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Taxes: Government Financing In A Free Society

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The first question has to be "Why is there government", and the answer is "Because there are irrational people who violate the rights of others, and that fact must be protected against". Thus for contract enforcement, as Rand suggested, an enforcement fee would be quite proper. In fact, it is not the proper function of government to decide who is responsible for the breach, and that is a function that should be handled by private arbitration. What is the function of government is to control the use of force, thus to determine that the arbitrator's decision should be enforced if the party found at fault refuses to comply. The person at fault should bear the financial burden of his wrongful actions, and should carry insurance to govern such an outcome.

A person who assaults, defrauds or robs another is responsible for the consequences of his actions. That would include the costs of prosecuting him. It is then just for the government to insist that criminals pay financially for their misdeeds. A nation which assaults another is similarly responsible for the consequences of its actions, and should similarly be made to pay reparations.

So the need for separate funding of legitimate government operations is really limited to those cases or rights-violations where the responsible person cannot be held financially accountable -- he can't be identified, or he has insufficient resources. Of course we can't know how much money that is until we actually have a properly limited government, but as a starting point, I suggest that the only legitimate source for paying the operating cost of government is voluntary contributions. Specifically, the government should not also be in competition with businesses to provide goods and services.

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I know there's not much interest in the specific how of government funding, but it seems to me that contingent contributions might have some potential. The idea is that contributions are pledged

I do not know if this has already been discussed before or not, but couldn't the government charge a user fee to private police, court, and PMCs in order for them to have a license to practice such professions? Since the government must maintain a monopoly over the retaliatory use of force then it would be perfectly just for the government to ensure that those specific private services hold a license in order to conduct business properly within that field of law enforcement/arbitration. There are many other user fee alternatives to taxation as well that a government as small as an Objectivist should have no problem generating voluntary revenue from, but nonetheless the specific methods are really a very narrowly practical matter thats rather unimportant to discuss because there are many, but the bottom line is that a government should be financed through voluntary means, the methods of implementation are relative.

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I do not know if this has already been discussed before or not, but couldn't the government charge a user fee to private police, court, and PMCs in order for them to have a license to practice such professions?
In a free society, one need not have a license to practice one's profession. The certifying function -- proof of competence -- which would be a marketable value should be performed by private companies. This is definitely not a proper function of government. Even in today's highly regulated economy, security guards don't need to be licensed and arbitration firms do not require government permission to do their business. It would be proper for the government to charge a fee for the cost of enforcing an arbitration firm's finding (and it would be proper to charge the miscreant who violates the contract). This is not a proper source of general government funding.
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I don't like the idea myself because it is government entering business, which is something they should not do. Maybe if a private lottery donated to the government. That would be fine. But I am against the idea of the government owning a lottery.

Again, this is government entering business, something they shouldn't be in.

The prohibition of an Objectivist Government to generate income through taxes demands that some other avenue be left open to it. You can't demand no taxes and no involvement in business. By doing so you are placing even the most rudimentary Government in an untenable position, condemned for employing force if it does raise taxes and denied the ability to enter into any business in which it could generate revenue.

No one could force anyone to buy a government lottery ticket. There would be no compulsion of any sort so how could it be wrong to do it?

As for the sale of land, currently there are millions of square miles of land in countries like the US and Canada and Oz that the government "owns". What do you propose when the government ownership is done away with, a huge free for all where the first person to strike a claim gets the land for free? Why not, if you are going to deny the state the right to own that land in the future let it sell the land it currently "owns" at a fair market price so that it can generate money which it can then invest (like a pension fund, only for future operating funds) so that it no longer needs to beg money from the people?

I know, time and time again people have said that the citizens of an Objective state would voluntarily support their government but I really don't see this as either practical or achievable.

