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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

You're right. I was just looking for a quick reply right now. I should probably read VOS first right? I don't understand how taxes are immoral. Then again, i used to be a theist so i'm sure ms. rand's literature will once again change my opinions on issues and help me look at them rationally.

Taxes are considered immoral by objectivists because they use government force on the citizens to appropriate their wealth.

I have a question for the board...could some kind of land/property tax be established as a sort of insurance program to fund a fire department, which I consider analogous to the function of the police to protect an individuals and their private property?

If you own land, you would desire for it to be protected from the dangers of a fire. But even if you choose not to have fire protection (don't want to pay for it), the fire department cannot not put out the fire on your property because it threatens the lives and property of other individuals. So it's kind of a universal user-fee.

I know the answer from many of you will be "no", but it's just something I wanted to throw out there.

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Could it be similar to going to the E.R. where they save you first, and charge you later?

The firemen put out your fire, and then charge you for it. There'd probably be some sort of contract saying, "In the event I need the services of the fire department, I will be willing to pay."

But still, If you don't want to sign the contract, do they let your property burn and endanger the property of others?

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Could it be similar to going to the E.R. where they save you first, and charge you later?

What if someone is unable to pay?

The firemen put out your fire, and then charge you for it.  There'd probably be some sort of contract saying, "In the event I need the services of the fire department, I will be willing to pay."
Where would this contract come from? The role of a fireman is to rush in to save your life and put out the fire immediately, there is no time to sign a binding contract.

But still, If you don't want to sign the contract, do they let your property burn and endanger the property of others?

I would say no, they don't let your house burn. Just as a person's right to protection by the police exists whether or not they voluntarily pay taxes (it's an unintended benefit of the wealthy who pay for the protection), a person should be given that same benefit when it comes to the fire department. It is, in fact, necessary in order to protect those who do pay for it from the danger of a spreading fire.

That is why I initially thought that the user-fee should be conditional for owning land in a given area, but now that I think about it, if we have a rational society that would not be necessary. The fire department can set a price (a fee) based on their financial requirements to protect a given area from fires. If few people want to pay, then the price will increase until the people stop paying all together. The result, however, would be an increase in fires and an increase in demand for fire protection. People, being rational, would then decide it is worth paying for the service, so more people provide more money, which would be enough to cover the entire town, including any "freeloaders" who will derive an un-earned benefit.

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In places and times where there wasn't a dedicated fire control service, individuals put out their own fires, or the neighbors helped. It's just CHEAPER to pay for professionals because they have dedicated equipment and training and so forth.

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Seriously though: Government has some proper functions such as upholding the law, defence, even democracy costs money. Given these necessary functions of government - necessary for the existence of free society, is it unreasonable that members are asked to pay taxes for them? Now for usage of government services in general the possibility of having personalized bills instead of nationalized taxes seems more desirable. But as regards Justice - should you really have to pay for it? Many people do not have money, not because they are lazy, but because they are investing all they earn in improving their situation be that though education or basic living conditions.

Jennifer argues you should not pay for a government service if you get no immediate benefit, and sure - for health, education etc that works. But Justice - surely everyone is getting a benefit out of that all the time? Surely thats the one thing that makes Government, albeit small government, necessary?

Edited by Charles
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"The problem of freeloaders" is another gimmick to counter LFC.  It's like saying we could never live in a free society because we can't solve the problem of criminals.  I'm not saying freeloaders are criminals, they aren't, but the claim is similar.  

Since man is fallible, he can be corrupt, mindless, and immoral--this will never change.  However, consider the fact that for LFC to even be a popular option among a citizenry most of the people must consist of moral men.  

Don't make the mistake of testing the viability of LFC with the kind of man most common today because doing so brings up these problems you're discussing (funding, freeloaders, etc.) which in the end are irrelevant.  Always consider the singular nature of a man that supports LFC and then remember that for LFC to be even be possible, this kind of man must exist in the majority population of a citizenry.

I dont think this is a valid argument. A communist could use the exact same argument in favour of his preferred society - "Noone would be forced to contribute to the common good in a communist society. Obviously today not many people would wish to work primarilly for the benefits of their fellow men. But for communism to even be a popular option, most people would have to be willing to do this. Dont test communism with the kind of men that exist today - always consider the nature of men that support communism and must exist in the majority in order for it to be a feasible option". In fact, this kind of argument could probably be used to smooth over implemetation difficulties for pretty much any form of government imaginable.

