Colorada is a nation that comprises the exact same land as the state of Colorado. Colorada is a rather small country with a population just shy of 5 million as of 2008, spread over 100,000 square miles in an exact geoellipsoidal rectangle. It is unique in that it is the only nation in the world with all borders exactly along latitudinal and longitudinal lines in an exact box shape. Its GDP per capita is roughly $47,000 USD, the currency of Colorada, and its GDP total is $230 billion USD. Colorada has a very high human development index owing to its past as a former member of the United States. With its secession from the Union, Colorada has retained its own flag, seal, motto, and anthem. As a token gesture to its past, the seal still says "state of Colorado" instead of something closer to reality, such as "nation of Colorada". Almost all of the people of Colorada are Americans and still hold their mother country in high regard.
POD (Point of Divergence): On January 1, 2000, the state government of Colorado secedes from the union.
The United States Congress is made to agree to such terms because the new government in Colorado is promising to pay $10 billion annually, inflation-adjusted to year 2000, in tribute to the US coffers should the state be allowed to become independent. Eager to reduce government debt by this amount yearly (or to be able to increase spending), Congress accepted these terms, simultaneously removing Colorado from the Union and replacing its position with the addition of another state. In January 1, 2000, the same day Colorado is allowed to secede, Puerto Rico (a former US protectorate) formally joined the Union as its 50th state, retaining the status quo in the total number of Senators. Incidentally, the new state's population is close enough to that of Colorado that the total number of Representatives in the House decreased by only 1. The same day, Colorado, now a federal democracy in its own right, renamed itself Colorada, becoming the first enclave within US territory. Its capital, Denver, is also its former state capital and largest city.
Although Colorada became independent as a federal democracy, things swiftly changed. What would one day become the new nation's first dictator, then-governor Daniel Kamakura, swiftly developed a cult of personality following him due to his widely perceived success at achieving independence from the US behemoth not seen since the Civil War - a tremendous victory for a state with such a paltry population. Leveraging the new state's promise to pay an immense tribute, Daniel reminded his constituents that independence would come at a price - number one being that he would have to enact a variety of reforms to drastically increase Colorada's income and decrease its expenditures. Being also a decisive and quick leader, Daniel was able to enact a variety of reforms despite occasional protest from the state legislature, as well as turn the majority of the populace against the new Congress. Through a variety of manipulative tactics, Daniel made himself everyone's hero and debased all other members of the government as being corrupt and bureaucratic, which ultimately led to their demise. It was not long after that Daniel (and the executive branch he represented) became the only branch of government remaining in Colorada. A classical example of how a well-meaning democracy can go astray because of a single man's political prowess.
Thereafter, Daniel has ruled as Colorada's uncontested dictator. The nation has no pretense of being otherwise, but no one seems to mind; his cult of personality has remained strong all these years, and coupled with the massive budgetary surplus that Colorada is able to generate every year, his popularity has seen a meteoric rise, with peoples and leaders worldwide envying and accolading his successes.
Colorada has no military and, because of its friendly relationship with the United States (a world superpower) which entirely surrounds it, certainly has no need for one. It also has no nuclear arsenal, no national guard, and minimal homeland defense infrastructure. In a sense, it is a US protectorate, even though it is fully autonomous, since it must pay a burdensome tribute to the US government yearly. Colorada and the US practice a policy of open borders, with minimal customs interference, and overall the two nations treat each others as if they were in a privileged status. Foreign diplomacy and negotiations is made easier by the fact that Colorada has the United States' implicit backing (including military).
Colorada rarely interferes in the outside world, preferring to improve itself rather than the peoples of other countries. Colorada neither receives nor provides foreign aid, although it has most-favored-nation treaties with all GATT countries and amicable relations (and the favorable tariff policies that come with them) with just about every nation in the world. Colorada joined GATT and NATO within its first month of existence, and is petitioning to join both the UN and NAFTA.
Diplomatic stresses have developed as a result of Colorada's minimal-tax policy, making the nation a definite tax haven. However, Colorada assures other nations that it refuses most corporations from posting their profits in Colorada, forcing them to still seek other tax havens (or else pay their taxes). Colorada also practices a variety of policies which many may find immoral, but none can deny Daniel's ability to generate money out of those exact same policies, and the US implicitly recognizes the importance of these policies in enabling Colorada to generate the tribute they pay the US.
Colorada's currency is the same as that of the United States, which means that their two economies are closely tied. It also means that Colorada cannot mint coinage and thus cannot earn seigniorage revenue, but it also means that the tribute money Colorada must pay to the US is exactly in the currency the US government wants it to be in.
Colorada is widely known for its governmental flagrant disregard for what is considered moral. These range from such innocent ventures such as the state-run National Lottery to more troubling drug trafficking and even to the extreme, including slavery and forced prostitution for inmates. Each of these acts as a major source of income for the government, along with tuition for education, the National Exchange and income from punitive damages assessed at court. Those who are caught by the government suffer tremendously, but are prevented from fleeing to the US.
