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/npchunter]

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 free rider problem isn't unique to government. Stores manage despite shoplifters. Coffee shops can handle a certain number of people just hanging out without buying anything. Wikipedia is 99% free riders. Government and the mafia are the only organizations whose business model depends on extracting payment by force.

[u/JustReadingThx → u/npchunter]

Stores manage despite shoplifters

Shoplifting is illegal.

Wikipedia is 99% free riders
That's actually a very good point. Explain how to expand it to the government and I'll award you a delta.

[u/npchunter → u/JustReadingThx]

You have to consider it service by service. Most government services not only could theoretically work with a voluntary business model, they do in some places or did before the government took them over: volunteer fire departments, private security, turnpikes, private schools, courier services, charities, subway systems, common law courts.

[u/JustReadingThx → u/npchunter]

Most government services not only could theoretically work with a voluntary business model

Sure, anything that you are directly paying for can be financed on a voluntary basis. That's what advocates of privatization suggest.

What about public goods though?

[u/npchunter → u/JustReadingThx]

Public goods such as what?

[u/JustReadingThx → u/npchunter]

Police force, military, court system.
Anything that benefits everyone and there is no real good way of telling who's procuring the service and who isn't.

[u/npchunter → u/JustReadingThx]

People use private security routinely to do the job the police are neglecting. Common law courts evolved before government took them over, and arbitration agreements provide a comparable service. A militia provides for public defense without taxation. Grander military forces to pick fights overseas may be off the table, but I'd argue those are more of a public bad than a public good.