How to Pick the Best Tax Rate in Cities: Skylines 2

In the original Cities: Skylines, taxation was easy. Players only had to boost each zone's percentage by a few points to make a profit early and keep that profit going through the rest of the game. That's probably why the developer, Colossal Order, has decided to make taxation a more complicated topic in Cities: Skylines 2.

Like before, a tax hike early on is a good way to stay in the green during the early game. However, players now have other ways to generate profits, and in Cities: Skylines 2, both companies and residents need spare cash to level up their buildings. All this means that the best tax rate can change depending on the stage of the game and what the city needs most.

The Taxation Tab

Cities Skylines 2 Taxation Panel — The taxation menu in Cities: Skylines 2.

Players can set their taxation policy after reaching the second milestone, Small Village. The tax rate is available in the Economy menu, which players can access by clicking on their current budget.

Each building zone has its own tax rate, and players can set it between 30 percent and -10 percent. A negative number means the city is paying building occupants a subsidy instead of demanding taxes. Higher taxes increase the city's income, but they decrease demand for that type of zone. They also reduce the disposable income of residents and profits of businesses, which in Cities: Skylines 2 are used to upgrade buildings.

Players can also adjust residential taxes based on education level and all other taxes by business type. For instance, commercial industries include Food, Convenience Food, Furniture, Lodgings, and Plastics, while industrial companies can create Grain, Timber, Crude Oil, and Food. By lowering the taxes for one industry type, players can encourage that industry to appear more often, and by raising taxes, an industry will vanish from the map.

Players may note that residential demand is based on density, but taxes are based on education. Players can adjust the general demand for low-density residential by changing the tax rate, but the only way to increase medium and high-density demand is by supporting more students with enough education services. Players can indirectly encourage high-density residential by lowering the taxes on Well-Educated and Highly-Educated households. However, these households also have the most money to spend.

To answer the basic question, a tax rate of 13% is a good place to start. Demand levels will stay steady, and even a small city will make a decent profit as it slowly introduces more services. However, once high-density zones become available, and demand for them goes up, players should start lowering their tax rates. This will encourage buildings to level up faster, and high-level buildings pay more in taxes. This will give the city a net profit even at a lower percentage.

One other thing to do is ignore the arrow next to the budget. The game appears to take recent purchases into account, and so the arrows will indicate a dire loss of income after players make a big purchase like a university or a police headquarters. The only real way to see whether the city is making a profit is to leave the game running for a minute and check whether the budget is going up or down.

The Services Tab

Cities Skylines 2 Services Panel — The services panel in Cities: Skylines 2.

Another way the city makes a profit from its residents is through service fees. These fees unlock at milestone three, Large Village. Just like taxes, players can adjust some of these fees to balance citizen happiness with income.

Specifically, the service fees players can adjust are for electricity and water. For each percentage point players raise the fee by, utility consumption goes down by 0.4%, company efficiency goes down by 0.4%, and citizen happiness goes down by 0.1. Each point lower than 100 increases utility consumption by 0.2%, increases company efficiency by 0.2% and increases citizen happiness by 0.05.

Something to keep in mind is that service fees will never cover the full cost of either service. They can make a difference if players are running a tight budget, but in general, the best choice is to reduce these fees and take advantage of the happiness and efficiency bonuses.

A better way to make money from services is through exports. Exporting the city's excess water and electricity generates money just like service fees, and players can even make a profit if they can get away with cutting the budget to 50 percent. The main issue is the cost of building enough pumps and power plants to sustain the city with such a low budget, but they literally pay for themselves when players pull it off.

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