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Funding Government Without Taxation
by Edward W. Younkins

Is it possible to fund the functions of a government of a free society without taxation? Even in a minimal state, police, military members, judges, and others have to be paid. Are there any feasible alternatives to taxation? Perhaps it is possible for government to act like any other service provider through the offering of services and allowing individuals to decide for themselves which services they want to use and pay for.
 
A person is paying a user fee when he chooses to use a government service and pays for it. User fees differ from taxes in that user fees are voluntary and the amount paid is directly tied to what is being used. The greater the extent that government is financed through user fees, rather than through taxes, the more it approximates   private companies operating in free markets. The user-fee approach is evident in today’s mixed economy with respect to toll roads, parks and other recreational facilities, waterways and harbors, and so on. A user-fee approach for government services permits people to make a rational decision regarding the purchase or non-purchase of the service.
 
In his various writings, Tibor Machan has made a well-reasoned case that a libertarian legal order or government could provide critical yet exclusive private as well as public goods for fees, thus making it possible to obtain the financing of government voluntarily. The supplying of the private goods can be linked to the citizen-consumer, who would pay for these goods. Given that each of these private goods is also a uniquely political good, it would produce the occasion to raise funds for the public good that is also necessary.
 
Machan explains that contract protection is a private good that government supplies at some level of the adjudicatory process. This service has the essential public feature of due process because even if a controversy is handled by a private arbitration board, the governmental legal structure must exist as a last resort or ultimate protector to ensure due process in concerns such as arrest, trial, seizure of property, and imprisonment, should the arbitrators’ decision be refused by one of the parties.
 
The classical public good that government would provide is the national military defense. Machan details how the government would both protect contracts and provide for the national defense with payments for the contract services being used to also fund the defense of the nation. He posits that having one’s freedom protected and maintained with respect to contractual relationships would be one of the most popular services sought in a free society. A system of contract fees, collected when contracts are registered or signed, with provisions for additional payments in the event of special services needed throughout the period of the contract, would supply funding for the legal system and its administrators required to interpret and enforce contracts and to settle disputes if they should arise.
 
Fees for other governmental services deliverable to individuals could be established in much the same manner as for contract protection. In addition, if criminal actions are involved, fees could be assessed and distributed according to the determination of legal responsibility. Court costs could be charged to guilty parties and criminals could be made to defray other costs such as police services.
 
Machan expands his case by observing that the government has overhead costs, including those needed to provide for the defense of the system of laws itself. Foreign aggression is a clear threat to the system. It follows that government charges for providing its various services could reasonably include some component to offset the cost of defense against foreign aggression. Private goods, obtainable from the government, such as the protection of voluntary contractual agreements, could thus be legitimately used to support the public good of national defense.

Machan’s fee-for-services-plus-overhead approach is one possible way to finance government in a free society—one in which the scope of government would be confined to protecting and preserving individuals’ Lockean natural rights. Given the soundness of this idea, it should be conceded that it is not only feasible, but also desirable, to give up taxation for some other noncoercive arrangement.
 
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