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According to the Ayn Rand Lexicon, an Objectivist society would have a voluntary tax, and that it would be in the individual's self interest to pay it. If I made a good amount of money and I could afford to pay it, I would. In any other situation, I would not. The obvious answer to the question would be that the government would go bankrupt, and it would cease to operate.

However, it should be noted that before the ratification of the Constitution in 1787, the United States of America was governed by the Articles of Confederation, which basically followed the premise that people would voluntarily give their money away, on the basis that the government didn't have the authority to collect taxes with force. No. That didn't work, and the Founders realized that in order to collect revenue, they needed some amount of force to fund what was once the three most basic forms of government: police, courts, military. There is plenty of more evidence that nobody would voluntarily pay taxes. I keep hearing stories on the news all the time where a woman dies in a hospital waiting room and nobody checks up on her, or when a homeless man dies on the sidewalk while everyone walked on by, carrying on with their own business. You say that people would pay it on their own accord, but you're relying on theory. It's a noble thing to believe in, I agree, but I can't help thinking about the fact that nobody cares. Nobody cares about the children dying in Africa; nobody cares about the crumbling streets--until it effects them directly. If people cared beforehand, we wouldn't have such troubles, would we? That's the real point in this question. I guess people would pay up until after the last minute, and that is frightening.

The initiation of force is illegitimate, I agree. Taxation is an initiation of force. An Objectivist government (police, courts, military) would only use defensive force, which is legitimate. Wouldn't it be legitimate if we considered the tax defensive, hence legitimate? A "totally free" society would be a state of anarchy, which ultimately leads to gangs, etc. Taxation must be a form of force, or else nobody would pay it. People donate to charities voluntarily, which is fine, but once you change the name from The American Red Cross to The United States of America, nobody's going to donate anymore. Getting taxed doesn't feel good both emotionally nor financially, and people won't subject themselves to it voluntarily.

On the side, I would also like to ask what would happen to those who choose not to pay the voluntary tax in this hypothetical Objectivist society.

asked Jul 31 '12 at 20:15

Collin1's gravatar image

Collin1
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edited Aug 03 '12 at 11:42

You can't be agreeing with Objectivists in thinking that all forms of force are illegitimate, because Objectivists don't think that is true. Objectivists hold that the initiation of force is wrong, while the defensive use of force is good. A proper government would most certainly use force -- but it would do so only in response to an initiation of force, to nullify the threat and/or rectify the harm.

(Aug 01 '12 at 12:56) Greg Perkins ♦♦ Greg%20Perkins's gravatar image

Objectivists recognize taxation as an initiation of force, so a proper government would not use taxes to raise funds. The initiation of force isn't ever benevolent in any degree, so about all one could hope for on the way to eventually eliminating taxation is to minimize the damage and economic distortion as much as possible (like, tax consumption rather than production; don't favor one person, class, or industry over another; make it as visible and transparent as possible; don't do "social engineering"; etc.).

(Aug 01 '12 at 13:04) Greg Perkins ♦♦ Greg%20Perkins's gravatar image

Sorry for going off topic. I tried to find a way to send a private message to ask this, but I couldn't find one: How does a tax on consumption minimize damage and economic distortion compared to a tax on production?

I would think that a consumption tax distorts things even more, as it provides an artificial incentive to save rather than consume.

(Aug 01 '12 at 15:38) anthony anthony's gravatar image

That sounds like an excellent question! ;^)

(Aug 01 '12 at 16:12) Greg Perkins ♦♦ Greg%20Perkins's gravatar image

Back to the original question: I believe Rand and other objectivists would agree that a free society, with a constitutionally limited government, with the single goal of preserving and defending individual rights, and voluntarily funded, would require a society grounded in reason. If we woke up tomorrow to find such a government, it would not survive long. The collectivists and altruists would have us back in a mixed economy and rights-violating system in no time. Our culture needs to change first.

(Aug 05 '12 at 01:48) JK Gregg ♦ JK%20Gregg's gravatar image
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Craig Biddld has a great article on just that in the recent issue of "The objectivist Standard" How Would Government Be Funded in a Free Society?

To address a few of your points:

  • It would indeed be in your best interest to support a proper, rights respecting government to the extent you could and to the extent you benefited from it.
  • Craig does a much better job than I can in this limited space explaining why such a system would not be bankrupt (Hint: A rights respecting government would be much smaller / less expensive than the monster we have today.)
  • The initiation of force is illegitimate. Note that police, courts and military are all (properly) forms of defensive force - police in response to domestic crime, courts to arbitrate contract disputes and military to respond to foreign aggression.

answered Aug 01 '12 at 00:04

Jason%20Gibson's gravatar image

Jason Gibson ♦
1184

We all hate the idea of giving up our income for taxes, particularly if we have earned it! We absolutely do need some government (defense, police, courts) and I feel that the fairest means of taxation is very high taxation on inheritance (because those due the inheritance rarely deserve it -- and they shouldn't need it if they are self-sufficient) + other voluntary contributions to government.

