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Taxes: Government Financing In A Free Society

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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 disagree with the first point: there's no basis for that statement. Young people have plenty to lose in a war (more than older people actually), and old people have plenty to lose if crime goes up (more than young people probably). They're also not less moral or willing to contribute to what they believe in than young people. If you look at the source of money for non profit organizations (charities, museums, schools, churches etc., it's mostly older people)

Look at it this way: if Bill Gates didn't have to pay taxes, he'd have hundreds of billions to give away-and he's actually giving away a lot of his wealth.

To the second point, I would reply that having crime increase, or having foreign threats grow is plenty of cause for fear. Our current government by the way acts on the same fear, and if anything, they are slower to react to it, because the fear of the population first needs to turn into political pressure, and then government will to act.

I don't disagree that contributing will return value, I just don't know that people will be willing to contribute indefinitely if they are not assured - at some level - that they will receive like value in return, rather than, say, spending their money on other, more personally effective crime prevention measures.

On my first point, I think it's fair to say that people in general are more likely to take risks when young, how about that? That doesn't take directly away from the assertion that older people would contribute, it simply draws a distinction between the contribution of young men in times of crisis and that of old men in times of peace. That is, my argument isn't that young military volunteerism detracts from the argument to financial volunteerism, only that it doesn't necessarily support it.

Bill Gates is a one-off phenomenon, but if you're expecting to fund government primarily through the contributions of people who have so much money they won't miss a large chunk of it, so be it, but understand that then you have established a government which is dependent on a very small minority for its livelihood, and that there are hazards involved in such an arrangement.

On your second point, I would point to the events of September through present to argue that the government is capable of stoking thunderbolts out of clear blue skies and thus pushing through virtually instant measures in response. My head is spinning from all that's coming from the Obama administration the past few days, from throttling the rich with $1T in new taxes, to re-banning so-called assault rifles, to cramming $800B (stimulus), $350B (bank bailout), $410B (spending) down our throats in quick succession (pretty soon, it adds up to real money).

Granted, the storm has been looming for years, but you couldn't tell that from the blue-sky rhetoric coming from both parties, up until the point where they decided to raise the alarm. (but I digress)

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So the only way for a gov't to effectively run on funding from lotteries is by establishing a coercive monopoly of same.

In that case, if the choice were between having the government out of all other business with a monopoly on lotteries, versus the current situation with govt involved in everything, I'd take the government controlling the lottery business. Not all gambling, mind you, just the lotteries. Horseracing, dog racing, casinos etc - they would be privately owned.

But what of contract insurance? That seems like a proper way to earn revenue for gov't, giving value for value and not taking over the entire insurance industry.

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I don't think you can make a clear distinction between lottery and other forms of betting. And if you can't then one has to wonder what advantage a government-run lottery has compared to a privately owned lottery.

I think one has to view it from a different angle, what values can the government actually provide? It does have some organisational structure, it has bureaus etc. I think there would be plenty opportunities where one can make money by using those facilities / that structure / the expertise without hampering with the actual daily work. The simplest example would be Hollywood and the military, filming rights could be sold, experts could be hired, war gear could be leased etc.

But in the end it always depends on donations. And any rational man would donate money because after a certain point, donating money to the government is the best form of investment possible, because it promotes rationality (justice, productivity).

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Please clarify: are you suggesting that the govt ought to require everyone to purchase contract insurance?
Not in the statutory sense. Everybody must take responsibility for their actions, and it would be sufficient to provide a cash bond. The bond is to guarantee that the costs of enforcing a decision in a contract dispute are borne by the person found to be in breach. If you do not provide such a cash bond or demonstrate that you are insured, then the government will not enforce the contract. (It follows then that it is in the interest of each party to a contract that they require insurance or cash in escrow as an aspect of contract formation, since otherwise the contract is unenforceable.).
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It's no more proper than the government selling car or health insurance. Requiring contract insurance to cover the cost of enforcement is proper.

