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An Objectivist IP Argument for Taxation

Objectivists say they are against taxation; they say that you can fund a state by some kind of contract fee or lottery system. Obviously, you can’t, not without the state compelling membership or outlawing competitors, which permits them to charge monopoly prices which amounts to a tax.

But Objectivists are strongly pro-intellectual property (see Why Objectivists Hate Anarchy; IP: The Objectivists Strike Back!). They believe you deserve to be rewarded for creative, innovative, inventive action. But note that they also are extremely fond of the American Constitution and Founders; they believe the Constitution is a great achievement of the intellect–this corresponds with their belief that a proper state, such as the original American state, is a great value to man. Well, put two and two together: the Founders gave us a great creation: the Constitution, and our system of government. We all benefit from it. It’s only fair that the Founders charge us a royalty for our use of their creation–and naturally, the state itself is the agency as the natural successor to its parent-creators, the Framers and Founders, to inherit and manage this royalty-collecting right. Don’t call it a tax–call it a royalty.

See also the following post from the Mises Blog (Oct. 18, 2010)

A Thought Experiment about Patents and Taxes

In Reducing the Cost of IP Law, I argued that one improvement to the patent system (short of abolition) would be to eliminate injunctions and provie for a compulsory licensing system. As I noted there, the compulsory licensing approach is not new. Some countries impose compulsory licensing on patentees who do not adequately “work” the patent. I discussed provisions in US patent law that do permit compulsory licenses already in some situations.1 I was reminded of this when discussing with some friends a comment to this blogpost, Pirated Software Could Bring Down Predator Drones. The commentor stated: “Just declare the IP a state secret. The market value is then zero, as the company cant sell it legally. Buy it from the company for 1 cent. Then classify the contract as top secret. If the company complains, send the people to jail or gitmo.”

As I noted in the previous posts, the feds have the authority to license third parties to manufacture patented articles, without patent infringement liability; this was threatened in the Cipro anthrax drug a couple years ago. The feds then have to pay “compensation” to the patent holder. Something similar happens if the some federal agency issues a “secrecy order” for military or other reasons for a pending patent.2

It occurs to me that the very notion of a compulsory license for IP can help to illustrate how IP is an obvious transfer of wealth. Consider: under current law, the state grants a patent monopoly to some applicant. Then, the state can declare a compulsory monopoly (or issue a secrecy order), and pay you some compensation for this “taking”. Obviously this payment comes from tax payers. So the IP step can be seen as just an intermediate step to justify transferring money from everyone else to the patentee. It’s as if you tell the state you have an idea and the state takes money from others and gives it to you. Come to think of it, this is exactly the idea behind proposals for tax-funded “innovation” awards–proposed even by some libertarians (!).3 The point is that even when the state does not issue the compulsory license, they are simply deputizing the patentee to go out and extort the money himself; it’s like taxation.

(Incidentally, in An Objectivist IP Argument for Taxation, I provide another argument for why IP could be used to justify taxes.)

  1. See Ciprofloxacin: the Dispute over Compulsory Licenses; Tom Jacobs, Bayer, U.S. Deal on Anthrax Drug, Motley Fool (Oct. 25, 2001); Compulsory Licensing in the US. See also Kinsella,Brazil and Compulsory Licenses, Mises Blog (June 8, 2007); Kinsella, Condemning Patents, Mises Blog (Feb. 27, 2005). []
  2. See The Secrecy Order Program in the United States Patent & Trademark Office; 35 USC ch. 17 §§ 181, 183. []
  3. See my posts Libertarian Favors $80 Billion Annual Tax-Funded “Medical Innovation Prize Fund”; “$30 Billion Taxfunded Innovation Contracts: The ‘Progressive-Libertarian’ Solution“; Re: Patents and Utilitarian Thinking Redux: Stiglitz on using Prizes to Stimulate Innovation, Mises Blog (Dec. 28, 2006) and Patents and Utilitarian Thinking Redux: Stiglitz on using Prizes to Stimulate Innovation (Sept. 19, 2006); .” []
{ 11 comments… add one }
  • Brad Spangler July 22, 2010, 12:58 pm


  • Steven Handel July 22, 2010, 1:00 pm

    Wow, that was clever.

  • Juan Fernando Carpio July 22, 2010, 1:04 pm

    Excellent. For once I have nothing but praise for a fellow libertarian’s post.

  • Stephan Kinsella October 18, 2010, 5:41 pm

    Wow. One of them actually admits it. See this thread, where one “Onar Åm” writes: “I tend to agree that the founders of a proper state are morally entitled to something akin to royalties for a certain period. Just like with ordinary IP this will of course be time-limited in order to prevent a feudal society with taxes. This would give an excellent incentive for private entrepreneurs to buy up land (or to homestead uninabiheted land) and create a proper state there. When the initial period of setting up the state is complete the entrepreneur will benefit for instance from the increase in land value when he sells it at a much higher price to citizens of the new state.”


  • Anna O Morgenstern October 18, 2010, 8:52 pm

    Wow indeed. If you can justify that, by very similar arguments you can justify farm bills, bank bailouts or any other oligopolistic strategy the state wants to come up with, as long as only the “right people” benefit from it.
    Objectivists are right. They’re not libertarians.

  • me August 12, 2012, 12:58 pm

    Nothing clever about this argument. I *don’t* want to use this invention, therefore why should I pay to use something I don’t want to use. Also Intellectual Property is theft, so there. I congratulation your ingenuity however and this post put a smile on my face because of its cleverness, but it is philosophically and logically wrong.

    • Gdw March 30, 2013, 5:01 pm

      I think you may have missed the point then.

  • Eric Hennigan March 31, 2013, 12:27 am

    Following further with the logic of your argument, we’d then have to apply the “patent and copyright” clause of the constitution to itself. Would the government then have been expired once the time limit expired, or would they have to continuously grant an extension? How does the extension inspire the advancement of useful knowledge and discoveries in the field of government?

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