These negatives are often dramatically outweighed by the across-the-board 0.00% tax rate (income and sales). As a result there are almost no distortionary taxes (with the exception of land-property tax). People not inclined to commit crimes often find Colorada to be a top choice for where to live, resulting in a dramatic increase in population every year.
The nation's government for the most part favors a hands-off, laissez-faire core policy, leaving everything from managing your retirement nest egg, saving for rainy days, medical expenses, insurance, social security, etc. to the private sector. Along with the lack of any military and a variety of unusual income streams, the government is able to achieve 0% head tax, 0% income tax, 0% consumption tax, 0% savings tax, 0% corporate tax, 0% capital tax, 0% sales tax, 0% excise tax, 0% gift tax and 0% wealth tax.
A significant chunk of revenue (7%) comes from education tuition. Within its first year of existence, Colorada had created the world's first entirely online university (the National University), complete with over 1,000 courses and a prerequisites tree stringing them together. The development cost in excess of $30 billion. After that first year, the only major educational expenses necessary were for proctoring the finals. Education is mandatory, and also not free: in the 15 years of schooling in Colorada's education regime, a person would end up paying the equivalent of $100,000 in 2001 - a hefty sum of money in which the government is clearly turning a profit and which also amounts to a head tax. Then again, Colorada doesn't have an income tax, and so its citizens shouldn't have the luxury of attending school for free.
The National Exchange is a mostly automated service provided by the government that holds institutions' monies and diversifies them in a variety of assets worldwide depending on their individual needs. In addition, it serves as Colorada's own, everything-in-one-place exchange, and provides hedging and investment banking services. Although one can trade actively (Denver is after all the Wall Street of the West), all transactions must still go through the National Exchange. The National Exchange's rates are quite low nonetheless.
Gambling and drugs
Colorada has expanded its gambling operation, aided by the fact that gamblers do not pay taxes on their winnings, swiftly becoming a secondary Las Vegas. Even more profits are earned through state-sponsored illicit drug trafficking - the state is the only organization authorized to import substance-abuse drugs, not that there is much of a black market, because the state's rates are quite acceptable (they can buy and market in bulk and ship the goods effectively after all).
Clearly the most controversial policies are those applying to the way the state treats convicted criminals and bankrupts. There is no bankruptcy filing; if at the end of the day a person can't pay off all his/her debts, that person ends up in jail, much like the old debtor's prison system. The lender gets a fraction of its invested money back, which encourages them to report those who don't pay, and the government is left to profit tremendously from the exchange in three ways. Likewise, convicted criminals are sent to prison, with the government extracting significant revenue from each of them. Inmates are forced to take online training courses in some subject matter or other to increase their productivity, and then are subject to a rigorous, 16-hour, 365-days-a-week regimen of slave labor. Female criminals are often forced into prostitution at brothels where those interested may pay $100 to $10,000 per copulation depending on the sensuousness of the slave/prostitute. Female criminals convicted of felonies may also lose their virginity in a similar manner, with the state capitalizing on this rare good by charging one-time premium prices. (A side effect of the policy is that a lot of convicted criminals come out of jail with intense trauma. But whose fault would that be?) Not only does this act as a strong disincentive to would-be criminals and risk-takers, it also maximizes productivity and government earnings, not to mention teaching the convicts and debtors a lesson (crime and putting too much at risk doesn't pay).
All this may seem like cruel and unusual punishment, but it pays: these three components account for around 50% of government earnings. Sometimes, in order to increase profitability, the government will seek buyers for these slaves, generally priced at a premium over the expected profits to be made from working a slave. Each transaction enacted in this way gives the government more money than it could have earned otherwise and opens up more room in the prisons, and of course improves the utility of the buyer, who supposedly can find a better use for the slave (more profitability) than can the government.
Colorada has a strong law enforcement sector. There are numerous hidden security cameras positioned at random, alternating locations, which are randomly monitored. The government believes it is only 20% effective at catching and noticing crime. This means that, as a rule, for every infringement a person is caught with, it is assumed that the person had already committed 5 crimes of equal weight and is therefore charged as such. A person caught for committing a murder, for example, will be charged with 5 counts of murder, not one (then back in court, those 5 counts are treated as 1 count again). This is basically a means for the government to greatly magnify the cost to the criminal of committing any given crime, and to increase the length of time that the government can force its inmates to serve in prison.
