On Sat, 27 Apr 1996 mkj@october.segno.com wrote:

Please forgive what may be a stupid question, but I've been wondering about this for a long time, and today I'm tired of wondering.

A consistent theme here is "crypto-anarchy", which appears to be essentially the idea that widespread cryptography will make tax collection impossible, bringing down governments.

Well, this is merely one aspect of what I consider "crypto-anarchy" to mean.

I don't see how this will work. The logical flaw in this argument seems so obvious (and at least some of the people who buy into it seem so obviously intelligent), that I can't help but think I must be missing something.

Certainly the widespread use of cryptography will frustrate modern systems of taxation, such as income taxes, sales taxes, etc., which are based on the monitoring of financial transactions. But these systems are a mere flash in the pan; taxes existed, and governments sustained themselves perfectly well, long before these systems arose.

Why then shouldn't we expect that modern governments, in the face of widespread cryptography, will simply revert to more traditional (and brutal) systems such as head taxes, land taxes, travel tolls, etc.?

Now, how are you going to impose taxes on heads if it becomes impossible to track down a person? You have to find them to tax them. With secure, anonymous communications, people can exist without giving away their location, business interests, property holdings, etc...etc... Travel taxes? Well, that's equally difficult to enforce. Particularly in large states. Consider the difficulty of charging $1 for crossing the Mexican-U.S. border. Any guesses as to compliance rates there? The only option for government becomes forcible seizure of land and or persons to enforce taxation. Note that even today property in the United States owned by tax evaders is difficult to seize if one cannot prove tax evasion. (Taxation is merely one example of regulations that become difficult to enforce with proper cryptography in place by the way). This being so I think it obvious that a manner of market economy among political systems will emerge. Some nation states will participate in what liberal-economists call a "race to the bottom" where they will continue to reduce regulations and so forth to attract businesses and thus income. Those on the far left somehow count this a _bad_ thing, citing typically environmental issues. It never ceases to amaze me that they don't get the message when 20% of the corporate population departs and they still don't realize that just raising taxes won't solve the problem. Essentially this is what the expatriation tax is. Money is fleeing because taxes in the United States are offensively high in the view of the citizens. I know! Let's impose regulation forbidding these traitorous deserters and increasing taxes on them! Uh huh. Sure. I invite those considering expatriation to consult with me. While I won't encourage tax evasion, I can show you, for academic purposes, how impractical the expatriation tax is to enforce. Short of closing the economic and physical borders, I'm not quite sure what you can do. (Closing the borders is hardly a viable option either). Much as secret banking emerged, I think it fairly obvious that some nation states will recognize that they have an interest in deregulating and charging nearly no tax. Many already have. It should come as no surprise to you that the United States considers these jurisdictions a threat. (Note that compliance in low tax jurisdictions approaches 100%). They will also recognize that they can attract several wealthy citizens to their shores who will invigorate their local economies if they pass laws with strict assurances of property rights. Force is only the answer so long as the population has no other option. I think it's fairly clear that nation-states who insist on using draconian means to enforce taxation in some last ditch effort to bail out their sinking boats will find their borders are leaking wealth to capital flight like screen doors. The only populations left to oppress and collect from will be those who cannot afford to flee. Not much left to collect, in other words. Not much to collect, a poor and disgruntled population probably nearing homicidal tendencies (especially in the U.S. example where a culture of freedom of spirit is less likely to foster much subserviance to a military type crackdown). More and more problems at home, less and less money to deal with it. Sound like disaster to me. Now, I don't think its going to happen quite that way. I think your assumption that draconian measures are going to be employed so easily is a incorrect one. Still, let's assume your correct for a moment. Are YOU going to stick around?

--- mkj

--- My preferred and soon to be permanent e-mail address:unicorn@schloss.li "In fact, had Bancroft not existed, potestas scientiae in usu est Franklin might have had to invent him." in nihilum nil posse reverti 00B9289C28DC0E55 E16D5378B81E1C96 - Finger for Current Key Information Opp. Counsel: For all your expert testimony needs: jimbell@pacifier.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SANDY SANDFORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C'punks, On Sat, 27 Apr 1996 mkj@october.segno.com wrote:

... Certainly the widespread use of cryptography will frustrate modern systems of taxation, such as **income taxes**, sales taxes, etc., [emphasis added]

Income tax is the Godzilla of taxes. It is THE TAX when it comes to the US. (Perhaps VAT has a similar status elsewhere, but both, as pointed out, are subject to crypto-anarchistic subversion.)

...taxes existed, and governments sustained themselves perfectly well, long before these systems arose.

But at nowhere near the voracious levels of modern states.

Why then shouldn't we expect that modern governments, in the face of widespread cryptography, will simply revert to more traditional (and brutal) systems such as head taxes, land taxes, travel tolls, etc.?

For the same reasons they were dropped in the past. They have only a limited ability to extract tribute from a defenseless populace. Today's citizens have far more power vis-a-vis the state, and far less deference for authority. HEAD TAX--This "regressive" tax would really piss off those on the lower end of the economic ladder if the price-per-head were anywhere near what is needed maintain a government. The amount of social control needed to make sure most people had complied would be beyond anything a modern state could field. LAND TAX--Might be better than a head tax, but the unintended affects would still piss off the poor. It would give the relatively few land owners enormous motivation to buy off assessors and, ultimately, higher government officials. To the extent land taxes could be collected, they would be enormously economically destructive. The net effect would be similar to Soviet collectivisation. The land, the productive base of a nation's economic health would be constantly eroded until everyone was impoverished. TRAVEL TOLLS--Yeah, right. The Soviets required VISAS, to travel between cities, yet they couldn't even stop students from taking unauthorized jaunts. The MODERN state is doomed and, thanks to technology, the people have too much power to permit more "traditional" governments to control them. States may not go quietly into that gentle night, their death throes may be very bloody, but go they will. S a n d y ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~