This article, first published in the September 1994 issue of Full Context, is a follow-up to On the Road to Voluntary Government Financing and includes replies to my critics. It is now superseded by my essay The Death of Taxes.
What is the nature of government, and how is it best financed? The two issues are intimately connected. In separate criticisms of my article "On the Road to Voluntary Government Financing" (Full Context, April 1994), Gary McGath (Letters, May 1994) and Murray Franck ("Taxation is Moral", June 1994) question my conclusions about those issues -- Mr. McGath challenging the means that I suggest and Mr. Franck challenging the goal of voluntary financing. In this article I present a case for my conclusions that will, I hope, be the stronger for the criticisms that Messrs. McGath and Franck have offered.
Mr. McGath's basic criticism is that I do not recognize that "people . . . don't know how many soldiers, teachers, or clerks are necessary", just as "the buyer of a product or service . . . does not, and cannot intelligently, decide how much the local store will spend on upkeep, inventory, employees, and so on." However, I am not suggesting that taxpayers must micro-manage in this way. All that I argue for is the power and the right to decide how money that is confiscated from you by government shall be divided among departments or functions of government (in addition to the power to elect those whom you think will most responsibly allocate government revenues). Since we all know that there are some functions that are legitimate -- defense, the courts, the police, the legislative and executive branches, etc. -- and some that are decidedly illegitimate -- welfare, education, arts subsidies, postal delivery, etc. -- we all should be able to decide which functions to support and which not to support. In fact, anything less violates the rights and conscience of the individual. As to my proposal for "choice-based taxation", I see co-opting the income tax as one way to let every citizen decide on the broad categories of government service to support. How this leads to "chaos", as Mr. McGath claims, is not clear. Some people would give all their money to support the redistribution of wealth, but I am confident that fewer typical Americans believe in such nonsense than do our self-anointed "representatives".
Mr. McGath suggests using the courts to make sure that each citizen is given "just compensation" in government services rendered for taxes taken. This idea has some promise, but it seems to me that Mr. McGath has an unrealistically high degree of confidence in the court system. Our courts cannot even try a common criminal, and routinely give fantastical sums away to personal-injury plaintiffs. These same courts are going to determine just compensation for the exact services rendered by government to each individual? Perhaps in the far future, but not anytime soon.
A more fundamental critique of Mr. McGath's position shall have to rely somewhat on conjecture, since he did not have the chance in a short letter to spell out all of his assumptions. However, this critique will serve to differentiate my position from what I take to be his in an enlightening fashion.
It strikes me that Mr. McGath's argument for "just compensation" rests on one version of a contract theory of government. Specifically, the assumption is that government provides services in much the same way that a business does, and that a price can be put on these services. Mr. McGath recognizes that "there are serious problems in determining the value of services in a monopoly market". However, he understates the case here, for there is no such thing as a market where forced monopolies are concerned; and economic calculation is impossible in such cases. The conclusion to be drawn, I believe, is that retaliatory force is not an economic good, but is some other kind of good (which nevertheless costs money to produce, unlike spiritual goods such as love or friendship).
As Bob Bidinotto notes, there can be no market for retaliatory force, because the existence of an institution with a monopoly on the objective use of retaliatory force is a precondition for an efficiently functioning market. To believe that retaliatory force is an economic good like any other is to fall into the trap of anarchism. Therefore, the "service" of providing retaliatory force cannot be paid for in the way that market goods are paid for. In other words, government is not to be conceived fundamentally along the lines of business (though, as I shall argue later, there may be times when so-called user fees are appropriate). And I think that this is the fallacy lurking behind Mr. McGath's position.
Murray Franck questions the end of voluntary financing, not the means for getting there. He bases his conclusion that taxation (i.e., forced expropriation of money from the citizenry) is moral on two premises: (1) given the social nature of human beings, government is a requirement of living, and (2) "a requirement, a necessity, without a means of implementation constitutes a contradiction". Since I have little sympathy for anarchism, I shall not question the first premise. However, the second premise is, at best, void for vagueness. Food, sex, companionship, shelter, and many other goods are all requirements of living, given our nature as social animals. Do we lack a "means of implementation" for these goods because we are not coerced into producing them? Those values are all provided according to the trader principle, whether in the economic realm of the market or the spiritual realm of love, friendship, and other voluntary associations. Government, too, I believe, can exist (and gain the funds it needs in order to function) without resorting to coercion.
I think that Mr. Franck himself provides one of the clues to how this can be done. He argues that "not all seizures of property by government constitute 'initiation of force'". His only example of moral seizure is that which takes place as retaliation for a crime committed. However, we can differentiate several different kinds or uses of force, each with a different moral status. One is retaliatory force, on which government conventionally has a monopoly. Another is initiatory or offensive force, which conventionally provokes retaliatory force on the part of government. Another is defensive force, or force used in self-defense, which all agree must remain the right of the individual (though not the sole province of the individual: governments can also use defensive force, for example against foreign invaders or against one who is in the act of initiating force).
Now, Mr. Franck wants to argue that taxation is not an instance of initiatory force on the part of government. What is it, then? Taxation is not an instance of retaliatory force (though I will later mention one way in which retaliatory force could be used to help finance government). And taxation is not an instance of defensive force, since one is not under attack by criminals or invaders at the moment one is being taxed (except in special circumstances, such as during a defensive war). The only way that taxation is not an instance of initiatory force is if there is another kind or use of force, which we might label preventative force. One sort of preventative force is in operation when, acting on some suspicion, I forcibly prevent you from doing an injury to another person even though you are not yet using or initiating force against that person. Some notion of preventative force is behind the doctrine of clear and present danger or, to choose a less controversial example, the judicial practice of issuing restraining orders.