The freeloader problem is a valid argument against LFC in my opinoin. It obviously isnt a fatal argument and it can be countered, but dismissing it outright seems to miss the point.

Edited by Hal
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The freeloader problem is a valid argument against LFC in my opinoin. It obviously isnt a fatal argument and it can be countered, but dismissing it outright seems to miss the point.

I am curious. How can an argument be valid and false? ( I am assuming you consider it false because it can be "countered".)

And what point is being missed?

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I am curious.  How can an argument be valid and false? ( I am assuming you consider it false because it can be "countered".)
It raises legitimate concerns which must be met by any serious account of how a LFC society would function.
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The freeloader problem is a valid argument against LFC in my opinoin. It obviously isnt a fatal argument and it can be countered, but dismissing it outright seems to miss the point.

Of course, we know better. Communism doesn't fail because of the merits, or lack thereof, a men living under it. It fails because it forces men to act contrary to their nature and sacrifice themselves. But, I digress...

I, too, have not yet come to the conclusion that all taxation is immoral. Things like police & courts everyone receives benefits from, so shouldn't everyone pay? Well, we run into some problems in that case. First off, it STILL will be the rich who pay the bulk of the cost (they have the wealth to pay it after all).

Ayn suggested in her essay "Government Financing in a Fee Society" that the cost of government will be much smaller, and much more managable, in a free society so the necessity to tax will be diminished. She said voluntary activities like lotteries can fund it.

On the side of user-fees, a small fee could be charged to sanction any contract and to make it enforceable in court. A person doesn't NEED to pay this fee, but if they don't there is no way the courts of law and the police will be able to enforce it, so rational people will pay the fee. Since credit transfers are a form of contract, they too would be subject to this voluntary fee. Since billions, if not trillions, of dollars are passed through credit transactions, a small fee on those will be sufficient to pay for the justice system of society.

As for "Freeloaders", they're not a problem, according to Rand. Their protection under the courts is a bonus for them.

Edited by Captain Nate
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Hal:

What point might that be (that I'm missing)?

My point was not made to "smooth over implementation" of LFC, it was to say that this "problem" would only be a major problem in a country where many people would not be rational in the first place, i.e., in a country not supportive nor ready for LFC.

If a country is ever to be ready for LFC, then the majority of the people living in that country have to be ready to embrace it. Get it?

Systems of governments don't shape their people, people shape their governments. A system of government survives so long as the people support it. If any system of government loses support from its people, then it is destined for death. It is a waste of time to fault a governmental system for not having measures to protect the ideas its existence depends on, ideas rooted in rationality, from people who don't support them in way that doesn't violate the rights of anyone.

Look, here is your "problem": In a country of free men where the government lives off of donations, there will inevitably be people who either pay less than the value they receive or not pay at all. What is to be done about this?

What is the role of government? To defend rights. Are any rights being violated by free-loaders? No. What will happen if too many of these kind of people exist? The government will not have money to operate and the system will perish. Is this the fault of the system of government? No, the people brought it upon themselves. Should the government be equipped with something to stop this "problem" from crippling its operation? No, refusing to donate money is not an initiation of force.

Get it? In claiming "the free-loader problem" is a problem, you are essentially saying that you wish to protect a system of government from a people no longer wishing to support it. You are demanding that the government do something (with force, since is an agent of force) to "fix" this "problem" that does not involve the violation of rights.

Get it?

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It raises legitimate concerns which must be met by any serious account of how a LFC society would function.

I see.

Legitimate by what standard? Met to whose satisfaction?

I ask because LFC is not a utopia -- it promises no such thing. As a result, there are an endless series of "concerns" that LFC cannot promise to address.

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What is the role of government? To defend rights.  Are any rights being violated by free-loaders?  No.  What will happen if too many of these kind of people exist?  The government will not have money to operate and the system will perish.  Is this the fault of the system of government? No, the people brought it upon themselves.  Should the government be equipped with something to stop this "problem" from crippling its operation?  No, refusing to donate money is not an initiation of force.
Those who cite the free-loaders problem are often doing so to suggest that an LFC system will inevitably fail unless it has counter-measures in place. If you wish to demonstrate that LFC is possible - that such a society could exist for any reasonable length of time - you need to show that their concerns are misplaced, and that they havent found an intrinsic flaw in the system. Refusal to address pragmatic concerns just makes people think youre living in utopian fantasyland, which is why a lot of writers on LFC have spent a great deal of time discussing freeloading.

