Twenty years of debates about reform have given me one solid insight: I now know exactly what the “key” to reform consists of. This knowledge comes not just from discussions but from experience—especially the experience of recent years, which demonstrates unambiguously that no circumstances can compel the state to reform itself, that is, to voluntarily reduce its own power.
What I mean by reform is the “window of opportunity” that would allow for the peaceful and least painful dismantling of the state over some—possibly quite extended—period of time. The actual trajectory of events remains uncertain, but if such an opportunity exists, it must not be squandered. Concrete actions require a starting point, a kind of key, which I will discuss below. I am convinced that this key is useful not only for those who view a stateless society as their ideal, but also for anyone who believes the state should reduce its footprint in society.
This key emerges from the same two decades of discussion and practical experience, which clearly indicate only one path to limiting state activity and its tendency to expand: restricting the state’s access to money.
All reform efforts concerning “transparent property rights,” the judicial system, or even reducing state expenditures will remain locally significant as long as the state retains freedom to determine the volume of its own “services,” and thus the volume of resources it extracts from society. As long as this situation persists, nothing will change; only the external appearance of the system may shift, while its essence remains intact.
The key itself lies in making the state’s revenue conditional rather than unconditional, as it is today. Let me clarify how modern states actually function: taxation, in the broad sense, is carried out “in general”—disconnected from anything. The state’s income is unconditional. Governments come and go, parties and presidents change, programs are written and implemented, but money is always collected, independent of this entire process.
Essentially, we must return to and refine the principle of “no taxation without representation”—though this principle is misunderstood here (and not only here). It does not merely mean that taxpayers are “represented” in the legislative body; it means they give consent to taxation. Moreover, this consent must be given regularly, not “in general.” The precise cause of the American Revolution was precisely the imposition of taxes without the consent of those taxed. In such a system, state expenditures would be: a) periodic, not permanent—they exist only for the period between elections; b) discussed before elections; c) competed over in elections and implemented afterward; d) funded by taxes levied each time for that specific volume and purpose of expenditure. There are no permanent taxes; all are nullified with each new election.
I call this a key because all other measures logically follow from it. Let me mention just a few. Obviously, those who receive money from the budget should not pay taxes. It is equally clear that such people have no right to participate in elections. In this system, indirect taxes are impossible—taxation cannot employ “anesthesia,” hiding from the payer the fact that he is a payer. Taxation of enterprises, activities, and so on is also impossible. The most logical approach is a per-capita tax on voters. Of course, there is no point in detailed calculations now, but we can make a rough assessment. If we take the Ukrainian budget and simply eliminate obviously objectionable expenditures like healthcare, education, and the pension system, the remaining 152 billion across 22 million working-age citizens gives us roughly 7,000 hryvnias per year in tax—not such a large sum. And since reducing state expenditures promotes economic growth, this amount’s impact on personal budgets would diminish further. In reality, the tax amount would be debated at every election, and parties would have to compete to offer a lower figure (whereas today they compete to offer a higher one).
State borrowing, both domestic and foreign, clearly cannot exist as a self-evident institution. The same applies to other state “revenues.” If they cannot be nullified before new elections, they must be eliminated—such as income from state enterprises.
All of this also applies to inflation. Such a system explicitly requires “honest money,” independent of the state, the abolition of the central bank, and free banking.
The government could be formed according to the system once used in Switzerland: the party that wins a plurality of votes forms the government, which cannot be dismissed during its term. The parliamentary majority takes on a somewhat different meaning than it has today. The government needs it only when adopting specific laws to implement its budget. Terms should obviously be short—one or at most two years, with the budget and tax amount formed for that period.
Within the scope of this article, I can address only the most general and significant points. For me, the central feature of this system is the direct and tangible connection between the voter’s wallet and the outcome of elections. I am convinced that as long as each person does not fully feel this connection, no reforms—let alone the dismantling of the state—can be taken seriously.