On the contrary, it is not about taking over OTHER kinds of insurance, David. It is paying for insurance on contracts. If you enter into a contract with Allstate to insure your car or home, then you would choose to buy contract insurance to protect that contract.

The purpose of Contract Insurance at its most basic is to provide the money in case of two things: 1. there is a breach of contract and you wish to initiate a lawsuit; and 2. the other party to the contract sues you for breach of contract.

The most basic policy would provide basic funds, and the amount you would need to insure for would drop, as tax is weaned out of the system and real numbers finally begin to emerge, which numbers represent true cost of suing, or being sued, as the case may be.

By making it voluntary, and instead stressing the BENEFIT, the VALUE of having Contract Insurance, more people will opt in.

What we don't yet know, but I can visualize, are the many many kinds of contracts people will begin to enter as they have more funds at their disposal.

This is why I say taxation is an inefficient method of collecting government revenue. It uses the fear method, rather than the honey/carrot method.

At the very least, protecting oneself against being sued is probably going to be the major drawcard at first.

And not having the insurance would not mean a person is absolutely precluded from paying the costs of going to court - rather it means they would have to fund such costs straight from their own resources. The point is - contract insurance needs to be positioned as the cheapest way to have the greatest level of protection. Persuasion is called for here, not the Initiation of Force.

Edited by AllMenAreIslands
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I don't think you can make a clear distinction between lottery and other forms of betting. And if you can't then one has to wonder what advantage a government-run lottery has compared to a privately owned lottery.

Not only can you make a clear distinction between lotteries and other forms of gambling, but a clear distinction may be made among various lotteries designed to benefit different causes.

I said earlier that I would rather have the government hold a monopoly on lotteries, if the choice were that versus the current system of taxation.

However, I do not believe that it would be necessary for the government to hold such a monopoly. I think Contract Insurance will be capable of generating enough money to cover all (or almost all) of the costs of a proper government. However, in case of a shortfall, or rather a projected shortfall, a lottery for the purpose of generating such additional funds would be the proper way to go.

Donations are successful these days for things like cancer research, because there is the possibility of using such donations to reduce the amount of tax a person is FORCED to pay. What happens when the concept of tax is removed from the equation?

There may still be some people who will be willing to make straightforward donations for the sheer joy of it, but I think in most cases, we'll do better by offering something that is of more tangible value and doesn't leave people feeling like they are pulling the load of paying for government all by themselves.

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By making it voluntary, and instead stressing the BENEFIT, the VALUE of having Contract Insurance, more people will opt in.
So far so good: there is a clear benefit to having such insurance, and it would of course be voluntary. "Requiring" insurance does not mean that the government uses force to get people to be insured; it means that if you are not insured (or cannot provide an equivalent cash bond, as I mentioned in my most recent post), the government will not enforce the contract, and will not consider the case.

The point that you seem to have missed is that it isn't the government that provides that insurance, any more than the government would provide fire, life or mortgage insurance. The government does not compete with business, and insurance (and lotteries) are a business.

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I think Contract Insurance will be capable of generating enough money to cover all (or almost all) of the costs of a proper government.
Again, the government would receive no money from contract insurance, which would be underwritten by private companies, above the actual cost of ajudication of a case. The government could not properly subsidize its general operations by excess fees for contract enforcement. The government has a rightful monopoly on the use of legal force, which means that there cannot be competition in the contract-enforcement business. Assessments for government services must be on a "cause-effect" basis, that is, the actual cost of adjudication for the case, since prices cannot be kept in check by free market competition.
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So far so good: there is a clear benefit to having such insurance, and it would of course be voluntary. "Requiring" insurance does not mean that the government uses force to get people to be insured; it means that if you are not insured (or cannot provide an equivalent cash bond, as I mentioned in my most recent post), the government will not enforce the contract, and will not consider the case.

The point that you seem to have missed is that it isn't the government that provides that insurance, any more than the government would provide fire, life or mortgage insurance. The government does not compete with business, and insurance (and lotteries) are a business.

