Since taxation is out of the question, what moral ways are there to fund government?
asked Sep 19 '10 at 19:52
Ayn Rand had her own thoughts on this topic in the essay "Govenment financing in a free society," available in The Virtue of Selfishness. To begin with, after noting that this topic is part of the science of the philosophy of law rather than philosophy itself, she pointed out that any answer that can be given has to be judged in light of the context of the particular institutions of the society in question. Different societies may find different concrete methods agreeable to them and consistent with their own particular social institutions, which is perfectly acceptable so long as the principles of justice and laissez-faire are adhered to and that the concretes are instances of those principles.
For example, given that the modern society is highly contractually-based, one of her suggestions is a kind of insurance premium on the value of the credit component of contracts. Only those who had paid the insurance premium could then initiate a civil case arising from a dispute with other parties to that contract. Given both the sheer amount of money involved in these contracts, and that in a free society there would be far less occasion for disputes that need court involvement, it is not hard to imagine a court system ending up with more money than it needs even were only a small fraction of contracts insured in this manner. She even seriously wondered if this revenue stream alone would be sufficient to cover the whole of legitimate government expenses. She also noted, though, that such a scheme would not be without its difficulties, both of a principles and technicalities nature. These are what the individuals in society of the day have to sort out for themselves.
Another possibility is to make greater use of what is already done in some countries: impose the court costs on those who were actually wrong-doers. This could, and in some places already does, include puntive fines intended to fund a system of restitution to victims of crime. This could easily be expanded to cover payments made to those who voluntarily take up jury service. However, prudence would strongly suggest that punitive fines not be used to support any of the mechanics of government itself, particularly not police and prosecutors, lest an incentive to improper prosecutorial behaviour be generated.
And of course, simple direct donation to government is not to be discounted, either. Today there are already pledge drives for various worthy causes that the rational and selfish man can and does get involved in and contribute to, and again it is not hard to imagine that this could be applied to government services (particularly police and military defence) that it is clearly in the interests of people with values at stake to support. In a society populated by a majority of free and rational people, without taxation, there would be far more money available for these efforts than today. For an encore, businessmen of all kinds could then be authorised to indicate how much they have paid, and so customers could include consideration for this in determination of whom to give their custom to. That principle could be extended quite a number of ways, too, and which would render the "free rider problem" as a total non-issue - but again such a system should not become inconsistent with the principles of morality and justice behind rational social institutions.
In the end, Ayn Rand is right. Under a free society the bulk of men would be rational enough to recognise that voluntary systems are in their own interest, and would happily support them. The real problems are finding concrete systems that are consistent with both the moral principles applicable to all men and which are consistent with the particular institutions of each society, and also that governments are likely to end up having more money than they need and so men have include means to hold back the big spenders in their funding and oversight institutions.