Monday, May 11, 2009

Government Without Taxation: Other Revenue Sources

Lotteries have long been used by governments to raise revenues. Forty-four states and the District of Columbia have lotteries. According to the North American Association of State and Provincial Lotteries, state lotteries generated revenues of nearly $18 billion (after expenses) in 2008. Lotteries are played voluntarily, and thus represent a non-coercive method for government to raise money.

Opponents of state-run lotteries argue that they are a form of regressive taxation—that the poor are more likely to play lotteries. Whether this is true or not is irrelevant—individuals should be free to act on their own judgment, even when others think that their judgment is poor. Another common argument against state-run lotteries is that they promote gambling. Again, the truth of this claim is irrelevant, as individuals should be free to act on their own judgment.

In a free society, private lotteries would be permitted (they are generally prohibited now), and consequently, governments would have competition for lottery money.

Selling Assets
In a free society, virtually all property would be privately owned. Government would not own parks, or forests, or museums, or large tracts of undeveloped land. Government would only own the few parcels needed to house the police, the courts, and the military.

The federal government is the largest property owner in the nation. Indeed, in many western states and Alaska the federal government owns more than 40% of the land. Selling this land would raise hundreds of billions of dollars, if not trillions of dollars.

Prison Factories
Pennsylvania Correctional Industries (PCI) is a program that employs inmates at fifteen state prisons while they serve their sentences. Inmates produce garments, soaps and degreasers, and forms for state government. Inmates received credits for their work, which can be spent at the prison commissary or applied towards fines and restitution. Director Tony Miller told an interviewer that “some inmates, after serving their time and being released, have written letters of thanks for the skills they learned through their PCI jobs that helped them get jobs when they left prison.” [1] For the fiscal year that ended in June 2007, PCI made $1 million in profit on $34 million in gross sales. The California Prison Industry Authority generates annual sales of more than $150 million from silk-screened clothing, fine-ground optics, and paper products.

Supreme Court Justice Warren Burger was a vocal proponent of “factories with fences”, as he called them. His efforts in the 1980’s and 1990’s led to the expansion of Federal Prison Industries, which produces furniture, textiles, electronics, and other items. [2]

Critics of prison factories argue that they have an unfair competitive advantage over private sector industries. While inmates are paid substantially less than private sector workers, prison factories are less efficient and must contend with significantly higher security costs. As Robert Q. Millan, a former member of FPI’s Board of Directors, once said:

As a former banker, I am well aware of the operations of a variety of businesses. In private sector business, it is of primary importance to eliminate all inefficiencies possible in order to maximize profit. I could not recommend to my former bank, or any bank, that it make loans to a business that was controlled by the conflicting mandates and had the inherent inefficiencies that handicap FPI. [3]
In 1995 FPI had gross sales of $459 million. Fifty-percent of the money earned by inmates was used to pay fines, restitution, and child support. Without a prison job, these payments would not be possible. During its more than sixty year history, FPI has been self-sustaining, and indeed, it has turned over more than $80 million to the federal treasury.

While the primary purpose of prison is punishment of criminals, prison factories provide opportunities for inmates to learn job skills, which does reduce recidivism. Inmates should be provided with the bare necessities, and any amenities they wish to enjoy while in prison should be purchased with money earned in prison. Those who work should enjoy a better standard of living, just as it is outside of prison. Prison factories also provide inmates with the means to make restitution to their victims.



[3] Page 6,

Updated on April 8, 2010 with links to all of the posts in this series:
Government Without Taxation: Introduction
Government Without Taxation: The Size of Government

Government Without Taxation:  The Police and Military

Government Without Taxation: The Courts

Government Without Taxation:  Other Revenue Sources

Government Without Taxation: Final Thoughts

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