As to the first paragraph of your response, you are building in the initiation of force into your proposition. If someone has not insured their contract, then they have no guarantee their case will be heard. But I do not see the need to make it prohibited. A person may be penniless but have a worthwhile case. It is the option for the law firm to take the case on, on a contingency fee arrangement.

People who have insurance automatically get money to go to court, regardless of the merits of their case. Depending on which kind of policy they bought will result in a certain amount of money being made available. This is where the different kinds of policies to have considered at the time of buying the insurance would have to decide. What kind of litigant would they be - someone eager to settle, or someone who visualizes himself in court, conducting cross-examination?

LOL. But it's true.

As for whether or not anyone would be willing to hear the case - that could be something that will gradually become more and more the province of individuals, and something that constitutes a service one requests of others, to provide objective views and judgments.

The place for government to really earn money in that kind of scenario is through registration of particulars fees. Registering on title to oneself, something akin to registering title to real property. Paying to register oneself as a payer of protection money to the government.

The original concept for which tax was set up was to provide protection for the group, and everyone had to chip in. Maybe that's the concept we need to work with - the idea of using what is already in the prospects' minds - that government is supposed to protect you from harm perpetrated by others.

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As to the first paragraph of your response, you are building in the initiation of force into your proposition. If someone has not insured their contract, then they have no guarantee their case will be heard. But I do not see the need to make it prohibited. A person may be penniless but have a worthwhile case. It is the option for the law firm to take the case on, on a contingency fee arrangement.
It is immaterial who provides the bond. The principle is, simply, that the government will not adjudicate a case without a guarantee that the cost of doing so is covered. I do not build initiation of force into my proposition.
People who have insurance automatically get money to go to court, regardless of the merits of their case. Depending on which kind of policy they bought will result in a certain amount of money being made available.
No, that does not follow from the nature of insurance. A rational system of contract insurance would almost certainly include in part "losses due to judgment against policyholder" as well as "cost of litigation", which in turn would include "attorney's fees" as well as "adjudication costs". An efficient system would require parties to submit to binding arbitration, in which case court-ordered enforcement would be a rarity.
As for whether or not anyone would be willing to hear the case - that could be something that will gradually become more and more the province of individuals, and something that constitutes a service one requests of others, to provide objective views and judgments.
No, not really. The government simply never would consider enforcing a contract without a guarantee that costs would be covered.
The place for government to really earn money in that kind of scenario is through registration of particulars fees.
Government would charge no fees, except actual costs for necessary and voluntary government functions.
The original concept for which tax was set up was to provide protection for the group, and everyone had to chip in.
Yes; but there is no "have to", no force. Every rational being would voluntarily contribute. Force would not be used against the evaders.
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Again, the government would receive no money from contract insurance, which would be underwritten by private companies, above the actual cost of ajudication of a case. The government could not properly subsidize its general operations by excess fees for contract enforcement. The government has a rightful monopoly on the use of legal force, which means that there cannot be competition in the contract-enforcement business. Assessments for government services must be on a "cause-effect" basis, that is, the actual cost of adjudication for the case, since prices cannot be kept in check by free market competition.

First of all, the government has to receive money from the contract insurance business. Why do it otherwise? That's the point - to make sure there is money for the use of the court system - to pay the fees of opening a cause of action, filing one's Statement of Claim, booking a Motion to be heard by a Master or Judge, or a Settlement Conference. Now, the settlement conferences are at present also handled by private adjudicators (usually former Judges).

The contract enforcement business - the police - is a different part of the system, and relies on judgments rendered by judges.

People who help to settle disputes, likewise, are people who could make a living from helping deliver those kinds of services.

