policies created the current surplus or deficit.

Managing the Budget (Gameplay)

Targeting a surplus:

• Raise income tax, corporate tax, or tariff rates through legislation
• Cut discretionary spending categories
• Let the economy grow — rising GDP automatically expands the tax base

Stimulating with deficits:

• Cut tax rates to boost corporate margins and consumer spending
• Increase spending programs
• Issue bonds to borrow (quarterly issuance covers any deficit automatically)

Debt reduction:

• Run surpluses consistently — principal is reduced automatically by the surplus amount each fiscal year
• Raise taxes specifically to generate surplus that can retire bonds faster
• Note: deficit spending provides short-term stimulus (+0.5% corporate margins per 1% of GDP deficit, up to +5%), so fiscal restraint has costs

Currency

Budget figures are stored in the country's native currency (USD for US, GBP for UK, JPY for Japan, EUR for Germany). Cross-country comparisons use the internal anchor unit.

See also: National Metrics, Sovereign Bonds, Central Banks, Corporations