When you consider that a single Aircraft Carrier costs $4.5 billion and has an average annual operating cost of about US$160 million not including the wages of all those people required to operate it then you can start to see the problem. Everyone who works for the new government has to be paid, every pencil and piece of paper must be bought, every government building has to be heated and cleaned and maintained... We're talking of hundreds of billions of dollars a year.

So on one hand you download and hope and pray that the people will come to the rescue through charity, or you can behave rationally and permit the government to sell what it currently "owns" and then you can go about your business as the new government has provided for itself for many years to come, perhaps (if managed properly) forever.

Think about it, how much do you think a 1 mile long stretch of downtown Manhattan road would be worth? How much revenue could that 1 mile generate for the company that owned it? What sort of price do you think the market would pay per square foot? Buildings in Midtown (Park Avenue) have sold for $1000.00/sq ft why not the roads? And why shouldn't government do it to generate the wealth that it needs to operate for years and years to come?

The mindset that places prohibition on government to raise taxes and then denies it the ability to generate money in the most logical and efficient manner (selling it's assets) would see nothing wrong with telling a man he can only eat with his hands after he has had them both amputated.

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No one could force anyone to buy a government lottery ticket. There would be no compulsion of any sort so how could it be wrong to do it?
Here are some other ways to raise money: raise cattle and sell them as food; process the hides and turn them into shoes, and sell them. Drive buses all over town and give people rides for money. Tend to people's medical needs for a profit. Fly businessmen from coast to coast for money. No compulsion, so how could it be wrong?

What is the proper function of government? The problem with your position is that it's predicated on the premise that voluntary contributions would necessarily be insufficient to cover the unrecoverable core of government expenses.

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The problem with your position

And I could just as easily tell you that the problem with your position is that it's predicated on the premise that voluntary contributions would be sufficient to cover the unrecoverable core of government expenses.

The fact is that I'm as sure as you are, and neither one of us can prove it. :P

However, thinking rationally if I have the choice between planning for the future and hoping for the best I'll take the plan. There's an old military axiom. "Fail to plan, plan to fail."

And in my view hoping that government will be able to survive in an Objectivist state is just as wrong as the communists that envisioned the state ownership of everything never bothered to look past that simple idea and see what it would lead to.

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And I could just as easily tell you that the problem with your position is that it's predicated on the premise that voluntary contributions would be sufficient to cover the unrecoverable core of government expenses.
I don't see that as a problem. My position is premised on two other things as well. First, it is based on a particular position regarding the proper function of government, which you may or may not agree with. A corollary of that is that it isn't proper for the government to do what isn't proper for a government (obviously). Second, my position and this entire discussion is predicated on the assumption that there has been a massive intellectual and political change in society whereby a properly limited government exists and that the concept of taxation is inconceivable. If you can imagine a world in which the masses no longer seek to make other people be the coerced means to their ends, where the government isn't responsible for filling potholes, shoveling snow, subsidizing wheat farming, taking care of the indigent, finding jobs for the unwilling, educating children -- the list is nearly infinite -- then you ought to see that such a world would require a huge change in people's beliefs about society and the nature of government. My position then simply depends on the same level of wide-spread rationality which caused this POG to come into existence, which then financially maintains that government through voluntary contributions.
However, thinking rationally if I have the choice between planning for the future and hoping for the best I'll take the plan.
Fair enough. Here's an alternative to your scheme for government competing with Walmart for goods and services, one which maintains the strict separation of force and reason / enforcement and market. If, and only if, it proves impossible to financially sustain the government of a society which is simultaneously so rational that it actually limits the government to protection of individual rights, and so irrational that it will not contribute voluntarily to maintaining that government, then extraordinary steps must be taken. Rather than penalizing rights-violators to the extent that is needed to dispense justice in the specific case, all rights-violators will be subject to an additional penalty which covers the cost of running the government. Steal a car? You're subject to reparations to the victim, government administrative costs, plus $10,000 punitive damages which will be used to cover the costs incurred by rights violators who have insufficient assets.
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We're talking of hundreds of billions of dollars a year.

