Funding Government Without Taxation

Whenever a libertarian-minded person says, “Taxation is theft!” critics immediately jump to responses like, “Well how do we pay for the roads?” and “How do we fund fire departments? Police? Schools? National defense?” “This article is meant to help people understand exactly how the government can get funding without relying on taxation as the core funding mechanism. The advocacy presented here is a free-market transition model, not the sole end goal. While it may not be the sole end goal, the descriptive means can help you and others communicate a practical model that moves us away from coercive funding and toward voluntary solutions.

NOT EVERYTHING THE GOVERNMENT DOES DESERVES FUNDING

The first principle that must be understood is that not everything the government does deserves funding. Many people already have at least some government program, project, or action that meets the criteria of “shouldn’t be funded.” For the libertarian Voluntaryist, if the government initiates force against others who have not:

  • Initiated force against another person or their property; or
  • Defrauded another (knowingly tricked a person into a trade with material lies)

then the act is not an acceptable government action.

Which means that any criminal laws for which there is no discreet human victim cannot stand. This includes agency focuses like the Drug Enforcement Agency (DEA) and drug possession laws, the Alcohol, Tobacco, and Firearms (ATF) agency and gun, alcohol, and tobacco control laws, and anything else that is outright prohibited where there is no harmed human victim.

Some readily understand what it means to have no harmed human victim, but others confuse having a substance or taking an action with a theoretical, unmanifested harm. For example, while many understand that drinking alcohol can lead to a deadly vehicular accident, few would say that alcoholic drinks should be outright banned. They understand that the act of drinking is separate from the act of drinking and driving with a resulting crash. In the same line of thinking, the act of owning a gun, owning drugs, or owning a pit bull, is not itself a harm to others. It is only a harm when a direct threat of imminent action is made toward another or that direct threat has been completed in action.

This means that government interventionism must be radically curtailed, from nanny-state seatbelt laws to rationalizations for foreign invasions and military base installations.

This is especially important to bear in mind because, when governments make a mistake using taxation, the harms can be much larger than they would be if only funded voluntarily.

For example, the U.S. government spent over $1 trillion developing the F-35 fighter jet.[i] The jet ended up being a failure that could not operate to expectations. Could the government justify spending $1 trillion to the American people on a single jet if they had to fund it voluntarily? Probably not.

So, as we discuss these funding mechanisms, please keep in mind that the goal is NOT to maintain the bloated government we have now which sits in over $31 trillion of national debt.[ii] The goal is to reduce the size, scope, and power of government and to incentivize spending only on direct goods and services most people generally want, whether it’s in the form of security with police and courts, or in infrastructure with roads and bridges.

It should also be noted that the goal with this change in funding is to help shift provision toward private means as private means become more efficient and practical in a freed market.

The more people have freedom to choose how they get their needs met, the better people can tailor their support to what makes the most sense for their individual situations.

AN EXISTING MODEL: TRIBAL GOVERNMENT GAMING

The U.S. government officially recognizes 574 Indian tribes in the contiguous 48 states and Alaska.[iii] Many of these tribes earn significant revenue through tribal casinos. The U.S. Supreme Court case of California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987) affirmed the right of tribes to host their own gaming centers if their host state permits some form of gaming.[iv] Federal Legislators created a legal framework for tribal gaming with the passage of the Indian Gaming Regulatory Act of 1988, 25 U.S.C. 2701.[v] As of 2011, there were some 460 gambling operations run by 240 tribes bringing in over $27 billion in revenue.[vi]

This revenue does more than just provide income for the tribal leadership. For example, when the 4th-largest U.S. tribe, the Muscogee Creek Nation, shut down their 6 casinos on the heels of the state Coronavirus closures, a large social support system was cut off.[vii] The Muscogee Creek Nation’s casinos were funding a variety of social programs including clothes for children, elder care, and emergency health care. The shutdowns cost the Creek Nation about $5 million in revenue each month, a devastating blow to their social system supports.[viii]

The National Congress of American Indians notes that Indian gaming not only funds social service programs, but is also key for funding law enforcement, tribal courts, roads, housing, sewer, and water systems.[ix]

With this information in mind, it’s easy to see how a corollary funding system could be built for the general American public, especially, if the costs and expenses with taxation are completely upended.

To get a sense of these changes, let’s look next at tax compliance cost.

TAX COMPLIANCE COST SAVINGS

The Tax Foundation is an American think tank based in Washington, D.C. that monitors the tax and spending policies of the U.S. government.[x] According to their 2022 estimates, Americans will spend more than 6.5 billion hours complying with IRS tax filing and reporting requirements for the 2022 fiscal year.[xi] Framed another way, this is equal to 3.1 million full-time workers spending their whole year doing tax paperwork.[xii] The compliance cost of this process is estimated to be $313 billion in lost productivity. The IRS net takings from those taxes will approach $4.1 trillion.[xiii]

The Tax Foundation coins the part of the year where people start keeping their earnings in full “Tax Freedom Day.” In 2019, that day was April 16th, 105 days into the year before people started keeping everything they earned from work after taxation.[xiv] With such enormous time commitment and cost, you can readily see how ending taxation would save countless people a significant amount of money and time annually.

