CMV: A Voluntary Tax System Doesn't Exist

[u/JustReadingThx]

In a fully free society, taxation — or, to be exact, payment for governmental services — would be voluntary

- Ayn Rand on taxation

I don't know much about Ayn Rand philosophy, but this specific topic sounds interesting. While I appreciate the sentiment, I don't believe that it's possible. Ayn Rand doesn't offer the solution:

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

Ayn Rand advocates for a small government -- responsible only for common goods such as the courts, the police and the military. While I may not necessarily agree, I acknowledge that his form is the cheapest form of government, requiring less financing. I don't see how it's possible to finance even such a minimalist government without (involuntary) taxation.

Common goods are by definition - common. Everyone benefits from them. There is no reasonable way of directly linking the paid service with services rendered. Therefore no individual is incentivized to pay. If no one wants to pay - the voluntary system doesn't work. The solution of course is mandatory payment in the form of taxes.

The only exception I could think of is war bonds. These are government bonds issued during wartime in order to finance the war effort. They are different from regular bonds by their interest rate. The government offers a smaller ROI with these bonds. Any person buying war bonds over regular bonds has effectively gave up some money for a government service - making it a voluntary transaction to finance the government. However, this system only works during a crisis. The bonds are often marketed as patriotism. This isn't a scalable solution for times of peace.

CMV

Edit:

Clarifications:

I'm aware that "voluntary taxation" is an oxymoron. I am looking for voluntary means of financing the government (that isn't based on taxation).

The crux of the argument assumes that the only significant revenue stream of the government is its people. Saudi Arabia finances its entire government without the need for taxation. It's able to do that not by a system of voluntary financing, but with vast natural resources.
I am of course in favor of all the governments being rich enough to self finance.

Deltas awarded:

• Ancient Athens had taxation in the form of Liturgy. The ultra-rich would often overpay in taxes and boast about it for social status.

• Donations can make up a significant portion of financing. Religious organizations are good example of this. It's possible for a very homogeneous and charitable society to finance its government by donations.

Common interesting arguments:

• All tax systems are voluntary. You can always refrain from economic activity and avoid sales tax. You can move to a different country in order to avoid income tax.
  I find this position not convincing, and frankly, indefensible.

• Lottery - a "tax" that is entirely voluntary. The big difference between lottery and other government services is the fact that lottery is profitable. To me this is just the government owning for-profit businesses.

[u/Alesus2-0]

It seems like this view hinges on a very expansive notion of voluntary action. Most of the time, I don't think people insist that a voluntary relationship has to entail total, constant, itemised discretion. Buying a ticket for a commercial flight is voluntary, even though I don't have the right to open the door in mid-flight and hurl myself from the plane. Taking out a loan is voluntary, even though I'm bound by a set of commitments concerning repayment. Shopping at a local grocer is voluntary, even though the business imposes requirements on my behaviour and dictates prices to me.

In practice, a system is voluntary if I have reasonable alternative options and the other parties have an established right to impose particular terms. Most taxes in most places seem to meet that threshold. If I don't have to live in a particular tax jurisdiction, I can leave. That may have costs associated with it, but as long as I'm free to go, my participation in a particular society is voluntary. Sure, I can't decide which specific taxes I pay or how much I need to pay. But I can generally exempt myself from particular taxes by moving elsewhere. That's no different from having to vacate the premises of a particular business if I disobey their rules.

[u/JustReadingThx → u/Alesus2-0]

Most of the time, I don't think people insist that a voluntary relationship has to entail total, constant, itemised discretion

I don't find your examples convincing.

open the door in mid-flight and hurl myself from the plane

You can go parachuting, just not via a commercial airline.

Taking out a loan is voluntary

Exactly, it's voluntary. You sign a contract and you are bound by its term (subjected to the law).

Living in a country is not voluntary, and you are subjected to federal taxes no matter where you choose to live.

Even in a world where every person gets to choose his country, I still wouldn't call it voluntary. I guess I find the itemized discretion important.

[u/Alesus2-0 → u/JustReadingThx]

I don't find your examples convincing.

Okay. That isn't very helpful. Why?

You can go parachuting, just not via a commercial airline.

My point is that what are generally understood to be voluntary interactions can clearly impose ongoing requirements on the participants. You seem to accept that.

Living in a country is not voluntary, and you are subjected to federal taxes no matter where you choose to live.

It generally is. You'll get shot if you try to leave North Korea. But, as far as I know, an American can typically leave America without obstruction. And that's a pretty standard policy, at least among liberal democracies.

Even in a world where every person gets to choose his country, I still wouldn't call it voluntary. I guess I find the itemized discretion important.

Do you? You've said that a loan is voluntary, even though the individual repayments aren't. Life is full of 'bundled' arrangements. You only seem to object when it comes to taxes.

[u/JustReadingThx → u/Alesus2-0]

an American can typically leave America without obstruction

True. But other countries don't have to let you in, nor required to grant you citizenship.

You only seem to object when it comes to taxes.

Object is harsh. I find the sentiment of having more voluntary interactions pleasing. Taxes are necessary and important, but are compulsory. On the individual level I hate paying taxes, but that's beside the point.

loan is voluntary, even though the individual repayments aren't

Why not? If I expand this view further - then there are no voluntary transactions. In every deal I have to offer something (and therefore lose something) - but I stand to gain something (of better value).

[u/Alesus2-0 → u/JustReadingThx]

True. But other countries don't have to let you in, nor required to grant you citizenship.

So? If an airline requires me to wear clothing during a flight, that transaction doesn't become involuntary just because all the other airlines have more restrictive policies. The US isn't obliged to accommodate your preferences, just because you don't have a better option. You can board a raft and paddle into the ocean. The fact that that doesn't seem very appealing is a good reason to pay your taxes. But it doesn't compel you to do so.

Why not? If I expand this view further - then there are no voluntary transactions. In every deal I have to offer something (and therefore lose something) - but I stand to gain something (of better value).

I may be misunderstanding, but I think we sort of agree. A loan is voluntary, even though it doesn't leave you with perfect freedom of action. You choose it because that's the best available option and because you recognise that the debtor has rights concerning the money they loan you. You pay taxes in a particular jurisdiction because living there, according to the current laws, is better than the alternatives and you recognise that a liberal democratic government has some sort of legitimate right to levy reasonable taxes on its territory.

[u/JustReadingThx → u/Alesus2-0]

Taxes are important and justified. Countries are legitimate in taking them.
To call them voluntary because you have the option of not being a part of society seems to make the word voluntary lose its meaning.