Divided between 300 million people that's amounting to something like $1000-$2000 per year per citizen, not exactly earth shattering Considering some people (the rich) have much to lose from the threat of invasion, they'd more than make up for their poorer counterparts who cannot afford such things.

Combine that with, say, monthly flyers mailed to citizens soliciting donations (perhaps containing a chart to help with how much a citizen could donate), you'll get donations. Ideally, the budget would be completely transparent, showing people what is spent where, in general, so that the citizens know where their money is going.

Tell the people what they're paying for:

$100 = 25 meals for a soldier

$1,000 = a cop's weekly salary

$10,000 = the cost for keeping three criminals incarcerated for 3 months

(please note that these numbers are made up for demonstration purposes).

I really don't think that garnering donations would be all that hard.

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I don't see that as a problem. My position is premised on two other things as well. First, it is based on a particular position regarding the proper function of government, which you may or may not agree with.
I do. But that belief can not be separated from the facts of the world as it is. A, as they say is A.

Second, my position and this entire discussion is predicated on the assumption that there has been a massive intellectual and political change in society whereby a properly limited government exists and that the concept of taxation is inconceivable.

So here is where the wheels fall off. A is A. There has not been and indeed has never been such a huge quantum shift in thought, belief and action that came out of the ether so to speak, so in order to actually ever be able to do something there must be a starting point. Otherwise you end up, as I said before with little more than mental masturbation and in the same theoretical vacuum as those people who claim that Communism in theory is the perfect political system.

If you can imagine a world in which the masses no longer seek to make other people be the coerced means to their ends, where the government isn't responsible for filling potholes, shoveling snow, subsidizing wheat farming, taking care of the indigent, finding jobs for the unwilling, educating children -- the list is nearly infinite -- then you ought to see that such a world would require a huge change in people's beliefs about society and the nature of government.
Oh I can imagine it but I also know that every change is incremental and that we have to start from the starting point, and that point is the government that we have today with it's greasy fingers in all the pies. The trick is to slowly remove those fingers and put other peoples fingers in those spots. But far from just wishing for the best we also have to plan for how we are going to still have a government, how we are going to limit that government, and fund that government on more than just pie in the sky, click your heels together three times and wishing.

My position then simply depends on the same level of wide-spread rationality which caused this POG to come into existence, which then financially maintains that government through voluntary contributions.

So your argument stems on the belief in something which has not happened and more than that has not happened in the history of mankind?

Here's an alternative to your scheme for government competing with Walmart for goods and services, one which maintains the strict separation of force and reason / enforcement and market. If, and only if, it proves impossible to financially sustain the government of a society which is simultaneously so rational that it actually limits the government to protection of individual rights, and so irrational that it will not contribute voluntarily to maintaining that government, then extraordinary steps must be taken. Rather than penalizing rights-violators to the extent that is needed to dispense justice in the specific case, all rights-violators will be subject to an additional penalty which covers the cost of running the government. Steal a car? You're subject to reparations to the victim, government administrative costs, plus $10,000 punitive damages which will be used to cover the costs incurred by rights violators who have insufficient assets.

Ignoring for a moment that I do not, nor have I advocated Government being in competition with any business producing goods... Who steals? The answer is 9 times out of 10, the poor. How do you expect someone who has nothing to pay your price for his crime?

All I am advocating is that when it becomes possible to elect an Objectivist government that the solution for the real world current system that we have is for Government to sell itself off. The Public service highways department is sold to private interests, the postal service is sold to private companies and the land it owns is sold to individuals or companies. the monies thus raised would be invested, (just like any individual or corporation would) and that money is used specifically and whley to fund the legitimate tasks of a legitimate government. I do not see the government competing with anyone once it's assets are sold, indeed it would have sold itself out of business, not sold itself into business which is what people seem to think I'm advocating.