If governments no longer use a tax-based model, people by-and-large will be free to live and enjoy their lives without the stress and anxiety of tax compliance and they will have more money in their pockets to devote to solutions that makes sense for them.

So, what would that freedom look like when intersecting with a non-tax funding structure?

THE NOT-FOR-PROFIT MODEL WITH AN ADULT GAMING FOCUS

If the government can no longer rely on taxes, then revenue must come from voluntary means. To achieve this, the government in transition could be funded by a mix of casino and lottery profits alongside other voluntary funding means like paid trainings, raffles, merchandise sales, and donations.

THE CASINO-LOTTO CORE

Casinos and lotteries can become the first line of government funding in the same way that tribal governments use gaming to fund their operations. Casino-funded government operation already exists and has had proof-of-concept since 1988 thanks to the tribal evidence. In addition to casinos, lotteries can also play a significant role in state funding as they already have proof-of-concept in existing state lotteries.

Forty-five U.S. states currently have lotteries and, in fiscal year 2018, Americans spent over $77 billion on those various lotteries.[xv]

In the State of Florida alone, over $43 billion has been raised for educational purposes since 1988, drawing in nearly $1 billion each year.[xvi]

As you can see, gambling is already an established tool for state revenue. The next question then is, “What can be done to further that core?”

To achieve a broader funding across the Casino-Lotto core, two key aspects must be addressed:

  • Greater offerings for participation with tailored funding.
  • Cultural acceptance of gaming as a ritual at holidays and special occasions.

GREATER OFFERINGS AND TAILORED FUNDING

To help promote funding for various government services, lottery offerings can be made with specific themes tailored to what is being funded. For example, in a state lotto scratch-off machine, different games can be artistically tailored to the funding purpose, like having a “Roads” game that support infrastructure, or a “Police” game that supports the police. The gamification of the support arenas makes it easier for people to participate with what they want to support and creates an opportunity to share information with the public about the needs of the various state service stakeholders by having an infographic on the back of a scratch-off that describes what is being done with the money and some key goals for the year. This information can be regularly updated to inform players directly of what is going on and what their funding is being used for.

CULTURAL ACCEPTANCE

Increasing funding within the Casino-Lotto paradigm is an easy task as the government can advertise for and normalize purchasing lottery tickets and scratch-offs as gifts for various events and holidays. For example, the government can promote adults purchasing scratch-offs as stocking stuffer bonuses for Christmas and lottery tickets as birthday gift extras alongside regular gifts. Normalizing this enables people to feel comfortable supporting programs while feeling good that, even if they don’t win, they are helping to support infrastructure they care about. Alternatively, if a person is not happy with how the government is spending money in a certain area, they are free to not support that area by choosing to get tickets/scratch-offs only for the areas that they believe are being productively provided.

CASINOS

Casinos provide a unique opportunity for funding as they not only can provide funding through games, but they can also host unique attractions and business outlets. Government casinos can host ticketed events, lease space to vendors, and even provide a rentable venue for special ceremonies like weddings.

Quality management could be incentivized to work at the casino using a profit-sharing model where key decision-makers earn a percentage of revenue to also incentivize business growth and reduce unwanted turnover.

OTHER FUNDING MECHANISMS

Casinos and lotteries are not the only ways government can be funded. Rather, they would provide a base revenue of operation that would then enable other activities for fundraising to emerge in voluntary form. Governments at all levels can host annual events sponsored by local businesses where the public can both dine and participate in raffles to fund government services. For example, a local county could host a dinner at a catering hall with paid ticket seats along with the opportunity to buy tickets for a raffle loaded with donated items from local businesses. The items would themselves be a promotional opportunity to the wider community of goods and services being offered. This symmetrical relationship helps to both build community in the local economy and provide a means to voluntarily fund things like fire services, road repair, and police.

The government could also sell specialty collectible items, much like they already do with the U.S. mint. They could offer gold and silver rounds for profit with limited edition runs of various types. For an existing example, the U.S. Mint’s bullion revenue was $3.8 billion, with net earnings of $68.9 million in fiscal year 2021.[xvii]

Governments can also offer paid trainings of various sorts to earn revenue, such as hosting tactical weapons training through the military or social service training for those wanting to work in the non-profit realm.

Governments can also raise revenue through paid advertising, whether it’s promoting a business in front of a city building or hosting advertisements on lottery tickets.

Lastly, donations can always be accepted and encouraged with honors, whether it’s a naming right to a donated building, or patrons donating to the construction of a walkway with names of the donors inscribed in the bricks.