(Aug 01 '12 at 13:31) orb85750 orb85750's gravatar image

Inheritance taxes are pretty much meaningless without gift taxes.

So are you proposing gift taxes too?

(Aug 01 '12 at 13:43) anthony anthony's gravatar image

You make a good point, given that mas$ive gifts would be an easy way to circumvent the system. Was not Rand generally opposed to receiving high value gifts?

Anyway, the money needs to come from somewhere, and I don't think that voluntary tax payments would fully fund the government. So what would be least offensive, if not inheritance taxes?

(Aug 01 '12 at 14:01) orb85750 orb85750's gravatar image

I do not believe Rand was opposed to receiving high value gifts which she deserved.

As for your claim that voluntary payments would not fully fund the government, I basically just disagree. I don't think people would let the government disappear because they can't figure out a way to enter into a contractual agreement among themselves to fund it.

(Aug 01 '12 at 14:46) anthony anthony's gravatar image

We should not have an inheritance tax at all. If I own something and I choose to hand it down to someone I know, who are you to say they don't deserve it, when I clearly made it obvious that they do, when I decided to give it to them?

(Aug 01 '12 at 14:50) Collin1 Collin1's gravatar image

The point I'm trying to make in this question is that if we all lived under a government which got funded via a voluntary tax system, nobody would pay it. The Articles of Confederation is my prime example.

(Aug 01 '12 at 14:52) Collin1 Collin1's gravatar image

"If I own something and I choose to hand it down to someone I know, who are you to say they don't deserve it, when I clearly made it obvious that they do, when I decided to give it to them?"

I agree. Although, this is really indistinguishable from a gift. I think automatic inheritance, of a person who dies intestate, is a bit trickier.

(Aug 01 '12 at 15:03) anthony anthony's gravatar image

"The point I'm trying to make in this question is that if we all lived under a government which got funded via a voluntary tax system, nobody would pay it."

Oh, I don't agree with that at all.

If this were true, wouldn't all non-profit organizations be broke?

"The Articles of Confederation is my prime example."

That wasn't a government, though. That was a super-government. A coalition of governments.

(Aug 01 '12 at 15:07) anthony anthony's gravatar image

We are all capable of writing wills. There is nothing stopping you from writing down to whom you'd like to give your fortunes to. You can give them to people you feel have earned it. Also, the word "gift" should not appear in any law book or whatever. A gift is a transaction between two or more people, and it shouldn't be a concern to any parties outside that circle. Period.

(Aug 01 '12 at 15:09) Collin1 Collin1's gravatar image

People donate to charities for different reasons, but once the charity becomes the US Government, they'll stop donating because, as I've written above, taxation isn't as rewarding emotionally, and people won't subject themselves to it voluntarily.

(Aug 01 '12 at 15:12) Collin1 Collin1's gravatar image

I'm not sure why we're still talking about wills and gifts.

As for people not donating to the US Government. Well, first of all, voluntarily funded governments would probably tend to be smaller, geographically. But secondly, I just don't see why not. I can see why people don't want to donate to the current US Government. But a proper government based on Objectivist principles would be a totally different story.

(Aug 01 '12 at 15:22) anthony anthony's gravatar image

Even Rand's very limited government would require an enormous amount of money. Has anyone done the math? (I haven't.)

(Aug 01 '12 at 20:41) orb85750 orb85750's gravatar image

Inheritance is rarely earned. If we're going to be taxed, it's better to take it from there than from the income we earn ourselves with hard and honest work. Speaking of inheritance, what about the legacy of slavery? Those massive sums are still being handed down from generation to generation. Much of that money was obtained immorally, by forced labor.

(Aug 01 '12 at 20:44) orb85750 orb85750's gravatar image

Are you kidding me? How would you feel if someone stepped in between yourself and your son and said he doesn't deserve your fortunes? That's just as evil as a man saying you didn't create your own business.

(Aug 01 '12 at 20:58) Collin1 Collin1's gravatar image

That's a shockingly poor post. I can't believe that you are even comparing money received as a gift to the money one earns from his own business, which has been built with countless hours of hard work, hard thinking, and perseverance. Any slacker can become wealthy instantly with a nice inheritance. It's by pure luck that he gets those dollars, by virtue of having the right parents, which is why it makes more sense to tax those dollars instead of the dollars one earns as a result of his own good work (assuming that a voluntary tax doesn't fund the government).

(Aug 01 '12 at 21:11) orb85750 orb85750's gravatar image

Doing the math would be entirely speculative at this point. As is the whole exercise, really. The current debate is not over how to fund a limited government, it's over whether or not to have a limited government in the first place.

