Saturday, April 17, 2010

Ayn Rand and Taxation

It's occasionally said (and I believe I said it) that Ayn Rand thought that taxation should be voluntary, or more accurately, that she believed government should be funded by voluntary contributions.

That, however, is somewhat misleading. Look at what she said in "Government Financing in a Free Society":

As an illustration (and only as an illustration), consider the following possibility. One of the most vitally needed services, which only a government can render, is the protection of contractual agreements among citizens. Suppose that the government were to protect--i.e., to recognize as legally valid and enforceable--only those contracts which had been insured by the payment, to the government, of a premium in the amount of a legally fixed percentage of the sums involved in the contractual transaction. Such an insurance would not be compulsory; there would be no legal penalty imposed on those who did not choose to take it--they would be free to make verbal agreements or to sign uninsured contracts, if they wished. The only consequence would be that such agreements would not be legally enforceable; if they were broken, the injured party would not be able to seek redress in a court of law.

Such an arrangement would hardly be voluntary. A makes a contract with B for a million dollars. A is afraid that B might default or otherwise refuse to pay. The only way A may enforce his contract is by paying a fee to the government. Even if the contract contained an arbitration clause, the arbitration agreement could not be enforced (as such agreements are today under the American Arbitration Act) by enforcing it in court.