As most Objectivists will agree, financing a government is something Objectivists have yet to completely figure out. Most shrug it off as unimportant or start spinning their wheels with such non-answers as, "well, let's reduce the size of government first and then talk about funding a government."
These answers are evasions of the issue. All Objectivists should take with solemn seriousness the proper method to fund a government. This issue cannot be dealt with haphazardly. If the government is improperly designed, with funding being the primary issue, a government could collapse on itself and turn into anarchy or mob-rule democracy. These distinctly fall short of the Utopia of a constitutionally-bound republic that Objectivists consider to be the Utopian political-economic structure.
First, it should be noted: a government is not a luxury to man, it is a necessity. It is not a question up for a debate, philosophically, the need for the existence of a government is paramount. The existence of a capitalistic government is indispensible to man's survival. There must exist a government, a higher authority than man himself, to enforce a proper code of justice -- one that protects his property rights. Without it, a man would no longer be able to live as a man, and instead would turn into a thug -- being forced to protect his own belongings. This is not a proper way for man to live; a man should be allowed to concentrate on his production and his production alone -- not his own protection. Morally, a man must live in a society in which he is guaranteed the protection of his property, the necessity of the existence of a government is not up for debate.
However, how can a government, a necessary institution for man, fund itself without doing the very thing it is meant to prevent: taking someone's property? Does not a government need the power of taxation?
No, say most Objectivists. Many Objectivists claim that a government can be funded voluntarily, without taxation. Although most Objectivists fail to make the divide, there are two different methods of voluntarily funding a government. The two voluntary methods of funding a government are arbitrarily and non-arbitrarily. Ayn Rand correctly made this divide and supported a government be funded voluntarily, but not arbitrarily.
Many Objectivists claim that in a "rational" society; all individuals should be allowed to initiate payments to the government of their choosing thus exchanging money for governmental services in a free market transation. This method of voluntary taxation is the arbitrary method. Citizens can choose which government their donation will go to, thus it is entirely possible that more than one government can exist. This method is one in which the government that citizens fund is arbitrary, the amount that they will pay is arbitrary, and thus what government exists and how stable it exists would be arbitrary.
This method is an irrational and impractical idea. Having a government "voluntarily" paid for, with its citizens voluntarily initiating to pay for their government, would defeat the purpose of a government, and would turn the government into a market function. The existence of the government would be dependent on pleasing its customers. Who will determine what the government is? The customers. If the customers want to prohibit drugs, tax the rich, or institutue slavery -- that is what will happen. The government, operating like any business, would be in the business of pleasing as many people as possible with the biggest donations. Who would stop citizens from choosing different governments? This method of paying for a government, in which citizens could choose and pay for whichever government they wanted, is identical in nature to free-market anarchism. Indeed, arbitrarily paying for the government and free-market anarchism are not merely similar, they are exactly the same. This method is free-market anarchism.
This method of paying for a government should be strictly ruled out of any rational society. A government is not and should not be a function of the market. The government is not an insitution in which people can go to the store and pick, and more importantly -- pay for -- their favorite brand. The ability to choose is something that is exclusive to the market, not the government. The correct government is objective -- it isn't up to the subjective whim of any citizen in a region.
Indeed, this method of paying for a government, in which private citizens voluntarily pick and pay for the government that they want, is not what Ayn Rand advocated. In "Funding a government in a free society," Rand clearly came down on the side that government should be funded voluntarily -- but not arbitrarily. Indeed, both Objectivists themselves and Objectivist critiquers usually fail to make this divide.
Rand did advocate that a government be voluntarily funded, but she rejected the idea of citizens choosing the government that they want and then paying for it in a market transaction. Instead, she thought of some creative ideas to give the government an objective amount of money while maintaing that that money was voluntarily extracted. Her two ideas were to fund the government by means of a lottery or by means of a "contract insurance." The first is self-explanatory, the government would raise revenue by running a lottery. The second was her idea that since the government protects contracts, every time two people enter a contract (which is voluntary), they should pay a fee to the government. Both of these make it so the method of funding a government is voluntary, i.e. you can choose when you buy a lottery ticket or when you enter a contract, but it distinctly does not advocate that what government you pay for or how the government gets its money be left up to the subjective whim of the constituents of a region, i.e. be arbitrary.
