Eliminating taxes : a brief example

One of my favourite discussion subjects is the complete wastefulness of taxes. Indeed, while most libertarians agree that taxes should be minimized, they do not know that they are not necessary at all.

This may seem like an absurd idea, because governments have conditioned us to pay taxes, and to think that they are necessary. However, many governments have survived for centuries without taxes and could very well survive without them. Rather the contrary, taxes only give them more tools to expand by feeding off our rights.

Out with taxes, voluntary trade is in

We have to consider, first of all, that even after eliminating unnecessary organisms and departments, the government would be even smaller than one might imagine. This is due to three main reasons.

The first is that, in a sociolibertarian point of view, the private sector would be free to fulfill public functions to a certain extent. We already have an idea of what this would look like with the private courts of sports leagues, and security companies, which partially fill the role of policemen. The presence of self-governing communities would reduce considerably the public burden even in its own core functions (security, justice, military).

Secondly, the remaining public departments would have a minimal role compared to what we know today. The military, which would no longer be sent to fight wars without rhyme nor reason, would only serve to protect the country, public security would no longer fight victimless “crimes”, and so on.

Finally, public goods should be progressively eliminated or sold, starting with all the unused public land. This constant thinning-out, proportionally with the growth of the free market’s ability to solve new problems, ensures that the services in question remain as efficient as possible.

Accepting these restrictions, we now see that financing a libertarian government is more trivial than we originally thought. Furthermore, there exists many voluntary means to finance a government. These means include :

1. Pay-per-use, for services such as transport, public works, and so on.
Exchanging services for money is the most simple and economically responsible way to finance government services.
Of course, we must again be reminded that such services would compete with the private sector : no one is forced to use public works.
Pay-per-use systems would be used in domains where the govt is in competition with the private sector, exception made of core functions.
2. Permits, to compensate for the work of public officers in enforcing regulations.
To give an example of regulation, regulations for consumer safety may be compensated by asking for permits to sell certain types of products which are checked for safety.
3. Pollution impositions and other minor impositions.
Instead of clogging up the courts, the executive may take over some minor, recurring offenses, such as the pollution encurred by cars, petrol, cigarettes, and such.
4. Tarriffs and donations.
These measures cannot be relied upon as a rule, but can still become pretty considerable.

Even in the unlikely event that the government simply cannot pay for all its services, it would be preferable to drop them for a while rather than raise taxes. Reverting to the free market completely for a while is not as damageable as giving the government tools to put its foot in the door, of course. Even in extreme situations, there is no reason to raise taxes.

Each of these measures apply to certain domains. I will now detail the extent of each of these domains, and the scope of the measures that I have briefly discussed, by using the example of the Quebec budget..

Québécois example

For the original calculations that are the basis of this article, see the french article “Budget Libertarien 2000-2001”.


     Quebec’s socialist government, as we know it, starts with a total spending of 46.5 billions of dollars. Making a prudent assessment of programs that would no longer exist in a libertarian government, we arrive at a new spending total of 6.2 billion dollars.


Quebec’s socialist government, as we know it, starts with a total spending of 46.5 billions of dollars. Making a prudent assessment of programs that would no longer exist in a libertarian government, we arrive at a new spending total of 6.2 billion dollars. This represents only 13% of our initial spending, and this is before any restructuration and opening to the free market. We now have a better idea of the scope of changes which this entails.

From these 6.2 billons, 2.1 billion dollars are dedicated to public goods. This 34% part includes transport, security, and judiciary services, and is covered by pay-per-use methods. That is, when someone uses the public bus, or is found guilty of a crime, a sum of money should be charged to them in order to cover the costs of these services.

Market protection, natural resources, the internet are all sectors which are regulated by the government. They cover a negligeable portion of the budget, but are covered under permits.

The rest of the budget represents administrative spending. While restructuration would certainly diminush that part greatly, even the 4.1 billion dollars remaining is covered by petrol taxes as they are today (1.6 billion), cigarette taxes (0.5), public companies (1.7), and other sources of revenue (1.1).

Note that provincial governments do not cover certain important services, such as the military, but also do not cover important revenue sources such as tarriffs. Even if the government imposed taxes for everything that is not a public good, the resulting burden would be around 750$ per taxpayer (assuming only one-half of the population are taxpayers).

Here is a little overview of the 3-year libertarian plan that results from the budget :

* Deregulation of the economy begins. End of laws on minimum wage, anti-discrimination laws, etc.
* Opening of all markets to the private sector.
* Elimination of all taxes except the income tax and tarriffs, elimination of tax shelters and exemptions, simplification of the tax code.
* Beginning of the elimination of social programs. Introduction of Social Responsability Programs (SRPs).
* Selling of the majority of public properties, to pay off the public debt.

Reductions in spending = 27% (12.7 billions) cut from year 0.
Reductions in income tax = 0.1% (1.05 billions / 15.71 billions) cut from year 0.
Other taxes eliminated : Sales taxes (7.09), Alcohol permits (0.14), Natural resources permits (0.3), Corporate taxes (4.12). Total eliminated : 11.65 billions.
Departments completely eliminated : Wildlife.

* Legal reform. End of all laws against drugs, prostitution, and other victimless crimes. Liberation of all victimless prisoners.
* The elimination of social programs is now going in its second year.

Reductions in spending = 64% (16.9 billions more) cut from year 0
Reductions in income tax = 49.3% (7.74 billions / 15.71 billions) cut from year 0. Reductions to target lower and middle class.
Other taxes eliminated : Health care premium (4.2), other anticipated losses of 6 billions.
Departments completely eliminated : Agriculture, Industry, Science and Technology.

* SRPs now established, end of all social programs.
* Constitutional proposition.

Reductions in spending = 87% (10.8 billions more) cut from year 0
Reductions in income tax = 100% (15.71 billions / 15.71 billions) cut from year 0.
Other taxes eliminated : none.
Departments completely eliminated : Education, Employment, Family, Regions, Health.

Revenue sources : Petrol taxes (1.6), cigarette taxes (0.51), Car permits (0.68), other permits (0.17), others (1.13), public companies (1.7 estimated), federal transfers (3 estimated). Total of revenues : 8.79 billions.

Because the numbers used in the budget are very conservative and, as I noted, do not take into account many other factors like the involvment of the free market, it may be considered as a worst-case scenario.