Sunday, August 14, 2005

Contributing to Government

The United States began as a tax revolt against a very small tax, but one that the founders thought was unjust, labeling it a form of slavery. Refusing to be tax slaves, they started their own government. The problem then becomes: who pays for it? Can you have a government in which money is not forcibly taken from citizens? How would you simultaneously fund government and not steal from the people?

Let's suppose I start an organization that provides a basic service -- defense, for example. In order for people to want to be in my organization, they must believe that they are receiving a quality service and it must not be too expensive. In short, I must meet the needs for which they are willing to pay. However, if I do not force everyone in my area to pay, there are a few of them who might not. Some may find that their need for defense is low since they are bigger, stronger, or better equipped than most. If they choose not to pay, that's ok. Others may believe that even though they don't pay, someone else will. So unless everyone feels a strong moral obligation to pay for benefits of defense, there will be at least one free rider. Much ado has been made about the free-rider problem. Those who advocate an involuntary tax system argue that public goods such as national defense will be undersupplied by the market if people are not compelled to pay for them. Without making a case to contradict this argument, one must ask, which is better? Is it better to have the problem of undersupplied public goods, or better to have an ever-expanding government fueled by involuntary taxes?

Many organizations receive voluntary contributions each year. Why do people contribute to them? Because they feel that the organization provides a quality service and it is worth it to them to contribute their money. Not everyone contributes the same amount, and some do not contribute at all. But organizations that provide quality services stay around and are subject to the pressure of demonstrating that they are indeed providing an important service. When taxes are forced from citizens, government is no longer subject to the pressure of efficiently using those tax dollars to provide quality services. Instead, elected officials spend at whim and taxes continue to rise. This is the tax slavery that the founders spoke of, and it is far worse than any free-rider problem.

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