Imagine No Taxes

On Tax Day, I dared to wonder what happiness I might pursue with the money I earn but never see. I asked readers to join me in the exercise and imagine what they might do with the money they lost to taxes last year. Reader Mike Mahoney added this insightful comment:

I would probably wind up spending it on protection, roads, litigation services. If one looks at tax receipts and the portion of the budget that is enumerated as a power to do things in the constitution you’ll note a similarity. The rest is all done on borrowed money. So, if I didn’t pay taxes I would still pay.

Mike lands a fair point. Government certainly provides a value. In the absence of particular government services, we would need to pursue alternatives, thus incurring expense.

Of course, in that case, we could choose to pay as we saw fit, and would benefit from the cost and quality controls of the market. Whether we would pay as much for the same services under a private model is an open question. (I think it safe to bet we’d pay significantly less.) However, we know the percentage of our income spent on such services would decrease as we earned more, instead of increasing as it does today. Market-driven prices are rarely progressive.

You don’t pay more for groceries or fuel just because you earn more. So why should you pay more for the services provided by government, particularly if you prove less likely to use them?

An unspoken assumption which may inform Mike’s comment is that a world without taxes means anarchy. But that’s not necessarily the case. Dr. Yaron Brook of the Ayn Rand Institute here briefly explains how government could raise revenue without coercive taxation:

Imagine the effect such an arrangement would have upon our incentives to produce and improve the lives of ourselves and others through trade. The sky would be the limit.