If we're going to be taxed, I'd probably favor a land value tax. But taxation is immoral, and I don't believe taxes are necessary.

On this point I'm not sure my position is consistent with Objectivism, though. Personally I think police and courts should be funded primarily through user fees, just like fire protection and medical care.

(Aug 01 '12 at 21:34) anthony anthony's gravatar image

@Collin1 - funding a rights respecting government is not an 'emotional' decision - it's a values-based one. I for one would lean towards businesses that "pay-up" vs freeload as would many others - similar to how I avoid when possible companies that support socialism, mysticism and the like today and try to patronize those that are more aligned with my SOL.

(Aug 01 '12 at 21:37) Jason Gibson ♦ Jason%20Gibson's gravatar image

Orb, do you think Leonard Peikoff deserved to inherit Rand's copyrights? Do you think he earned them? Do you agree that the government has no right to charge neither Peikoff nor Rand for this transfer?

I understand this is not a typical case of inheritance, but I was wondering your view on this.

(Aug 01 '12 at 21:41) anthony anthony's gravatar image

In any case, I think a tax on inheritance is a nonstarter without a tax on gifts. And even if it were right to tax gifts, which it isn't, avoiding gift tax in a world without income tax would be trivial (and/or trying to enforce the tax would be incredibly intrusive - who's going to determine the fair market value of a game of hide-and-go-seek with your grandkids? what about the fair market value of having your kids visit you in the hospital in your final weeks of life?).

Not to mention all the fun things you can do with trusts. And life insurance. Et cetera, et cetera.

(Aug 01 '12 at 21:44) anthony anthony's gravatar image

Estate planning today is basically a choice between income taxes, gift taxes, and inheritance taxes. Eliminate income taxes, and it becomes a choice between gift taxes, inheritance taxes, and no taxes.

Google "lifetime caregiver agreement" for an example, if you don't know what I'm talking about.

(Aug 01 '12 at 21:49) anthony anthony's gravatar image

Orb, you're talking about people who inherit money as if they're a bunch of freeloading moochers. Whom I deem worthy of my estate and whom I choose to give it to is nobody else's business except myself and those who are written in my will. It is not up to you or even Ayn Rand herself to tell me how to manage my property. It is the principle that I can do whatever I want with the property that I own that I follow. You must consider this first, or else you are not following Objectivist ethics. I'm not trying to be mean, but you must check your premises.

(Aug 01 '12 at 22:17) Collin1 Collin1's gravatar image

And how did we get to this anyway? I'm merely trying to figure out how the government would collect revenue through a voluntary tax system. Just for a laugh, I'll tell you this. I told my mom about how Objectivism would handle taxes, and I asked her if she'd donate the money she earned. She said "no" rather loudly, but she did say she'd give $10 to the military. I cracked up.

(Aug 01 '12 at 22:20) Collin1 Collin1's gravatar image

Guys, my comments about taxing inheritance were made assuming that a voluntary tax to fund limited government will not work. It is not completely clear to me that is true.

Anthony, I have not thought about the issue of Peikoff inheriting Rand's copyrights. You could argue that he earned them.

Collin, some people that inherit large sums of money are in fact lazy, freeloading moochers (I know a couple), and some are not.

(Aug 02 '12 at 00:01) orb85750 orb85750's gravatar image

Can I suggest we break this up into at least one or two new questions instead of keeping this one going for as long as it has? One on "Inheritance" the other on "Gift Tax" might be a start.

(Aug 02 '12 at 17:20) Jason Gibson ♦ Jason%20Gibson's gravatar image
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The original question apparently is prompted by the topic of "Taxation" in The Ayn Rand Lexicon. The excerpts provided in that topic make several key points, but unfortunately do not include some additional important material from the same VOS article. The points expressed are:

  • "Taxation," i.e., government financing, would be entirely voluntary in a free society. (This includes elimination of all compulsory gift and inheritance taxes as well as taxes on income, property, and/or sales.)

  • This would be economically feasible because government would be limited to its three proper functions and would be vastly smaller than it is today. (There also would not be military excursions into Iraq or Afghanistan unless the public was willing to pay for them.)

  • Voluntary taxation emphatically is not feasible economically today because government today is far too big and goes too far beyond its three proper functions.

  • Implementation of voluntary government financing (in a future free society) is a task for the philosophy of law:

The question of how to implement the principle of voluntary government financing—how to determine the best means of applying it in practice—is a very complex one and belongs to the field of the philosophy of law. The task of political philosophy is only to establish the nature of the principle and to demonstrate that it is practicable.

