VOLUNTARY TAXATION - THE ROAD TO REAL PROSPERITY

"Government should NEVER be able to do anything YOU can't do."

---Ron Paul---

Voluntary taxation is an alien idea to most. The idea is so alien and so blatantly opposed to our way of ingrained thinking that most would feel outright scandalized. Voluntary taxation means that you pay taxes only if you want to and no one will pressurize you or threaten you if you choose to not pay.

We all have been living in a system where taxation is not only compulsory but is considered criminal if one does not pay it. Do we ever question the validity of this kind of taxation? Why is it that this idea is so prevalent and why is it that our taxes perpetually keep on increasing? Why does it never happen ever in history that one day we wake up and the government tells us that our taxes will be reduced now onwards? We need to ask the question whether all this taxation through the centuries has helped us get really prosperous as we should or could we have done better? What is the real equation of taxation? This article will unravel the crux of this matter and explain how our prosperity and happiness are connected to something such as taxation. 

Human needs include not just food, water and air but many other things and the greatest among those needs is ‘happiness’. All human action directly or indirectly is aimed towards a single endeavor – The achievement of happiness. But there are so many of us here each having infinite desires but we live in a world of limited resources. What is the best system under which we can make the most of what we have and none of human labor or wealth goes to waste or in the hands of those who have not rightfully earned it? 

Let us try to understand how it works by imagining a little story which is as follows;

Imagine that you are renovating your house and you intend to get it done in the best possible way and in the least possible time and cost so that you can start to live better and enjoy the wonderful newly renovated ambience of your home. Well, first of all you would need to hire a competent interior designer and an equally competent workman like the carpenter, the painter, the electrician etc. When each of them do their respective jobs properly and in mutual sync then the house will get renovated efficiently and quickly. 

Now suppose you have a society watchman whose job is no more than to provide security and who suddenly forces you and takes over the job of interior designer. This watchman being illiterate and absolutely new to the field of interior aesthetics and has no expertise whatsoever. Just imagine how the renovation work will proceed. Well, he begins his work as a designer and in his ignorance and arrogance, he first designs badly and has no work plan so he overrides your wishes and also disregards the pleas of the workmen and rejects all their advice. He forces the carpenter to do the painting work and the painter to do the electrical work and the electrician to do the carpenter’s work. What do you think happens as a result? What you get is total disaster and your house interiors in a messy state.Would you like to hire an able and expert man of your choice to do the work or would you like to be bullied by someone like the watchman in this instance into hiring him despite his lack of expertise to renovate a house. The answer is obvious! 

This seemingly fanciful example has a stark parallel to the reality we live in. We all live in this world together which has limited resources and we all desire to achieve the maximum prosperity and growth for each of us. For this we need to use our resources with maximum efficiency and we cannot hire the watchman in the above story to do the job. We are constantly renovating the world and our lives through the resources we have at hand. But today by slow process of inaction and inability to challenge validity of the accepted idea of compulsory taxation we have unfortunately given the reigns of renovation to the watchman who in character is same as the government. In real world the situation is even worse than that of the story above because here the government not only has taken over the renovation but has started to dictate things and intrude in our lives beyond its moral eligibility.

Money is an objective equivalent of the wealth that we create. When your money is taken away forcefully by a third party in the form of taxes on the pretext that your money will be used in your favor then be assured that it won’t be used as promised. The widely accepted idea of compulsory taxation in truth is an affront to the idea of democracy and is immoral. To forcefully tax people and use that money not according to their wants is taking power away from the people. Voluntary taxation is an idea exactly opposite of this. Under voluntary taxation, people hold total power and money is not wasted because it allows people to use their money to sort out their problems as they wish and no outsider can understand the problems of the people better than the people themselves.


Suppose you want to make a piece of furniture, like say a chair and you give your money to the milkman to do the job instead of the carpenter then not only will the quality of work be compromised but also your time and money will be wasted and would result in diminished productivity because the milkman has no skill in the making of a chair and he cannot make it as efficiently as the carpenter and of equivalent quality. The same thing the government does… it taxes away your money and re-allocates a miniscule amount not according to the actual free market need of the people but according to the whims and fancies of the central planners . The remaining major chunk of tax money just disappears somewhere. The next year the government again taxes you but the tax must be higher this time because of inflation and because the government has opened newer departments and started other schemes supposedly to help you so it needs more funds. So eventually the people have to give larger and larger shares of their earnings as taxes and hence they have to work more and more for less and less, thus leading to a kind of financial bondage. Just ask a farmer who is forced to commit suicide if he is interested to send a spaceship on the moon or if he is interested in Commonwealth Games, while his family is dying of hunger. This system never helps people in reality and it has never alleviated poverty because it is a system that reduces investment money and thus reduces growth and constricts the economy and thus diminishes the prosperity of the people.