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*** Mod's note: Merged with an existing thread. - sN ***

As I argue for Objectivism in various places I usually run in to a problem when we come to the point where I express that voluntary taxation is the only moral way for a government to receive income. This usually comes after the point that the other side says that protecting people from physical harm requires an obligation placed on people to pay for a police and military force. When I say that people will pay for this service voluntarily I usually lose them. What is the best way to make the argument? Or is there any other form of taxation that Objectivism deems as moral?

Edited by softwareNerd
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Usually when I encounter this argument, they are making what is called a "false dichotomy". They aren't conceiving of a society so radically different that they don't realize how much money they lose to taxation currently. Ask them if they ever look at their paystub at the end of the week or actually pay attention to how much in taxes they paid when they file in April. Then ask if they have any idea how much money in sales taxes they have paid their entire lives. Then ask if they have any notion of how much more the goods and services they pruchase every day cost because the manufacturers and retailers have had to imbed THEIR taxes into the price to the consumer. If these people truly understood how much MORE money they would have to their name right now, they might not have trouble conceiving how people would have the money to donate to all sorts of voluntary things in a truly free society.

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What is the best way to make the argument? Or is there any other form of taxation that Objectivism deems as moral?

I don't have any historical examples of voluntary taxes working, but I can say that there is no third alternative. Taxes are either voluntary or compulsory.

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I tell them how volunteer fire departments used to work. They used to (not very long ago) receive no tax money. All truck and equipment were purchased with donations from private citizens and companies within the district that realized there was a real need to protect their property from fire and other disasters. It worked.

You could also talk about war bonds...people bought those voluntarily. I am not real sure how they worked, but people are willing to give money to causes they believe have value to them.

EDIT: I don't have it with me at work, but there is an essay in The Virtue of Selfishness about government funding.

Edited by K-Mac
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It also helps if you indicate that you're not talking about "voluntary" in the sense that government officials will go around door-to-door with a sack and ask politely for money. The government would be best off collecting voluntary *fees* for certain services that people are absolutely willing to pay for--either that or holding a lottery like a lot of states already do.

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You need to switch the whole argument around-make them come up with reasons why people wouldn't pay, and then knock those reasons down with examples:

Right now, people are voting for leaders who tax them for around 40% of their money, perhaps more, so almost everyone thinks it is right to pay the government for security, they believe in it.

We know people are willing to put their money where their mouth is, since even after this massive taxation by the government, the christians are paying their dues to the church, and record numbers of Americans (compared to other countries) are giving money to charity.

Also, whenever there is a war, millions of Americans are willing to risk their lives for their country.

Keeping all this in mind, why on Earth wouldn't Americans pay for their own security voluntarily, knowing what the consequences are for them and their families if they don't--especially since they would be so much more prosperous without the huge taxation? Make them think of arguments as to why this would not happen. Tell them to imagine themselves in this new world, where the police and army are dependent on their contribution: Wouldn't they feel morally obligated to give, the same way people are morally obligated to give to their church, or to sign up for military service in times of war?

Another question to ask: Why would the defense of this country not be far more important than anything people currently contribute to voluntarily? Someone who five minutes ago advocated looting for the exact same cause will not have an honest answer to this question.

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This usually comes after the point that the other side says that protecting people from physical harm requires an obligation placed on people to pay for a police and military force.

What argument are they making to back up this statement? Are you going 'on defense' before they even establish the reasoning behind this statement?

Edited by RationalBiker
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As I argue for Objectivism in various places I usually run in to a problem when we come to the point where I express that voluntary taxation is the only moral way for a government to receive income. This usually comes after the point that the other side says that protecting people from physical harm requires an obligation placed on people to pay for a police and military force. When I say that people will pay for this service voluntarily I usually lose them. What is the best way to make the argument? Or is there any other form of taxation that Objectivism deems as moral?

Why not make the people who make the police NECESSARY pay the price? IE the criminals, once duly convicted, will have to pay a service fee for their arrest, prosecution, and detainment.