The business of buying insurance to cover the costs of enforcing or defending contracts is one with a very wide application to the vast majority of inhabitants. Think of how many contracts we all enter into in our lives. To be determined are what portion of the premium is the government's outright share, to spend now, and what portion has to go into the pile that accumulates to pay out on claims, what amount is needed to cover the costs of writing the policy and what to do with what is left over is something that is worth thinking about. How to split it up - 30% - 30% - 30% and 10% might be a good distribution to run some sums through. Like what if there is $10 billion collected. Per week, or month.

That is the business-model method of properly funding what ought to be the most-used part of government services. The court system - the judicial system - is the key element of self-defense in a civilized world. It is the means of settling disputes. The true key element is not people filling positions, but the having of objective law by which to judge actions, contracts and deeds. It is having the means by which to establish lawful rights of way and ownership of property.

Government is the legal use of force. It being properly defined as the use of retaliatory force might help. Having the right to wield force lawfully means being or being found to be the lawful owner of goods, the lawful provider of services, etc.,

However, don't forget that government is in competition with business. Think of the man with 5 sacks, like in Reisman's book Capitalism. The amount of grain you have to eat to defend your home and goods is grain you aren't eating while hunting for something else to eat or doing some other task you'd like to complete. At its heart, spending on defense takes away from all other spending you could do.

It's a necessity, but you don't want to spend more than you have to achieving it. Just as you don't want to spend more than you have to on anything.

Creating a government that delivers what it's supposed to - i.e., defense of rights and rightful ownership - means, basically, having to start over. Any society that wants to set things up so government is only defending, never attacking, means eliminating all the laws that permit government to initiate the use of force.

As for prices, the costs will fluctuate, and people will find that buying a certain amount of money will buy more or less arbitration/litigation depending on many factors.

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When I worked at the United States Patent and Trademark Office, the fees collected by the Office paid for all operations and provided a significant surplus, which was used to subsidize other operations of the government.

edit- significant compared to the size of the USPTO budget, not the total federal budget.

Edited by Grames
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I think one has to view it from a different angle, what values can the government actually provide?

Limited to its proper role, it can determine whether an action is legal or illegal, and enforce the appropriate sanction for an illegal action.

In that context, David Odden is right, contracts which engage the government in respect of your legal rights could be sold. No other entity could provide such service.

Could the government therefore properly refuse to consider debts payable in other than government issued legal tender? If so, would it be proper to include such a fee in the use of legal tender for exchange? In other words, could the gov't enforce an exchange (sales) tax on currency transactions?

That's the current situation, I know, but - as long as other means of exchange, not covered by gov't jurisdiction, were allowed - would it be consistent with a fully-free government?

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  • 8 months later...

Here are some things that I haven't been able to answer:

- How is an obligation to pay in exchange for living on a certain peice of land "theft"?

- When referring to "theft", does tax apply to the income tax or any tax, including a consumption tax or a property tax?

- How would you be able to fund the military? It's not like there is a specific benefit that a national defense can provide one single person. It would be pretty hard to charge individuals for what the nation as a whole would need.

Edited by Black Wolf
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Here are some things that I haven't been able to answer:

- How is an obligation to pay in exchange for living on a certain peice of land "theft"?

- When referring to "theft", does tax apply to the income tax or any tax, including a consumption tax or a property tax?

- How would you be able to fund the military? It's not like there is a specific benefit that a national defense can provide one single person. It would be pretty hard to charge individuals for what the nation as a whole would need.

One has an obligation to pay for living on a certain piece of land only in the feduciary sense, if they are buying it, renting it, or otherwise as a legitimate voluntary market function. One does not have an obligation to pay for something simply because a group of people get together and decide to threaten punitive action on anyone who doesn't comply.

When referring to theft in the ethical sense, one refers to someone forcefully seizing someone else's justfully-acquired property against their will. That applies to all taxes. If one person stealing from another is wrong, then one person stealing from another is wrong, even if one person calls himself an "IRS Agent."

Voluntary financing. How a specific system would work, that is a question for reasonable people to debate on, but the principle under capitalism is that only a voluntary system would be moral.