These ideas, although noble, are self-defeating and morally wrong. First, in order to run an effective lottery, the government would have to have a monopoly thus shutting down any other organization that wanted to run a lottery. This distinctlly would be the initiation of force, thus immoral according to Objectivist philosophy.
The contract insurance ideas is also wrong. When you enter a contract with a person, morally, the government should simply protect that contract. It is a function of government that should automatically be upheld, it should not be contingent upon paying a fee to them. The same could be said for individual property. When you produce wealth, the purpose of the government is to protect that wealth, thus you should have an income tax on that property to pay for the services rendered by the government. The contract insurance idea, like an income tax, is morally wrong.
So the arbitrary voluntary method of financing government should be strictly ruled out - as the system of government would quickly collapse into a free market anarchist society, and also the non-arbitrary voluntary methods should be ruled out as being impractical and immoral. This leaves the question, again: should the government be given the power of taxation?
This point was the primary issue mulled over in The Federalist Papers by our Founding Fathers. They did not take the issue of taxation lightly or shrug off the responsiblity of paying for the necessary institutions of government as a minor issue. Although they did not like the idea of giving the government the power to tax, they recognized that having the power to tax, at least having the power to have some objective steady income, is an indispensible ingredient for the existence of government. Given no other options, the Founding Fathers thus gave the government the power to tax. As Alexander Hamilton said, having the power to tax is the very "life-blood" of a government.
A government must have some objective amount of money coming in. This objective amount of money must come from taxation, as noted by our Founding Fathers. This sets up for, again, our original dilemma: a government must exist as a necessary condition for man's survival, and yet it cannot exist without doing the very thing it is meant to prevent: take a citizen's income. Now what does one do?
If this were the case, that a government must tax its citizens to exist -- then so be it. The government should thus exist and it should take a small portion of its citizens income to fund itself. To anyone who cries this is unfair: too bad. This is the price you pay to live in a civilized society. The existence of a government is simply necessary for man's life. The existence of a government is more important than the slight shaving that would be removed from man to maintain its existence. With a slight shaving from his pocket -- man can still live. With the abolition of the government -- man would live in a perpetual hell.
Some amount of "crime" will always exist in society. Utopia is not an option. The only way man can exist in a world in which there was no crime, i.e. no one took from another's property, is if everyone in the world all mutually agreed to never steal or hurt one another again. Given this will never happen, it thus entails that someone somewhere is going to have a crime committed against them -- and yes, it is unfair. However, since Utopia is not an option, the goal of a society is not to eradicate crime, but to minimize it.
Indeed, the very existence of a government is manevolant in nature. The existence of a government is set up with the manevolant premise that crime will exist and it must be dealt with. If Utopia were possible, in which no one had anything "stolen" from them, either from privatize citizens or the government, then the existence of a government would not be necessary.
But the existence of a government is necessary. Indeed, under the premise that the goal is not to eradicate all crime, but to minimize it, one should support the existence of a government with a slight shaving from man to sponsor it. Without a government, sure, a man would not have property stolen from him via the government, but now, without a government, all criminals in the world are waiting, with fork and knife, for him to accumulate some wealth. Having a capitalistic government with the power to tax is necessary for a safe and healthy society.
Indeed, if it were such the case that a government cannot exist without taking from the genuine property of man; then one would advocate to take the slight shaving of man in order to maintain a functioning, healthy society. However, we have been under the assumption that taxation necessitates a hamper on man's survival. Too often free-marketers think in terms of liberty vs. non-liberty (aka force). Indeed, the dilemma revolving around taxation and government comes down to "a government cannot exist without initiating force." However, one must go back and "check their premises."
The question one must ask is: why is the initiation of force wrong? The reason why the initiation of force, be it stifling a man's opinion, putting strict restrictions on his business, forbidding him his money etc., is wrong is because it takes away from man's life. Specific to taxing, it is wrong because it takes away from man's productivity -- the "life-blood" of his life. It would be more accurate to speak in terms of taking of productivity, not liberty, when speaking of a taxation.
When one frames it this way, the question then becomes -- Can a government exist without taking from man's productivity? That answer is yes.
