State, public sector and theoretical prerequisites to a model of an “economy without taxes”

The paper offers a new view of the role of state based on recognition of the economic ability of the state as a separate factor of production. Recognizing the state’s economic ability is as a fifth factor of production and correspondingly gives indirect taxes the status of factor income as state profit. Direct taxes play two roles: they fund expenditure that is necessary for the production of public goods and at the same time they are in effect the latter’s price. If we were to apply the mechanism of producing and purchasing private goods to public goods, direct taxes would be replaced by the state loans that are non‐repayable, but yield interest, or by irretrievable loans with computed interest. In this case, which is illustrated by the budgetary equations in the model of an economy “without taxes”, indirect taxes become analogous to state profit and direct taxes are replaced by irretrievable loans with computed interest.