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- How is an obligation to pay in exchange for living on a certain peice of land "theft"?
The same way that an "obligation" to pay in exchange for continuing to live after walking down an alley is theft. Any form of income theft is theft, regardless of what adjective you put in front of the noun.

As for funding the proper functions of government, you've presumably read Rand's essay on the topic, so the implications of your question just don't make any sense.

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How is an obligation to pay in exchange for living on a certain peice of land "theft"?

Obviously, rental or lease payments to an owner are not theft.

If you own the land free and clear (which is what private ownership ought be, subject only to contractual obligations such as putting it up as collateral), by what right does any other individual say "pay me some cash for living there or I shoot/throw you into a locked room"? By what right does a group of such individuals say "pay cash into the kitty for collective needs or we shoot/throw you into a locked room?" And by what right does an organisation acting on behalf of that group say "contribute to this organisation's existence, purely by dint of us being authorised by your neighbours, or we shoot/throw you into a locked room"?

Answer: NONE. The money demanded is not a payment for a particular service, but an 'obligation' that is based on the premises of collectivism and duty and the alleged right of the collective to enforce that duty at the point of a gun. The owner of that land has no obligation to anyone else except not to violate their rights.

When referring to "theft", does tax apply to the income tax or any tax, including a consumption tax or a property tax?

Technically speaking, tax is more like extortion than plain theft. And yes, all taxes are variants of that threat, differing only in the technicalities of how the payable amounts are calculated and what circumstances they are demanded under. Taxation is legalised extortion.

- How would you be able to fund the military? It's not like there is a specific benefit that a national defense can provide one single person. It would be pretty hard to charge individuals for what the nation as a whole would need.

Voluntary payments of varying kinds. Don't forget that the members of a society who is rational enough to abolish taxation are also going to be rational enough to want to contribute without needing a gun pointed at them.

On another technical note on this issue (which I have said somewhere else before, IIRC), I am strongly inclined towards a fee being charged for voting rights: no pay = no say. The payment should be identical for everyone, rich or poor just the same, just the same as everyone has equal influence over who gets elected.

I also think that this fee should deliberately be set so as NOT to be enough, so that other voluntary means also become required. The point is to inculcate the idea of putting one's money were one's mouth is and making it clear that there are non-rights-violating consequences for non-payment.

Nevertheless, if a man wants to, he should be able to go thrown the whole of life earning bucketloads of cash and yet not contributing a single cent to government and still have that government on call to defend his rights - where the price for it is that he doesn't get to have a say in who is going to write the laws and appoint others to uphold the law (he would, however, have to pay various fees in the first instance to the court if he wanted to launch a lawsuit against someone). In addition to the no-say part, it should also be an issue of private criticism from individuals, each making their own judgement about the man and his reasoning for what he does or doesn't pay.

JJM

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This subject is being discussed on a myspace thread:

http://forums.myspace.com/t/4660730.aspx?f...amp;SortOrder=0

This is an example of what you can expect on a general political forum:

person A: Taxes are not theft.

A theft transaction: x has $50. y forces x to give him $15. x now has $35.

A tax transaction: x has $50. y requires x to give him $15. y provides services and security worth vastly more than $15 to x. x now has $35 and services and security.

Pretty simple.

and now the reply:

Person B: The initiation of force by x in the tax transaction is what makes it theft no matter how much y allegedly profits from the exchange materially. The most important thing that is stolen from y is his freedom to act in his own interest according to his own judgement.

Counterpoint:

Person A: He wouldn't have any freedom if not for society. And tell me this, is there force involved when you rent an apartment? Is your landlord stealing from you? No.

The next reply:

Person B: Hogwash. The only precondition for freedom to exist is for folks to dispense with the initiation of force altogether. The landlord in your example does not require anyone to pay him a single penny. The apartment is put up for rent to anyone WHO CHOOSES TO RENT IT! The transaction in that case is initiated by the renter, not the landlord and such transactions are strictly voluntary on the part of each party. The government does not offer services for a fee on an open market to men who choose to buy them. They force you to pay taxes to finance all govt operations regardless of whether you would choose to use the service or not.