The issue isnt that some isolated people wont contribute - its that most people may not bother contributing. The fact they claim to be willing to contribute at the time the society is set up isnt really relevant, since attitudes often change quickly. WHY are you so sure that enough people are going to donate money, when they arent getting anything material in return? And so on.

Edited by Hal
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I ask because LFC is not a utopia -- it promises no such thing.  As a result, there are an endless series of "concerns" that LFC cannot promise to address.

Noone is suggesting that 'endless' concerns should be met, just the most obvious and important ones. Anyone who thinks critically about LFC for more than 3 minutes will run into the free-rider issue.

Edited by Hal
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In claiming "the free-loader problem" is a problem, you are essentially saying that you wish to protect a system of government from a people no longer wishing to support it.  You are demanding that the government do something (with force, since is an agent of force) to "fix" this "problem" that does not involve the violation of rights.

Get it?

I dont particularly like modern society, but I prefer it to anarchy. If implementation of LFC is going to result in society falling apart while its strongest supporters shrug and say "oh well, if thats what the people want", then I'd rather not bother.
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The issue isnt that some isolated people wont contribute - its that most people may not bother contributing. The fact they claim to be willing to contribute at the time the society is set up isnt really relevant, since attitudes often change quickly. WHY are you so sure that enough people are going to donate money, when they arent getting anything material in return? And so on.

The solution to your last question is contained in the issue you are ignoring here. We aren't talking about government financing by United Way campaign. We are talking about people choosing to voluntarily pay for services that they NEED.

No one predicts the collapse of the food industry because people have to choose to pay to eat voluntarily! Same deal with government! Much as you need food in order to survive, you need a government to protect you from the unintelligible whims of the mob in order to survive. Most of the proposed methods of government financing don't require people to even be capable of THAT much abstraction. They require simply, "OMG, if I don't pay to have this contract/patent/copyright/what-have-you secured, and this guy sells me out, I'm TOTALLY SCREWED!" or "Blank stole $200,000 from me and the courts can't prosecute the case unless I forward $750 bucks! Here's the court fees get me my $200,000 back!"

EVERYONE is capable of this much abstraction; those that choose to ignore it are so totally marginal and basket cases ANYWAY that it's not even worth thinking about.

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Software Nerd - Im going to try and address that point within the context of this post in reply to Jennifer's post:

Jennifer Snow: No one predicts the collapse of the food industry because people have to choose to pay to eat voluntarily! Same deal with government! Much as you need food in order to survive, you need a government to protect you from the unintelligible whims of the mob in order to survive. Most of the proposed methods of government financing don't require people to even be capable of THAT much abstraction. They require simply, "OMG, if I don't pay to have this contract/patent/copyright/what-have-you secured, and this guy sells me out, I'm TOTALLY SCREWED!" or "Blank stole $200,000 from me and the courts can't prosecute the case unless I forward $750 bucks! Here's the court fees get me my $200,000 back!"

I understand what you are saying. You are describing a culture of understanding where people see the results of their actions/inactions because there's no big government to cushion them out. In this hypothetical scenario people would see crime and understand their responsibility in dealing with it. Very much like the Gibbon quote I give below. However...

I am an idealist, but I am also a realist - In an ideal world everyone would understand their freedom came with responsibilites, that there are certain indubitable principles in human relations, and thus act accordingly. Such ideals are not going to be approached anytime fast; the actions necessary to create such a culture of thought are seriously long term. In the present I am focusing on low taxes, and would never argue for no taxes - its not workable given the way people currently act - thats not to say you can't change the way a society thinks, or that the idea is inhuman like communism, but that the level of mutual understanding and community required for that to work is almost religious and not political. Its not really useful.

See in the UK we had a spate of privatization in the 1980s under Maggie Thatcher, the problem with which was that they were lightning fast and ill thought out. I do not think you can click your fingers and privatize the lot - take railways for example; rather than suddenly annoucing your policy change and immediately putting the entire rail system on the market for the cheapest buyer (any old asset acquirer), you should announce a change in policy and legal changes that would secure potential investors immunity from future re-nationalization, then sit and take offers - refusing the unserious ones. That may sound boring, or unlikely to happen, but its the only way I think free market principles will ever find a way in the long term. When we talk of the last few percent taxation, once health, education and the rest are privatized, I think its no longer political change that can reduce (or eliminate all together) taxation - its cultural changes. Changes in the way people think and act on a massive scale. A gradual scale.

If your going to reply to this you may want to follow my line of thinking from my earlier post.

Edited by Charles
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I have a question for the board...could some kind of land/property tax be established as a sort of insurance program to fund a fire department, which I consider analogous to the function of the police to protect an individuals and their private property?

