In this three-part series, I'm going to show how a state can be a pure market actor and not require taxation. The state will still have an income - cynics would call it taxes under any other name - but the key difference is that the income is obtained through market means, based on a state's USP, and not through coercion by force. This leads to a society where the state does not need to know anybody's income, wealth, or transactions, leading to the obsolescence of most registers and reporting requirements (including the elimination of a corporate register), and where a "black market" is a contradiction in terms, as the state does not interfere with the market it is a natural part of. It also means an end to victimless crimes by its very nature.
Oh what a lovely state, except it has horrible taxes and complexity
What is a state's unique selling point? What can a state construct do, that nobody else can do (or do nearly as well)?
I would argue that the value proposition of a state consists of three unique activities:
- Defend the territory from aggression from other state actors which want to control the territory
- Act as an arbiter in civil disputes, enforcing arbitration with force where necessary
- Defend actors in territory from aggression from other actors in the territory
The problems with this set of state activities started when the state found out it was able to abuse its power as arbiter of civil disputes to give itself preferential treatment as a market actor, something we would describe as corruption in everyday terms. (Technically speaking, a state can't think, so it was nobles and kings of flesh and blood who walked down this path, but let's talk in terms of abstractions for the sake of simplicity.)
In any case, these are three things that a state is uniquely positioned to do well. A state that does this, and only this, is known as a Night-watchman state. However, as we shall see, when the state is treated as a market actor, it gets the ability to offer some other services over and above this basic set like various civil services - but only on market terms, never coercively.
What is land property, when you look at it up close?
In order to model the Simplified Taxless State, we need to remodel our view of land ownership based on some harsh realities. To do this, we need to compare the property rights of land to the property rights of objects.
If the Russian Embassy were to steal an object from me here in Berlin, I would be able to seek redress and have Berlin order the property returned (or the value thereof), and the Russian Embassy in Berlin would have to comply, being on Berlin soil and Berlin jurisdiction. In this dispute, the Russian Embassy and I are equal-level market actors with Berlin as arbiter of a dispute.
However, a plot of land I have in Berlin is written into the Berlin ledger (land register), which - important! - assumes that the ledger itself is the authoritative source of who owns what land in a particular Berlin-controlled territory. If Russia were to steal that plot of land, by rolling in tanks over that plot and others, then they would not just deny its use to me, they would be stealing it from Berlin - or from Germany - and directly from the ledger that says I own it, negating the ledger's authoritiveness over what-used-to-be-my-plot-of-land.
It has happened in the past, after all.
In this scenario, my plot of land would be transferred from the Berlin ledger to the Russian ledger, and that Russian ledger would completely disregard what the Berlin ledger asserted about "ownership". And unlike the case with the object where I can seek redress in a dispute, there is no international arbitration for land ownership between states' ledgers except brute military force. You own what you defend.
Thus, we can talk of tier-one and tier-two land owners, where tier-one owners are those land owners capable of defending their territory against state-level aggression (or capable of performing state-level aggression), and tier-two land owners are those who are somehow at the mercy of the tier-one owners retaining ownership of the land the tier-two owners think they own, but actually don't when push comes to shove.
In cleartext, a state-level actor is the only type of actor capable of owning land. Within a state, there is arbitration for when tier-two "owners" are in dispute over a piece of territory. But between states, there is no international arbitration of land ownership - brutal aggression decides who owns what (whether one approves of that fact or not). When tier-two "owners" are in dispute, it is not much different from when two children are fighting over who gets to use family property: at the end of the day, it's still the adults' property.
If one accepts this reality - that the state is the only actor capable of owning land within its territory, and all other territorial actors are at the mercy of the state retaining ownership of that land - then one can also stop pretending that a tier-two ownership of land, an "ownership" within a state, defended by a state, and contingent on a state, is on the same level as a tier-one ownership of land.
And if the state is the only actor capable of owning land, then that land can be leased at market rates, thus giving the state an income with which to defend such territory and fulfil its three obligations on it - obligations possibly even specified as part of the lease. We'll be looking closely at such income structures in parts two and three of this series, and how they encourage urbanization, resilience, and free trade.
In practical terms, absent a tabula rasa state like Liberland, a change like this can be a hard sell politically and make many enemies, as it obviously changes existing wealth structures and removes subsidies that are taken for granted. People who have "owned" land for generations (and have had it defended for free) will no longer have such a service provided for free, subsidized by coercive taxation of others. Therefore, it needs to be said that while this can easily be portrayed as a seizure of property from its current owners, it is not: it is an acknowledgement of the reality described above, that land owners operate in different tiers, and that a "land owner" on any tier below the first is completely at the mercy of the ledger maintained by the state -- a ledger which would not be respected by a different state should it seize the territory in question.
Such a rethinking of land property, were it difficult to portray as the acknowledgement of tier-two property, could also be framed as a rewriting of tax rules: doing this while calling it "revising the taxation framework" would be completely within the bounds of the current corrupt state construct, but would set it on a path to rapidly and completely eliminate the coercive taxation construct as such and to make it very difficult to rebuild such state corruption, absent the databases and infrastructure supporting taxation.
What this means is not only that the state needs to behave as a market actor among many, but also that it can't arbitrarily raise its income by the popular-but-harmful notion of "raising taxes". Instead, a state has as much income as the market will determine (by auction, or by vacancy), and will have to adjust ambitions to actual capacity.
In parts two and three of this series, we'll examine how such a remodeling to market principles results in a possible eradication of not just all taxes, but also all the supporting structures required for collecting taxes: the only databases necessary are a citizenship register and a land register. There's no further need for a car register, a corporate register, coercive bookkeeping requirements, income reporting, tax returns, and so on. We'll also look at a complete elimination of victimless-so-called-crimes as a result of the Simplified Taxless State.
(For people on the traditional left in politics, this proposal can also be called a Simplified Fair State, as the state doesn't give itself preferential treatment in the market. Words are important and "fair" is classically a left-wing buzzword like "taxless" would be for libertarians.)