WOULD THERE be enough revenue for the public sector? To address this question, one should consider different types of public activities separately. The type of public activity that can most readily be financed by charges for exclusive access to natural opportunities is local public services. When these are desired by voters and provided efficiently, they tend to raise the rental value of land by enough to pay for themselves, since a local public service provides a benefit in a limited region, and people will bid up the rental value of that land by the value of access to the service.2 Thus local services can be financed without even beginning to draw on the value of opportunities provided by nature.

Another broad area of public spending is national defense. While defense increases the value of land in a dangerous world, one might reasonably hope that the need for defense spending would be greatly reduced in a world that had adopted a general norm of acknowledging the equal rights of all persons to natural opportunities.

To the extent that defense costs are raised when a nation becomes a more attractive target-- because of increases in its stock of capital or in the productivity of its citizens--it would be efficient and not unreasonable to have an annual charge on capital and on talent (an asset protection fee) to defray these costs. Such a fee could be collected by a self-assessed tax. For capital, the tax could be enforced by an obligation to sell the capital at the self-assessed price. For talent, the tax could be enforced by a rule that if a person was injured in an accident and wished to sue for loss of earning power, the self-assessed value of the person's talent would be the upper limit on the damages that could be claimed. It is likely that a tax rate of two or three tenths of one percent per year would suffice to fund the current level of U.S. defense spending. But I would hope and expect that defense spending would fall substantially. Between the reduced need for defense spending and an efficient asset protection fee for the extra defense costs generated by increases in capital and talent, it should be possible to finance defense without exhausting the rental value of exclusive access to natural opportunities.

The next major area of government spending to consider is social welfare programs-welfare, social security, unemployment compensation, health insurance, etc. These would tend to raise the rental value of land to some extent, but they would generally not raise land rents by enough to pay for themselves, because their perceived value to individuals tends to be highly disparate, so that those who value access to such programs generally do not need to offer the full value of such programs in rent premiums in order to get access to them. Thus one cannot count on financing such programs by increases in rent. The disparate value of public education to families makes this public service subject to the same analysis.

Social welfare programs often have an insurance component, requiring payments by potential beneficiaries. If a program is so close to a true insurance program that virtually everyone receives an expected benefit that is as great as his or her assigned contribution, then it can be financed by the assigned contributions, and few will find the program objectionable. But social welfare programs rarely approximate true insurance programs.

The difficulty with financing social welfare programs with rent arises because those who design such programs usually seek to require some people to pay more than the expected value of their benefits. In a world that recognizes the equal rights of all persons to natural opportunities and the right of any person to emigrate, social welfare programs of this sort will be possible only to the extent that they reflect shared community values. If such a program draws on shared feelings of community responsibility, then people will be happy to contribute part of their shares of the value of natural opportunities, or even part of their earnings to such programs. If an attempt is made to implement social insurance that exceeds what people are prepared to pay for out of a sense of community, people will tend to emigrate or secede. Thus in a world that operates on principles of global economic justice, people will not be required to pay for social insurance that they object to. If people have potential needs that exceed what their fellow citizens are willing to provide, they will have to buy their own insurance before the need arises or rely on friends and family. If those who are never able to provide for themselves are to be provided for in a just world of limited generosity, parents will need to buy insurance against having children with special needs before they conceive those children. But I believe that feelings of community are sufficiently extensive that those who need help would receive it. Unlike the present situation, in a just world every person would have a share of the value of exclusive access to natural opportunities, which would provide a guaranteed income that would provide for many contingencies....  Read the whole article.

Nic Tideman:  Improving Efficiency and Preventing Exploitation in Taxing and Spending Decisions

An even greater share of the federal budget is used for various programs that provide help for people with special needs--welfare, Medicare, Medicaid, Social Security, unemployment insurance, disaster assistance, etc. Some of these programs (social security, Medicare, and unemployment compensation) are funded in part by payments by prospective beneficiaries. But all incorporate substantial elements of deliberate redistribution.

In a world that adhered to a classical liberal understanding of justice, there would be three sources of funding for people with special needs:

1) insurance that those with special needs had bought for themselves prior to the onset of their special needs,

2) donations from family, friends and other compassionate persons, and

3) local public expenditures that would be non-coercively financed, because anyone who objected to the financing could leave the locality.

In a just would, people would ensure, prior to conceiving children, that any expensive special needs that their children might have would be paid for, either by insurance that the parents would buy, or by voluntary conventions in their communities that the community would pay the costs of such needs.

Perhaps you object that some people would not be able to afford such insurance for all their children. If this is true, it implies one of two things.

• Either the parents of such children are behaving unjustly by conceiving those children, who will either lack what they ought to have or will be able to receive it only by the imposition of unjust taxes.
• Or else the parents have been treated unjustly by having started life without enough resources to provide for the children that they ought to have had the chance to bring into the world. I would guess that sometimes the first is true, sometimes the second, and sometimes both.

Nic Tideman:  The Ethics of Coercion in Public Finance

Nic Tideman:  The Political Economy of the Gospels