Government Financing in a Free Society

Answered by Malini Kochhar

Objectivism recognizes the necessity of a rational governmental authority that performs the basic functions of maintaining law and order and providing for defense. Its job is the protection of the individual rights of its citizens, and it exercises jurisdiction over the use of force in any sphere of activity. The logic behind this is that government is the entity charged with determining if a given use of force is justified in order to protect the rights of individual citizens from being infringed upon by others.

This does throw up the question of how the activities of the government would be financed, but does not justify the present day system of taxation, which has little justice or rationality behind it, as it is a method of forced payment that violates the fundamental rights of citizens.

Ideally, taxes should be replaced by voluntary payments to the government, which is only possible in a free society.

I suggest you read the chapter on “Government Financing in a Free society” in The Virtue of Selfishness by Ayn Rand, which deals with this in detail. The issue has also been addressed by William R Thomas in his paper “Objectivism Against Anarchy.”

One of Ayn Rand’s ideas for a possible means of voluntary government financing was that individual contracts could include a payment to the government in return for assured governmental enforcement of the contract. That way, the makers of each contract could choose to pay the government a fixed amount that would be built into the contract. The underlying idea was that people could pay for each individual service provided by the government as they used it, and this has some practical applicability in the realm of contract enforcement. The question of financing foreign defense measures is more complex.

Ayn Rand maintained that this example was just an illustration that voluntary payments as a means of government financing are possible. However, the issue will only be relevant once a society is truly capitalist and free. She emphasized that once a society comprehends the importance of maximizing individual freedom, the question of government financing is a technical one, one that lies in the realm of legal philosophy. She didn’t propose any one definite means of replacing taxation, and there is no single Objectivist view on the matter.

The vital issue is to restrict government to its proper functions. With it limited to its key function, it is likely that voluntary support of the government will be as plausible as voluntary support of, say, the Red Cross is today. But however it is financed, a limited government will be a great improvement over the ever-expanding, increasingly oppressive monster we have today.