The judicial system is very streamlined. There is no jury; each trial is presided by a judge, bailiff and related personnel. Most cases are presented quickly, with minor crimes being resolved within minutes and more serious ones being resolved in hours. Class action lawsuits, and certain cases involving considerable evidence, may still take days, but in that case the judge will often appoint a third party to determine the true nature of the situation (such as an auditing firm to identify discrepancies in financial statements). The judicial system severely punishes prosecutors who go to court for only minor infractions on the part of the defendant, such as stealing $5, for example. This is to eliminate inefficiencies resulting from lawsuit-happy individuals. The system also punishes those who seek out lawyers, both prosecutors and defendants, by not giving the winner any additional money with which to pay lawyers. The government certainly does not provide any attorney-general, district attorneys, or free attorney service for the poor.
In accordance with this, the law is made to be intensely consumer-friendly. The laws are crafted to be as simple as possible, with most legal documents easily fitting on one page and fines being placed on all contracts longer than a thousand words. Oftentimes, the government may directly declare as void those 40-page end user license agreements, and at other times declare that "tiny text" disclaimers are so small (or said so quickly) that they are void. The end result is that people know what they're getting into, and since the winning side is not showered with punitive damage rewards, the monetary stakes are significantly lower and, in many types of trials, no side in a trial stands much to gain from hiring an attorney. The government does not actively promote negotiation and settlement out of court because doing so would eat into the judicial system's revenues.
Severity of crime
There are two types of crimes: misdemeanors (light crimes) and felonies (serious crimes). The punishments for misdemeanors are extraordinarily light Stealing $20, for example, is punishable by returning $20 plus interest, no reprimand, nothing more. This is even to encourage "borrowing without asking" in certain situations. Performing CPR unsuccessfully is punishable with a recommendation to take a CPR course, nothing more. Slandering, non-harmful assault, and sexual harassment are punishable with an order to publicly announce an apology, nothing more. As a result, misdemeanors are cleared out of the system very rapidly, or they may often not even be reported. Felonies, however, are grave matters, all of which involve forcing the convicted criminal into menial service (slave labor) or forced prostitution (sexual service) for an extended period of time, many of them for life. While debtors may face the same punishments as felons, their duration is often a mere three years.
A sentence for a felony generally runs like "(menial service OR forced prostitution), starting at X points, parole at Y points". Every convicted felon has points attached to his/her name; every time they are disobedient while in prison, they lose one or more points, and they gain 1 point each month. Should they ever fall to 0 points, they are executed, no questions asked, regardless of the severity of their crime (for debtors, the amount they originally owed). Inmates may protest their conviction, but should they fail at this they will lose 12 points. They start with X points, and are released when they have obtained Y points. Built in to this system is that for every 12 points Y is above X, the prison sentence is extended by another year minimum. Those who are resistant and disobedient will stay in prison for life and will gradually reach the point at which they are executed, regardless of how many points they started off with. Before long inmates will be scared into line. The more severe the crime, the lower X will be and the higher Y will be. For debtors, Y is by default 36 points above X, meaning they can get out of jail in three years, after which they start with a clean record.
A partial list of felonies and their typical sentences:
- Treason: start at X = 1, parole at Y = infinity
- Murder: start at X = 3, parole at Y = 2000
- Rape or kidnapping: start at X = 6, parole at Y = 1000
- Grand theft: start at X = 12, parole at Y = 750
- Bribery: start at X = 24, parole at Y = 500
- various counts of fraud: start at X = 24, parole at Y = 350
- Law evasion: start at X = 36, parole at Y = 200
- Perjury: start at X = 48, parole at Y = 100
In the case of class action lawsuits, should there be a conviction, the defendant generally will have to pay out millions in punitive damages. This is the case whether it is because a company launched a misleading advertisement or if they posted fraudulent statements to attract more investors. Generally the punitive damages far outweigh the actual benefit the defendant could have obtained through the criminal activity. Of this amount, almost all of it ends up as revenue for the government; only a tiny fraction - the amount the judge deems fitting - is actually given to the prosecutor(s). However, this is generally still an amount that would encourage such court proceedings. In essence the government is acting as a monopoly for the distribution of justice, and earning a nice profit in the process.
Cost of debt
It is entirely up to the poor to be able to maintain positive cash flow and stay out of debt; the government provides no financial relief. There is no income tax, but there is a head tax (as mentioned earlier, this is the education tuition). As a result everyone has a definite incentive to be as productive as possible and to improve their net worth as much as possible. Those who are in debt are not allowed to leave the nation but are instead imprisoned and forced to labor as slaves for three years - only then can they leave. As a result the constituency of Colorada's population is on average comprised of people earning considerably more than that of the United States.
The following table details income and expenditure for the first eight years of the nation's existence, namely, from 2000 to 2007. For an explanation of line items, refer to their corresponding sections, above. The estimates are based on a flat-rate 6% interest rate compounded yearly. Bold items are unusual, temporary situations. Colorada has saved much more than it has spent in each year of its existence. In only seven years its current account surplus is $870 billion, 6 times the GDP for that year. In fact, from 2005 onward Colorada's entire expenditure budget can be completely paid off by just the interest on its account surplus.