Furthermore, since going to court is voluntary (if you're a plaintiff), make those who initiate the decision to go to court (which would be the defendant ONLY if and when the defendant appealed) pay for that aspect of government.

As for warfare, this gets a bit tricky because Objectivists usually believe that waging war is okay as long as it's a bad nation. There needs to be an objective way for a civilized country to pay for the military other than simply volunteer payments, and supposing another country IS guilty, that country would have to pay.

Of course in each and every case, if a decision is reversed then so should the flow of money be reversed.

It'll take a bit to make this work, but it is actually more just than making the victims pay for their own defense.

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Why not make the people who make the police NECESSARY pay the price? IE the criminals, once duly convicted, will have to pay a service fee for their arrest, prosecution, and detainment.

Furthermore, since going to court is voluntary (if you're a plaintiff), make those who initiate the decision to go to court (which would be the defendant ONLY if and when the defendant appealed) pay for that aspect of government.

As for warfare, this gets a bit tricky because Objectivists usually believe that waging war is okay as long as it's a bad nation. There needs to be an objective way for a civilized country to pay for the military other than simply volunteer payments, and supposing another country IS guilty, that country would have to pay.

Of course in each and every case, if a decision is reversed then so should the flow of money be reversed.

It'll take a bit to make this work, but it is actually more just than making the victims pay for their own defense.

Well, there are many reasons why that's a bad idea , but for one:

In both cases (criminals and enemy countries) it would create an huge incentive for government, even a democratically elected one, to arrest rich people or go to war against certain countries, even if such an action isn't justified.

The beauty of a government which isn't allowed to collect taxes, no matter what, is exactly the fact that it becomes very nicely limited, no matter what the people voting for it's leaders would like it to do.

Another point: how exacltly do you collect from an enemy country? The only way is through a lengthy occupation and heavy taxation, Roman Empire style. Remember what happened to them?

P.S. Objectivists believe war is the answer only if a nation is a threat, not if it's a bad nation.

Edited by Jake_Ellison
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There are a lot of topics on voluntary taxation throughout the forum. Lots of brainstorming and stuff. The thing you need to remember is that the most important issue is not how a free society is going to run it's technicalities, but is it moral that men not be forced of their money for the benefit of others? That is the primary.

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Rand also mentions State lotteries as a way to raise money. the other thing as some have already alluded to is that the government in an Objectively run Laissez Faire Nation is treated as a paid servant of the people not as a benefactor.

So when a commercial interest is concluded lets say the purchase of some conglomerate then the parties involved in order to secure the purchase and sale insure their deal through the government for a fixed percentage. As you can imagine on a multibillion dollar deal such as this that would generate quite a sum. Now imagine if every credit sale from mortgages on homes to car loans was secured in such a way. Deposit insurance could also provide a huge revenue stream as well.

All of this insurance would be voluntary of course but in the case where you decided not to insure your savings in a bank and the bank was robbed, failing the return of your money from the apprehended felons you would be, as they say... SOL. :lol:

Edited by Zip
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I think the primary thing that one needs to convince people about is: the role of government. If enough people are convinced that the role of the government should be limited to police, military and courts, I'm happy to pay the substantially smaller taxes, and leave the debate about financing to the 22nd century.

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I tried that last week sN, and all I got in response "Yeah, good luck getting elected without promising anything." :lol:

Don't these people realize they are just being bribed with their own money?!?!?

Worst thing was the guy that said this was about 45 years old.

After he said that I knew the argument was done and I said to him "Shhhhhhhhhhhhhhh, go back to sleep"

He looked at me really strangely.

I just laughed.

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It's really hard for people to think creatively about solutions when the government has always been the answer. I tend to believe there are solutions we may not have even thought of yet, but when there's a need and it's (finally) illegal to impose force, I bet you anything people will get creative, fast. :lol:

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