However, if there is a concept of preventative force involved in taxation, it is different from the foregoing concept. On Mr. Franck's position, it would appear, government may tax you in order to fund those activities that may in the future prevent the offensive use of force -- or, more likely, that may make it possible for government to use retaliatory force against one who initiates force. In other words, it is moral for government to forcibly take your money in order that it has the capacity to use retaliatory force against one who initiates force (even, it should be noted, if that person is you!). On this view, government -- far from being similar to a business -- is almost a kind of lord or master, providing (promises of) protection for all individuals within a certain geography, though at the expense of each individual's full right to the fruits of his or her labor.
Flowing from his conception of the necessity of government, Mr. Franck's solution to the problem of government financing in a free society is that government deserves to have the power of taxation -- the power to forcibly take monies from private citizens -- though only in order to pay for the capacity to use retaliatory force. (Legitimate expenses might include salaries for policemen, judges, legislators, and government executives, leases for necessary buildings and equipment, and so on.)
Let me emphasize the word "only" in the previous paragraph -- and let us linger over the nature of government that Ayn Rand envisions when she speaks of "a fully free society". Government in a free society will be radically different from government today, because it will not offer services that can and should be supplied by private companies or by charities -- services such as delivering the mail, teaching children, putting out fires, building roads, minting coinage, subsidizing artists, running parks, providing housing, healing the sick, collecting the trash, and on and on. Government in a free society will provide one service and one service only: the retaliatory use of force (and in some contexts the preventative use of force). However, this does not mean that government will even do everything in the areas of protecting individual rights and settling disputes that it currently does. Private security firms can, and already do, protect your property much more efficiently than the police (after all, you pay to have security officers on your property continuously, not just drive by in a squad car once in a while and stop by after a crime has been committed). Private associations and arbitration companies can settle most civil disputes much more efficiently than can a government judiciary system -- though, I would argue, the court of final appeal must be run by government. I see no compelling reason to have a standing army (Costa Rica does fine with no army whatsoever), and many reasons not to. As many government positions as possible should be uncompensated (those of legislators, certain executives, voluntary militiamen outside the context of war, etc.). You get the idea: the expense for government in a free society will be inconceivably lower than it is now.
The question is: how low, and how will we pay the price? Let me give you an example from the local level. The town of South Orange, New Jersey, which is right next door to the town in which I live, has a population of 16,390 people and an annual municipal budget of approximately $17 million, or about $1,000 per person. How is that money currently spent? Well, South Orange shares with my town one of the best (and most expensive) school districts in the state. It owns and maintains expansive parks, with swimming pools, tennis courts, baseball diamonds, and soccer fields. It owns an extensive system of roads, well maintained by town crews. It owns a beautiful fire house and a number of fire engines. Its town hall is on the National Register of Historic Buildings, and costs a lot of money to maintain. It collects the trash. It runs a shuttle-bus service for senior citizens. For all that I know, it provides many similar services. And it pays competitive wages for a mayor, clerks, and many other employees to manage all of the above endeavors.
My point is: none of the above are legitimate expenses. All of those services could be provided by private companies or by charities. What is left? The police force, the municipal court, and the town jail. How much should those three things cost (assuming that they are all necessary)? Do you think that they could be provided for $250,000 or even $100,000 in a residential town of 16,000 people? If your answer is yes, I have a piece of interesting news for you: South Orange, New Jersey, in cooperation with a local bank, has become the first municipality in the United States to sponsor its own credit card; and each time a cardholder uses that card, he or she will be donating one percent of the transaction to the town of South Orange. That card is expected to raise $100,000 to $250,000 every year.
Now, municipal credit cards may not cover every expense of every government entity in existence. But I am sure that similarly creative, voluntary financing schemes can be dreamed up -- everything from official T-shirts and other paraphernalia to telethons and other kinds of fund drives. And we all have received phone calls from our local police force asking for money with which to purchase bullet-proof vests or a new squad car or whatever. The above are a few of the innumerable potential ways to voluntarily raise money for government.
In addition, government can raise other revenues without initiating force against innocent citizens through taxation. Government can use its power of retaliation to force those who commit crimes to compensate the victims for their losses, and can legitimately keep a portion of such monies because it is only the retaliatory power of government that makes such recompense possible. Furthermore, all civil and criminal offenses should incur fines that go directly to government, since government (i.e., the law) is a kind of victim of all such offenses. Certain "user fees" are also probably legitimate, for example money collected to pay for court costs, including the tradition of levying fines for frivolous lawsuits (in a free society, such services should be priced in line with those of private arbitrators). Prisoners can be made or enticed to work, with a certain percentage of the sales going to government. And none of the above methods (excepting perhaps some kinds of user fee) involves the initiation of force that is inherent in taxation.
It should be clear that my ideas on how to finance government are different from those of Mr. McGath and of Mr. Franck, because my conception of government is different. Mr. McGath seems to believe that government is analogous to a business, with the result that we should fund it on a pay-as-you-go basis, as we use its services (where this leaves the poor is an interesting issue -- presumably the government has no obligation to serve you if you have not paid for its services). Mr. Franck seems to believe that government is a kind of lord over its citizens (though a benevolent one), with the result that government deserves to have the power to take money from the citizens in the form of taxes.
I have a different vision of government. Perhaps government is, more than anything else, a kind of charity. Surely government provides the "service" of retaliatory force, but it provides that service equally to one and all, regardless of how much one has paid for that service. The appeal of government is that it concentrates the use of retaliatory force in a monopoly that retaliates objectively, according to written laws. Protecting individual rights and retaliating against those who violate rights, is something that is in the universal, common (not collective) interest of all citizens. It is a "service" that all should be willing to pay for through voluntary donations (supplemented by user fees and compensation for criminal and civil offenses) -- and a service that they should be able to pay for, given the severely limited nature of government in a free society.
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