Okay, so the major problem with laissez-faire capitalism is that it rapidly ceases to be laissez-faire capitalism. One interest group gets its, the next one wants its, and so on and so forth.
So how do you align the incentives of voters to promote a free state? Constitutionally, what's the solution?
I think I have it.
First, constitutionally, all federal income in excess of expenses gets distributed evenly among all citizens. Every person gets the same amount. This is your welfare system. If public funds get looted or spent, there is no welfare.
Second, constitutionally, taxes are required to be flat; nobody is taxed more, nobody is taxed less.
I think a good tax system for this is a federal sales/services tax with a deduction (up to, but not exceeding, the cost of purchase) for resold goods and services, and nothing else - tax consumption, and consumption alone. Yes, that means you're taxing unprofitable businesses. Good. When it comes to market distortions, distortions which promote saving money and closing unprofitable businesses is best. Another good option is a strict land tax (NOT a property tax), as I discussed in a previous post; this has the advantage of not requiring businesses to do the government's tax accounting work. An income tax has debatable merit, but with flat taxes, the damage it could do is muted.
I think such a system creates incentives for precisely the correct behavior, and would be self-sustaining. (As opposed to strict libertarian systems, which tend to devolve into socialized systems.)
Anybody see the obvious failure I'm missing?