BUT WON’T PEOPLE JUST BE SELFISH?

The issue of selfishness needs to be disabused because everyone’s own self-interest is what drives a desire for peace, security, and quality service. People have an interest in having stable, prosperous lives, thus, they have an incentive to either fund government directly if the government is providing quality services or, if not, to seek help elsewhere if the government services are lackluster.

Americans in 2021 gave $484.85 billion to charity.[xviii] Now, while this does reflect an environment where there are tax benefits to giving, this still should impress upon you the idea that people are willing to give where the incentives align. Rob Reich questioned these incentives in Stanford University’s Social Innovation Review Journal asking, “Would Americans Make Charitable Donations Without Tax Incentives?” He noted research from Harvard that, while giving may drop if tax deductions were cut, they would not be cut completely, with an estimated drop between 40 and 65 percent, mostly, in the non-religious giving areas.[xix]

Which, if taken at face value, would mean it’s probable over $200 billion in charitable giving would still occur in 2021 even if tax deductions were completely removed.

This should give pause as a reminder that people give charitably for a host of reasons, not simply for tax write-offs. And, as charitable giving to non-state actors is itself a part of social services, we can remember that the government is not the beginning, nor the end, of all social service opportunities.[xx]

CONCLUSION

Government can be funded without taxation by reducing its monopoly down to adult gaming and using that as the cornerstone from which other voluntary funding means can spring. The Casino-Lotto framework is an excellent banner under which to get the general population to move toward a more voluntary future with the government being reduced in size, scope, and power. Continuing to move toward market means should not stop at casinos and lotteries but, for now, it’s a practical advocacy that upends the coercive backdrop we face today from government encroachment on our lives and wallets with taxation.

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[i] Pierce, Charles P. “This Country Is Spending $1.7 Trillion on Planes That Don’t Work.” Esquire, Esquire, 1 Nov. 2021, https://www.esquire.com/news-politics/politics/a35631305/f-35-doesnt-work-1-7-trillion-dollars/.

[ii] U.S. National Debt Clock : Real Time, https://www.usdebtclock.org/.

[iii] “Indian Tribes and Resources for Native Americans: Usagov.” Indian Tribes and Resources for Native Americans | USAGov, https://www.usa.gov/tribes.

[iv] Nigc. “History.” History | National Indian Gaming Commission, https://www.nigc.gov/commission/history.

[v] Ibid.

[vi] “Native American Gaming.” Wikipedia, Wikimedia Foundation, 12 Dec. 2022, https://en.wikipedia.org/wiki/Native_American_gaming.

[vii] Haslett , Cheyenne, and Laura Romero. “For Tribes, Casinos Fund What the Government Doesn’t. Now, They’re Closed.” ABC News, ABC News Network, https://abcnews.go.com/Politics/tribes-casinos-fund-government-doesnt-now-closed/story?id=70371212.

[viii] Ibid.

[ix] “Gaming.” NCAI, https://www.ncai.org/policy-issues/economic-development-commerce/gaming.

[x] “Tax Foundation.” Wikipedia, Wikimedia Foundation, 27 Oct. 2022, https://en.wikipedia.org/wiki/Tax_Foundation.

[xi] Hodge, Scott. “The Compliance Costs of IRS Regulations.” Tax Foundation, 14 Sept. 2022, https://taxfoundation.org/tax-compliance-costs-irs-regulations/.

[xii] Ibid.

[xiii] Ibid.

[xiv] York, Erica, et al. “Tax Freedom Day®.” Tax Foundation, 10 Apr. 2019, https://taxfoundation.org/publications/tax-freedom-day/.

[xv] “Lotteries in the United States.” Wikipedia, Wikimedia Foundation, 29 Dec. 2022, https://en.wikipedia.org/wiki/Lotteries_in_the_United_States.

[xvi] Hayes, Megan. “Florida Lottery Education Contribution Hits $43 Billion Total.” Https://Www.wflx.com, https://www.wflx.com/2022/12/13/florida-lottery-education-contribution-hits-43-billion-total/.

[xvii] United States Mint 2021 Annual Report. https://www.usmint.gov/wordpress/wp-content/uploads/2021/12/2021-US-Mint-Annual-Report.pdf.

[xviii] “Charitable Giving Statistics.” NPTrust, 7 July 2022, https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics.

[xix] Reich, Rob. “Would Americans Make Charitable Donations without Tax Incentives? (SSIR).” Stanford Social Innovation Review: Informing and Inspiring Leaders of Social Change, https://ssir.org/articles/entry/would_americans_make_charitable_donations_without_tax_incentives.

[xx] Barrett, William P. “America’s Top 100 Charities 2022.” Forbes, Forbes Magazine, https://www.forbes.com/lists/top-charities/?sh=1249a9d95f50.

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