Now is person A beginning to reach a little here? Is this a common retort?:

Person A: Nobody's forcing him to live here. He doesn't want to pay for society's services he can leave. It's as simple as that. No force involved.

I'm person B in this conversation. What should my next reply be?

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I'm person B in this conversation. What should my next reply be?

Well, you asked if its a common retort, and yes it is. Its the "move to Canada" sort of argument (even though for almost everyone who suggests moving to Canada, it would be worse for them there than it is here). My reply would be something along the lines of saying that the government's purpose is to protect men's rights. No right can involve an obligation to another person, except in the negative sense, i.e. "You must NOT kill me," etc. They cannot require any sort of positive action on their part, for that would make rights nonuniform across individuals in their application and scope, and since man is man and rights are derived from man's nature, it simply doesn't make any sense. Everyone, everywhere, has the same rights, because they are all rational beings. So, if the government is performing some function which involves enforcing some type of obligation on anyone who has not violated another's rights (a law-abiding citizen), for example taxes, then it is violating its basic mandate and is stealing from that person.

If the government was really such a great deal for that person, than he'd just donate/purchase/use its services without anyone forcing him to do anything. If it isn't, then he won't. Its that simple.

Edit:// Woah, looking at that forum its amazing how, for example, that Centrist Bill guy is so astonishingly off-base.

And its kinda disturbing that it sounds like exactly something I would have argued, and did, 4 years ago. Thank you Mr. Friedman, Mr. Hayek, and Ms. Rand for setting me straight! :pirate:

Edited by nanite1018
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Craig24, Person A is now employing the "love it or leave it" argument, or more succinctly, the "do what I tell you to do, give me your money, give me your liberty, and ultimately, give me your life, or get the fuck out" argument, which is what it really is.

Of course, this is Person A's country, he owns it. His beliefs are the only one's acceptible for living in America, and if you don't agree with his delusions about "society's services" (the notion of which you should pounce on immediately) then you either have to do what he forces you to do, or get the fuck out, his arguments are infallible. If you disagree to paying extortion money to a gang of thugs to fund wars, welfare, and non-objective laws that take away your own freedom to act, then you have to get the fuck out, or get shot or thrown into a government cage. He says it is necessary to steal from you in order to protect you from violations of your freedom (like... theft for example?) So ask him, if this is the "land of the free" why does Person B have to leave? If he doesn't like what you are doing with your freedom, why doesn't he get the fuck out, because honestly it sounds like his problem.

And after that point you can begin to explain to him that if this is a truly free country, then nobody should be forced to leave for the same reason nobody should be forced to give their property to someone else at gunpoint, nobody should be forced to do anything because that's what freedom is. If he wants "services" go ahead and ask for money to fund them. If he wants social security, wars, government education, socialized medicine, the war on drugs, anti-immigrant laws, fiat money, government monopolies, and people paid specifically to tell him how to live his life, then feel free to ask for money from whoever agrees with him and feel free to exclude the rest of us that want to be left alone.

Not a very rigorous response, but I hope it helps.

Edited by 2046
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By what right does a group of such individuals say "pay cash into the kitty for collective needs or we shoot/throw you into a locked room?" And by what right does an organisation acting on behalf of that group say "contribute to this organisation's existence, purely by dint of us being authorised by your neighbours, or we shoot/throw you into a locked room"?

How would home owners' association dues figure into this? Certainly, a contractual agreement is made in buying a house under a home association whereby the collective decides upon fees to be paid into a kitty for the collective wants. Under that contract, a homeowner is objectively required to pay, and the contract may stipulate a right for the collective to call upon the services of the government to uphold the contract (throw you into a locked room). One can choose to buy in that neighborhood, or not. So, the question then becomes: Does one implicitly agree to any such contract when they choose to live in any particular country? Can the government be likened to the home owners' association; enforcing the contract created by the collective?

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