Like most policy proposals in the libertarian lexicon, and indeed the larger political discourse, ending taxes is obviously not a switch you can flip. There are still services the government provides, albeit that the market could provide them more effectively, that people rely on. It’s unnecessarily cruel to yank out the rug from underneath people without regard for whether or not there’s a viable market alternative in place first.
But, there’s a solution to the question of taxes that one American state and other national governments already use: the permanent fund.
The rationale behind the creation of a permanent fund is twofold: if the government gets direct returns on investments in the market, they are incentivized to not disrupt the market, and if revenue comes from investment, the government can offset taxes without cutting spending. Cutting spending, while still admirable when it’s waste and inefficiency being cut, necessarily means laying off government employees and leaving people who rely on these services in the lurch. Finding new ways to provide those services, when those new ways are voluntary, is preferable and hardly objectionable. The pressing issue is allowing more people to keep more of their money. Libertarians can’t just be about taking things away.
In the United States, Alaska already does this. The Alaska Permanent Fund, enshrined in the state constitution, is a fund managed by the state-owned corporation Alaska Permanent Fund Corporation (APFC). APFC was designed as an investment in oil, created shortly after the Trans-Alaska Pipeline System began piping oil from Alaska’s north slope.
Now, the Alaska Permanent Fund pays out a dividend to residents who have lived in Alaska for a full calendar year (Jan. 1 – Dec. 31, and partial years don’t count) and meet a whole host of other requirements. In 2019 the dividend payment was $1606. But instead of getting $1606 sent to your bank account, imagine if your quarterly property tax bill was just $400 lower. The Government of Norway has a Pension Fund that’s made up of 10,000,000,000,000 NOK (at press time, US$1,091,540,000,000) in assets. So, this is an issue that the vast majority of the United States is lagging on.
And if the Alaska Permanent Fund is based on oil, municipalities around the country could base their own on the renewable energies that are best suited to their community, or on nuclear energy. A solar power plant could move into a town or city that makes a direct investment to the company, and then pay out a perpetual return as it would to any other shareholder. This encourages moving to renewable energy, doesn’t disrupt tax flow, and is entirely revenue neutral.
Returning the initial deposit to taxpayers either as a dividend or a reduced tax bill, and then using some of the future returns to invest further and some to offset taxes, municipal governments could phase out property taxes without pulling government services before market solutions are in place.