Nate, were you thinking about a Land Value Tax (LVT) when you asked this question?

http://en.wikipedia.org/wiki/Land_Value_Tax

It's an idea that's gaining popularity in some cities. The tax would be assessed on the unimproved value of the land.

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Nate, were you thinking about a Land Value Tax (LVT) when you asked this question?

http://en.wikipedia.org/wiki/Land_Value_Tax

It's an idea that's gaining popularity in some cities.  The tax would be assessed on the unimproved value of the land.

That sounds interesting, it was pretty much what I was thinking! All though, I probably wouldn't assess the value of the land, but tax the owner in proportion to the amount of land he has compared to others in the town, ultimately based solely on the needs of the fire department.

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I have been thinking about this for quite a while. I agree that taxes are a bad thing. However this contract enforcement idea is just another form of tax, which is actually unworkable. The reason for this is that it forgets the role of power in a society.

For example, say we are living in a perfectly rational society. Government needs to fund defense and police and law courts. So its sets up this contract enforcement policy. Everything works well. Walmart who benefits a lot from having a well funded police force etc, pays its fees happily.

Or would it? I think that instead of happily paying the fees to enforce its contracts, Walmart shareholders (some of whom wield vast power) would lobby the government to scrap this policy even before it got off the ground. They are acting perfectly rationally as shareholders in doing this as they are protecting their profits. In effect they would use their power to transfer the tax away from themselves and on to other people. I am not condemning the rich people here, as they are acting in their rational interest which is morally sound.

Another idea is that of a lottery. People buy lottery tickets in the hope of winning large prizes and the profits go to fund the government. Again on the surface this sounds fine. However, in a free market this government lottery would face competition form privately run lotteries. I would argue that in the long term, the privately run lotteries would do much better as they would not have the burden of their profits being used to fund the state and could for example invest in advertising. I guess the state could ban privately run lotteries but again this is just another use of force no different than any other tax.

This leads me to my idea. The state is created with one off voluntary donations. This raises £500bn. The state's job is then to invest that money and make a return of 10%. It hires the best investment managers who are sacked if they fail to return 10% in any year but who are rewarded by a percentage of the profits. The state uses its £50bn a year profits to reinvest in the fund to make sure it keeps up with inflation and the rest is used to fund defense, police and law courts.

The problem of power is gone. Since investment managers would be sacked if they fail to return 10% then they would not be tempted to fund projects that CEOs are pushing at them unless they are worthy no matter who the CEO is. They would use their own objective investment skills to keep them in their high paying job and would not accept bribes etc.

I have just thought of a lot of this in the short space of time I have been typing this and so there are bound to be errors. However my main point is that traditional voluntary methods of financing government that objectivists have come up with are in fact taxes, and that a government investment fund is the only way I can think of that does not involve the use of force.

Dollarman

(Moved to a topic that is closer to the to focus of this post - softwareNerd)

Edited by softwareNerd
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You display an ignorance of politics and economics in your "refutation" of the contract enforcement fee method of government raising revenue. In a rational society, where the government's powers are limited by the constitution, lobbying is impossible.

In a rational society, which is the precondition to the elimination of taxes, very few people would ever play the lottery, whether government or private. The lottery as a means of government revenue is simply parasites feeding off of the bottom feeders.

Your idea is quite flawed: first, government ought to be forbidden, constitutionally, from owning any property which it does not use for legitimate government purposes, ie, military, police, courts, and and capitol buildings. Second, whether one makes or loses money playing the stock market is usually random; and, as the government would be constitutionally forbidden from having insiders in private companies, government would have no means of trading based on knowledge. Moreover, mutual funds etc. typically underperform compared to the market. In order to set up a fund that will guarantee some amount of money per year, government would first have to acquire - somehow - fifteen or twenty times that amount of money in a single year. The chance of raising the budget required to fund police, courts, and military over twenty years within one year is slim.

Your point about inflation shows another gap in your knowledge of economics: a rational society requires a 100% reserve gold standard, and that is inflation-proof by both definitions: government cannot manufacture new and additional money, because it is constitutionally forbidden from owning gold mines, and the rate of expansion of the supply of gold does not exceed the rate of expansion of the supply of gold (see Reisman, Capitalism).

Your errors are many and your ideas in principle unworkable. In fact, Ayn Rand's contract enforcement fee is workable and does not involve aggression.

(Moved to a topic that is closer to the to focus of this post - softwareNerd)

Edited by softwareNerd
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