Funding Government: Of Fees and Taxes

How do governments get revenue with which to operate? No, contrary to what some would have you believe, it doesn’t magically appear out of nothing. There are some basic ways governments are funded:

Conquest, thereby gaining resources previously outside of that government's domain

Owning businesses, thereby selling goods and services.

Collecting rent

Selling land or mining rights, etc.

Gifts

Customs duties and tariffs on imported or exported goods

Taxes

Fees

Assessments

Fines and forfeitures


Some sources would list loans, bonds, tributes, and subventions, but each of these eventually necessitate one of the other funding means previously listed.

Let’s take a closer look at these funding methods.

Despite what the America-bashers say, we haven’t engaged in conquest in a long time. Very few people would advocate conquest in the historic sense. I do think a valid argument could be made for seizing the assets of nongovernmental terrorist groups and using those to fund our anti-terrorism efforts and to compensate American victims of terrorism.

The government should own very few, if any businesses. Free markets can take care of the needs there.

Collecting rent, for any land the government owns, is certainly valid. That rent should go first and foremost to the maintenance of that property.

Selling land and mineral rights. This could be a good idea. The government needs a certain amount of land for essential Constitutional functions, but otherwise should consider getting out of being a landowner.

People sometimes give gifts to local government, such as donating their land to be a municipal park upon their death. Gifts, such as statues, may come from other places. Gifts to governments should be under certain narrow circumstances to avoid the appearance of undue influence.

The "buy American" crowd loves the idea of duties and tariffs on imports.  However, these keep prices high for American consumers and reduce the incentive to Americans to provide goods and services that will be desired around the world.

Now we’re getting to the nitty-gritty.

Taxes are forced and supposedly for a common benefit. We have income taxes, capital gains taxes, property taxes, estate taxes, sales taxes, luxury taxes, sin taxes, gas taxes, so on and so forth. Although I highly doubt it will ever happen, most of these should be done away with. A sales tax may work, provided the government doesn’t lose too much through underground markets. Sales taxes will still mean "the rich" will be likely to pay most of the tax burden, because they tend to buy more expensive items. We should not allow taxes to be called “fees” for the sake of political comfort.

Fees are for a special benefit, collected upon a transaction. For example, not everyone owns a motorized vehicle. Some people own many. If we’re going to have government regulation of motorized vehicles and government programs and projects centering on them, it makes sense to charge fees for registering those vehicles in a way that covers enough of the costs so that someone who does not own such a vehicle does not have to pay a tax to support them. Retailers pay fees in order to have their scales and registers certified as accurate. Fees should not be used like income taxes. They should fund a specific, related purpose.

Assessments are charged on a property, usually for an extraordinary expense, such as public works or utility infrastructure construction. Assessments make more sense than most taxes, though in some cases, the same results can be achieved through private property and private infrastructure. For example, property owners in a certain area may pay an assessment to build and maintain a nearby bridge.

Provided they do not violate property rights, fines and forfeitures are another excellent way to fund government functions, and they do so widely now. When someone violates laws, necessitating a response from government, it would be ideal if they could pay for the costs of enforcement, investigation, conviction, and maybe even incarceration. If someone can make money by violating the law and a fine will only amount to a small percentage of their illicit gain, that is hardly a deterrent. But it makes sense to "tax" crime with fines and forfeitures.

So, taxes are not fees, fees are not taxes, and we should not try to hide taxes as fees nor treat fees like taxes. There are many ways for the government to fund its necessary functions without raising or even having income taxes or estate taxes.