How, then, does Ayn Rand "demonstrate that it is practicable"? This seems to be the crux of Collin's question. What is missing from the Lexicon excerpts is that Ayn Rand described two specific implementation possibilities in her full VOS article, "Government Financing in a Free Society":

  • A government lottery. Note that this method offers participants something in return for their money, in addition to the abstract value of supporting their government: it offers them the possibility of winning a large payback, if they win the lottery. In the many years since Ayn Rand's article was written, we have seen increasing numbers of states in the U.S. adopt lotteries of one kind or another, with plenty of interested participants all looking for "the big one." Overwhelmingly, we all know the chances of winning "the big one" are miniscule, but not zero, and winners do exist. That much, along with the idea of "contributing to a good cause," seems to be enough to attract great sums of money from huge numbers of eager participants. Offering something in return for such "contributions" is a perfect expression of the principle of trading value for value.

  • Governmental contract insurance -- a fee paid voluntarily by those who sign contracts, in exchange for access to the legal system in the event of a breach of the contract. Those who choose not to pay would not have such recourse:

Such an insurance would not be compulsory; there would be no legal penalty imposed on those who did not choose to take it -- they would be free to make verbal agreements or to sign uninsured contracts, if they so wished. The only consequence would be that such agreements or contracts would not be legally enforceable....

Note again the principle of trade in this approach. Insurance is a highly financially lucrative business today. (One might think that an unenforceable contract is meaningless, but there are plenty of cases where trades take place based on the sincerity and good will of the traders, with the possibility of legal recourse seen as remote and unlikely. Very often the threat of losing future business for being unreasonable is enough to motivate both parties in a trade to abide by their mutual understanding.)

Ayn Rand's article also emphasizes that this proposal is only an illustration, an example of one way that it might be done in a practicable manner. Again, note that it is far too premature today to discuss implementation when there isn't even the beginning of agreement on the principle -- the principle of a properly limited government in a fully free society. The "what" of government has to be settled before the question of how to pay for it can be given much consideration (beyond showing how it might be done in a practicable manner, as a form of trade).

Update: More on Lotteries

A commenter questions the viability of a lottery as a means of financing a properly limited government in a fully free society. Ayn Rand's exact mention of lotteries in her Feb. 1964 article is extremely brief, basically just a single sentence:

There are many possible methods of voluntary government financing. A government lottery, which has been used in some European countries, is one such method.

(VOS, Chap. 15, pp. 135-136 in the Signet paperback edition.) The article then discusses contract insurance in considerably greater detail, along with still more discussion of the underlying philosophical principles and effects of voluntary government financing.

I do not know whether the type of lottery mentioned by Ayn Rand is a government monopoly, but I would certainly agree that Objectivism opposes all laws against gambling. I would also point out that one of the remarkable features of a free market is that the presence of one producer in a given market doesn't necessarily preclude the presence and economic viability of other producers. There are also many different forms of gambling, all of which can readily coexist with each other in areas of the country where the law allows it.

answered Aug 03 '12 at 16:07

Ideas%20for%20Life's gravatar image

Ideas for Life ♦
467718

edited Aug 05 '12 at 01:47

A government lottery is unlikely to be much of a revenue generator unless the government holds a coercive monopoly on lotteries (as governments do today). And I don't think Rand was proposing that kind of government lottery.

I'm really not sure why Rand would have brought up the idea of government lotteries in the first place. Elsewhere she called for "a complete separation of state and economics". I don't think she'd want the government in the car sales business. Why would she want it in the lottery business?

(Aug 03 '12 at 17:01) anthony anthony's gravatar image

In direct response to your question, there would be no society if the individuals refused to voluntarily bear the cost of that association. In a properly formed free society the members have the choice to pay or not. If they choose not to pay, they no longer have membership. That is all that is required to formulate an Objectivist/capitalist society.

It is like joining your local country club. The managers determine what the fees are going to be for the services anticipated, you decide to be a member or not. Under a voluntary world system, there might be states/countries with varying levels of services, and associated costs, as determined by their members. Some might require/choose a police force, some might not. Some might be very complex, and very large, and require a significant contribution, some might even require members to pay in advance, even for a predetermined number of years, in order to provide revenue stability. Regardless the specificities, at any level, all members would have to agree to pay, otherwise simply not be members.

I would also imagine that in some states/countries the military would consist of participation by all members, each person bearing their own costs. In others it may be a combination of financial supporters and volunteer soldiers - or even financial contributors and paid soldiers. However, it would require that all be in agreement the military is necessary and that all members are willing to bear the burden of the cost.

Some might argue that the U.S., and all other nations frankly, already have a voluntary membership system. Rather than discuss that here, I think that assertion might be properly addressed in a different post.

answered Dec 13 '12 at 16:19

MarcMercier's gravatar image

MarcMercier ♦
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Asked: Jul 31 '12 at 20:15

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Last updated: Dec 13 '12 at 16:19