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tax_proposal.md

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Set On-Chain Tax Rate to 1.5%

This is a proposal to increase the on-chain tax rate from 0.5% to 1.5%, and to leave it in place until a total supply target of 10B LUNC (10,000,000,000) is reached.

With the 80/20% tax split this would be a tax breakdown of:

  • 1.2% burn tax
  • 0.15% to the community pool
  • 0.15% to the oracle pool

The existing 0.5% tax is split:      

  • 0.4% burn tax
  • 0.05% to the community pool
  • 0.05% to the oracle pool.

This proposal for a 1.5% tax would:

  • 3x the burn tax rate, from 0.4% to 1.2%
  • 3x the rate of community pool funding from the tax, from 0.05% to 0.15%
  • 3x the rate of oracle pool funding from the tax, from 0.05% to 0.15%.

We can expect a substantial increase in the rate of LUNC and USTC burns from the tax, the community pool funding rate, and funding to the oracle pool for long term staking rewards.

The proposed 1.5% tax rate is a taxation rate better suited to the goals of our chain in reaching our target supply and in the continual long term funding of the community pool and oracle pool.

The increased burn tax rate provides opportunity for a renewed effort towards off-chain burn tax adoption.

With the recent implementation of the improved tax handling upgrade, double taxation of dapp contracts is eliminated, the burden of technical issues in dealing with the on-chain tax is removed, and CW20 token transfers are already tax exempt.

With LUNC and the wider market in the early stages of expected bullish conditions, the timing to raise the on-chain tax is favourable.

This proposal is an opportunity to renew the chains focus on burning and recovery by enhancing the existing deflationary mechanism, to provide a fixed and clear target supply goal, and is put forward to vote for the LUNC communities approval. 

To read the full Commonwealth discussion complete with motivation, background and research, see the link below:

https://common.xyz/terra-luna-classic-lunc/discussion/24094-set-onchain-tax-rate-to-15

Voting

  • Vote YES if you agree to raise the on-chain tax from 0.5% to 1.5%.

  • Vote NO if you disagree with raising the on-chain tax to 1.5%.

  • Vote ABSTAIN if you neither agree or disagree with raising the on-chain tax to 1.5%, but want to contribute to quorum.

  • Vote NO WITH VETO if you strongly disagree with raising the on-chain tax to 1.5%, and wish for the depositors funds to be burned.

Implementation:

If this parameter proposal passes the 1.5% on-chain tax will be automatically implemented at the next on-chain epoch (within 7 days).