I will have to have another read of your figures. 

I have never switched tax rates because there just didn't seem to be any point. It is not like you can make subtle changes.  

I guess if you are constantly selling items then there is less point to have high taxes ... but what if you are not constantly selling items?

Also, you could just build more buildings, and have a larger and larger army ... which would EVENTUALLY require you to raise your taxes don't you think?

I admit I'm new to the Beta, but I hardly ever build stuff in my cities, and just have taxes run at a positive so that I won't run out of gold

(I build things that make mana, and more gold, and less unrest, and occasionally research ... but thats it)

(late-game I sometimes spam militia units if losing cities becomes a problem)

ChungasRevenge, What I skipped over (the post was already too long) is that taxing has a negative connotation and is often seen as a no-win scenario.  I bet very few people are like you and never change the tax rate even though it has dramatic effects.  It can increase both production and research by 30% by switching from normal to low!!  For instance:

I start a new game and it takes me 12 turns to build a workshop and 15 turns to get civics on the default "normal" tax rate.  Now, after switching this to a "no" tax rate, I'll get 8 turns to a workshop and 13 turns to get civics.  I'm suddenly much faster, and all I'm losing is .4 gildar a turn.  I had my champion walk 3 spaces and I picked up a silver flute, worth 300 gold, sells for 150.  That's 375 turns worth of gildar at the normal tax rate but only 50 turns worth of production lost.  Plus, no matter how much gildar or production I have, I can't speed up the research process except to cut back on taxes.  So a no-tax policy is the best.

seanw3, I left out food and prestige because they murky the waters further and the idea of governments can spiral out into so much more that would take a lot of time to balance.  For instance, government that change to another form might require a period of anarchy, sometimes have consequences diplomatically, sometimes need to be researched, and might affect both prestige and food as well as soldier recruitment.  For the sake of simpler balancing and easier implementation, I'd keep governments strictly as an alternative to the tax system (and really just one formula change plus redefining).  Prestige especially can have a radical impact as population growth is directly related to power growth across the board.  I like that few things affect prestige.  No idea how to balance it.

Tasunke, if gildar wasn't constantly flowing like water from items, then gildar is just a cap on max infrastructure and army size.  Let's say in a game I'm running a deficit of 10 gildar because of armies and buildings.  Let's say I can only sell an item for 10 or 20 gold, and I get items infrequently.  Then I'll need to increase the tax rate or sell off armies or buildings.

Raising the tax rate, though, will cut down research which is long term power and also reduces my ability to build buildings and units, which are well needed on the frontier towns.  So the ideal strategy then is to do as you did and build few buildings and build few units until absolutely necessary.  The longer you do not create a deficit, the further you can get down the research tree and the faster you can build important or no maintenance buildings.  This creates a game of chicken where the first person to build an army loses and the last one to build an army wins.  I'm especially worried that the AI will make horrible choices and mass produce units, draining their economy and research, and we'll often be fighting stone age computer armies when we are in the iron age.

You make a good point about there needing to be some balance or possible redesign of the economy system. This game is supposed to play as a TBS/RPG, but tactical so far has much more put into it than the strategic level. There is an absolute disconnect between the value of hero objects in gildar and the value of city objects in gildar. Someone has also pointed out that selling just a few magical items and the loot from adventuring can allow you to rush buy units and buildings that for some reason cost the same as a shield and some spider silk. 

The government system would be a fun way to disguise the tax system. I personally just set it to the lowest and power my economy with loot. We will have to see what happens in beta 2 before anything more useful can be said. I have heard rumors that this kind of analysis is preferred by Derek Paxton (being sincere here). He must love text walls or something. Hope he takes some of this into account. 

I never come across enough items to sell that will allow me not to raise taxes. And magic items are rare and saved for my champs very rarely do I sell them.

I also stay at normal Tax level for about 100 turns then switch to High tax. I tend to build lots of armies I use champs as leaders of armies so I rarely have a stack of champs running around.

I like the idea of governments.  However to fully carry out government in a city, there ought to be a governor.  This is where Administrative minded heroes as well as administrative buildings could come into play.

Unrest could creep up by default as population goes up.  If there's insufficient military presence, it goes up further.  Administrative heroes stationed in a city help mitigate this effect.  So could buildings.  A city watch, for instance, could be a high upkeep, yet highly effective way of controlling unrest.  There also needs to be more than just a loss of efficiency when unrest is high.  Riots, looting, civil war, cessation, etc.  The people of your cities should matter.

This is Act II type stuff, which could make the mid-late game more challenging.

I'd just like to point out that you can burn through 10k+ Gildar within a single round, just equiping a few champs cost me 20-30k. A normal tax rate and nearly no extra army and I still got to 0 gildar. Amour upgrades cost a 3k per man (leather to plate mail). Selling a few items won't bring me the money needed.

I dunno, I think income should be based more in taxes and less in items.

Furthermore, I think items should be cheaper. As in, not cost 3000 gold to just upgrade a champion with 'basic items' such as leather or plate armor.

Maybe mana for hero objects and gildar for rushing production (as well as metal and crystal used for putting unit production in the queue)?  If you paid for your hero equipment in mana it would be quite fitting I think, and give an alternative use for all that mana, restricting its oversupply in other parts of the game.

But isn't crystal already used to buy magical equipment for troops?   The advantage of using mana is that you'd have to decide what you'd like more of - casting more spells or upgrading your heroes with better weapons, armor and items.  Note that items (such as picked up from quests, loot or notable locations) would be able to be sold for a one-off mana boost.  And it makes some logical sense (in a world of magic ) that pure mana can be used to convert to any type of item in the world, for a suitable cost.

Whatever the currency, if the costs are not balanced, items will either be sold to gain too many resources, or bought in mass numbers due to low costs. Derek might need to head over to the accountant department of Stardock to get this ironed out. 

I guess I could deal with Mana for everything, if I had to.

I value not having to manipulate a damn slider.