Productivity is the basic means of survival for man. Productivity, by definition, is the creation of wealth. Man cannot live without productivity, without the creation of wealth. A plant can live without productivity - it only needs to absorb the sun's rays to live. An animal can live without productivity, it merely kills other living species of animals to survive. Man would perish if he lived in either of these ways. From forming the simplest knife and building the simplest hut to designing complex cars, heaters, and medicine - man must produce to live.
To take away from man's productivity is to take away from the very source of his life. A man has the moral right to every penny that he produced by his own mind, by his own effort. He created them and they are his. A proper government is designed to protect man's right to produce and keep his production. Man must be given full security from an institution higher than he that they will protect his individual rights.
Indeed, funding this particular government is the very dilemma of this piece. However, our dilemma has become more precise, and has been put into more appropriate terms: how can a government exist without doing the very thing it is meant to prevent, take from the productivity of man?
If it were such that a government could not exist without taking from man's productivity, then a government would indeed be forced to do so. However, there is a tax which would generate revenue for a government which would not take away from man's productivity, i.e. would not take away from man's life. That is the land tax.
Productivity is based upon the metaphysical fact that man must make wealth. Most wealth that man enjoys is indeed brought to him by one means and one mean only - by creating it. There is wealth, however, that is not made, but taken.
Land is not such a good that is made or produced. Land simply exists, and has automatic value to human beings regardless of any production added to it.
People who own land thus own it by coercion, not production. They either "got there first," or seized it. A man who owns a piece of land and sells it to his neighbor is not receiving a profit for efforts of his own mind, but from seizing a free gift from mother nature.
A tax on land would thus not be a tax on productivity. It is not taxing a good that was produced by man's mind. The practical implementation of the land tax would be as follows.
Each plot of land would have a "rent" assigned to it. That rent would be based on the market value of the raw, bare land that exists on the given plot. Each person would pay their "rent" to the government on a regularly given basis (yearly, biyearly, whatever) and if they chose to move off their plot of land, they would simply relinquish themselves of their former rent and pick up the new rent on the new land. No exchange of money for the land would exist between a previous owner and the new owner. There would be an exchange of money for the man-made goods, such as the house, the garage, and any other produced good on the land, but not for the metaphysically given goods. The previous owner would not be able to profit off of a free gift of nature.
Indeed, not only does the land tax not take from productivity, as it is in essence paying for a good that is given naturally to all man, it removes the ability of some men to take from the productivity of other men. The land tax removes the ability of a landowner to receive a welfare check. The pennies in a landowner's pocket are not earned pennies. The land tax merely reroutes revenues that would have gone to make a landowner's pocket fatter to the government. The land tax simply reroutes where money that would normally be spent goes.
As one can see, the land tax does not take from man's productivity. It takes away a person's ability to make a profit off of land. Excuse me, it removes a person's ability to take a profit off of land. Again, the land tax distinctly does not take from the productivity of its citizens.
Not only that, but the net sum that you will pay for your "tax" is $0. No matter what -- you have to pay for land. The only question is, do you pay to it to a former landowner in one lump sum or to the government over a period of time. Since you have to pay for land no matter what, you will be hit in the pocket -- thus the net sum of what the government would be "stealing" from you is $0.
Indeed, the land tax is just as "voluntary" of a tax as a lottery or a contract insurance idea. It is completely voluntary if you want to own land, just as it is voluntary if you want to enter the lottery or enter a contract. Indeed, it could be rationally argued that the land tax is more voluntary than either of Rand's two voluntary non-arbitrary ideas.
The funding of a government is not a minor issue. It is a major issue. It is such an issue where, if the government were not funded, all objective law in society would break down, and men would be left living in a state of hell, i.e. in a state of anarchy. It would be particularly dangerous if one adopted the abritrary method of taxation in which citizens were expected to initiate payments on their own volition. This method would turn the government into free-market anarchy thus breaking down all objective law in society.
Without proper funding, and an ability to keep its authority, a government is weak and unstable. The fluctuations of a "market-driven" tax (such as from the lottery) is insufficient. A government simply must have the power to tax.
However, there is a tax that can be levied on citizens which would not unjustly take from anything they produced. That is the land tax. The land tax does not take from man's life. The land tax should be upheld as the proper and objectively correct method to pay for an indispensible institution to man's life -- a capitalistic government.
Amber Pawlik
January 9, 2001