Voluntary taxation would work like a super voting machine and the only reason that people will be incentivized to pay taxes voluntarily would be if they see that it will actually benefit them and if their ‘self interest’ is served. If there is garbage and water stagnation in your locality and if it hurts you enough then out of your own self interest you would want to get it cleaned and you would offer to pay for it. Voluntary taxation will empower the people with true power as it should be in a real democracy. People vote not merely with their ballot but also with their money. Whatever people will want, their money will flow towards it to make it happen. A central government cannot know what the problems of the people are and how to best solve them. Today the governments are very large and they are increasingly interfering with different aspects of our lives. To fund all its activities, the government needs to tax people more and more and must force them increasingly. This tax money does not come from the people’s consumption capital but from their savings, i.e; their investment capital. When this investment capital is diminished and taxed away, that would simply mean less money for investment which in turn would mean lesser productive enterprises and lesser job opportunities and lesser growth. This creates a huge economic distortion of such epic proportions that to maintain it becomes increasingly difficult and more and more laws are enforced on the people and their taxes must keep on increasing and at the same time majority of people become poorer.

The biggest question that comes to mind whenever the idea of voluntary taxation is brought up is that who will build the public utilities and who will support the military and where will the money come from. It is generally thought that if voluntary taxation is implemented and if no one pays taxes how will the government carry out its activities. The answer to that is that the people will build the roads, hospitals and schools etc. People can do this by forming small local groups and collecting money for such purposes. When people start building like this from funds collected with voluntary consent then money and resources get used with maximum efficiency as you cut out the watchman completely out of the picture and thus a lot of money can be saved. When you ask the watchman to do the same work, he will not only deliver a very poor quality of performance but will siphon off huge amounts from your funds for his personal benefit.


Under voluntary taxation, one of the greatest fear is that what if people won’t pay any tax or pay very less tax. The first thing to understand is that under such a system the size of the government as compared to what it is today would be extremely small. The government job would roughly include no more than to maintain the army, the judicial system and the police system to ensure its enforcement to maintain law and order and apart from that the government will not be allowed to interfere in anything. The amount of money needed to maintain this would be extremely miniscule, thus leaving people with a lot of surplus savings. A tiny portion of these savings, people can use to build and maintain public utilities, social welfare, military etc. Even after all this, people would still be left with huge surplus savings which will get reinvested in new enterprises and create greater growth and job opportunities. No one would want to put their money into offshore tax havens such as the Swiss Banks any more because their money is safe here, so all that money will stay within the country and fuel further economic growth of the nation.

Why would people pay voluntarily? For the same reason that people pay voluntarily for Mediclaim, insurance, the maid, the sweeper, the tailor, the garbage collector, the milkman, the doctor etc.; because it is in their ‘self interest.’ A frugal government that does not step outside its justifiable bounds and which does not stifle economic activity by unjustifiable interference and which gets no incentive to siphon off people’s money will be a government in every one’s interest and benefit. Such a government will only be possible under a system of voluntary taxation where the true power at all times is vested in the hands of the people. Under such a system, there will be a great outburst of economic activity and innovation, that will change the course of the nation and the people’s lives in a positive and dramatic way. A nation of people who can utilize their resources with maximum efficiency and who can keep their earnings as they wish and who no more live under fear of their wealth being confiscated will be a nation of people who are on the road that leads to true prosperity.

Voluntary taxation is a system that has far reaching implications. It is the only system that can achieve the greatest efficiency in utilization of resources and thus achieve greatest real growth. It is the only system that truly empowers people in all respects by enabling people to vote with their money. It is a system that will check the massive corruption that goes on in our country. It is a system where people can work and keep their earnings and have freedom to achieve their highest potentials. It is a system that can spark a new era of great economic activity benefiting people from all walks of life. It is a system that will truly set people on the road to freedom and prosperity. It is a system of the future, if mankind ever wants to live free.