Taxes in the digicash world
Hi Suppose that digital cash becomes easy enough to use and becomes the mainstream medium in most [or at least many] economic transactions. The question is, how can the government TECHNICALLY collect taxes? I do not mean to start `libertarianism vs. socialism' discussion, I am more interested in the technical aspects of tax collection when transfers of money are protected by strong crypto.. Let's say, maybe this tax would work: every time someone verifies that a piece of digital cash is valid, s/he has to pay the government a little percentage of the amount. Since digital banks are easier to control than other participants of the market, this kind of tax legislation is easier to enforce. Of course these banks may be offshore, and then such collection becomes problemstic. Another alternative that I see is property taxes and poll taxes,or taxes on some commodities such as oil. But incomes seem to be hard to track. What else? - Igor.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SANDY SANDFORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C'punks, On Tue, 30 Jul 1996 ichudov@algebra.com asked:
...how can the government TECHNICALLY collect taxes...when transfers of money are protected by strong crypto[?]
Igor answered his own question with regard to trying to tax digital money transactions at the bank level:
Of course these banks may be offshore, and then such collection becomes problemstic.
He then suggested:
Another alternative that I see is property taxes and poll taxes or taxes on some commodities such as oil. But incomes seem to be hard to track.
Under a totally anonymous digital money scheme, directly tracking income becomes effectively impossible. One solution that is used in countries with historically low rates of tax compliance (e.g., France) is to base taxation on apparent wealth. Not very efficient. Commodity taxes--especially taxes on only one or a few commodities--create market distortions as people seek to minimize their tax load by commodity substitution (e.g., natural gas or ethenol for oil) or the use of black market sources (e.g., bootleg cigarettes.) Poll taxes are universally hated and trivially avoided. Their evil twin, head taxes, are likewise hated and only enforceable with mandatory universal identification. (In two months, the Mafia will be selling perfect forgeries supplied by the ChiComs.) If I were the government, I'd tax realty as my primary or only source of income. It *appears* "progressive" so it appeals to the lower class, but it is passed along to everyone in the form of higher commodity prices and rents. Realty can't be picked up and moved to another jurisdiction like personal property or people, so it is easier to hold as a tax hostage by government. S a n d y ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
At 11:47 AM -0400 7/30/96, Sandy Sandfort wrote:
If I were the government, I'd tax realty as my primary or only source of income. It *appears* "progressive" so it appeals to the lower class, but it is passed along to everyone in the form of higher commodity prices and rents. Realty can't be picked up and moved to another jurisdiction like personal property or people, so it is easier to hold as a tax hostage by government.
Sometimes, in my wilder moments, I think about it this way: Agriculture created cities, where the "government", actually large landowners, relied on implicitly forcible payments-in-kind of agricultural produce. Industrialism (Maybe. Maybe printing did.) created nation states, which rely on forcibly obtained taxes on cash-flow and financial assets. Maybe, in a financial cryptography -enabled geodesic economy, cashflow and financial asset taxation become impossible as a revenue source for anything but the propigation and/or regulation (probably private) of cashflows and financial assets themselves ;-). The phrase "Government services" becomes exposed for the oxymoron that it really is under this scenario. There'll be no way to compel payment for these "services", so they'll be forced to prove their usefulness in a market of some kind. They'll have to earn their money the old fashioned way. I expect that large economic entities may exist, the way cities and nation-states do, but they won't be geographic in nature, because location ceases to be as economically important as it is in agriculturalism, where land is the source of all wealth, or as it is in industrialism, where actual physical positions in distribution and information heirarchies are so important. (The three laws of retail, and all that...) It's even hard for me to see large permanent entities as salient features of such an economy. That is, each entity will be more like an ad-hoc partnership of other smaller entities, which goes away after its specific financial purpose has been completed. We're experimenting with those "virtual" organizations now, and the word "syndicate" will probably reemerge as the dominant way of doing larger business projects. The financial and entertainment markets work this way a lot, and, even though large corporations exist in those markets, lately there's been a proliferation of smaller and smaller firms as information technology enables their creation. Permanence is a function of physical reality, and information, because it's not physical, is not permanent. It is always in the process of becoming something else. So, real estate taxes may be the only thing left, but they might be used for really trivial stuff, like very local roads, infrastructure (dark fiber maintenance? :-)), etc., and not much else. Kind of like local irragation committees in third world countries (or New Mexico ;-)) devolved from the water-monopoly "states" of places like ancient Mesopotamia, Egypt or China. Cheers, Bob Hettinga ----------------- Robert Hettinga (rah@shipwright.com) e$, 44 Farquhar Street, Boston, MA 02131 USA "'Bart Bucks' are not legal tender." -- Punishment, 100 times on a chalkboard, for Bart Simpson The e$ Home Page: http://www.vmeng.com/rah/
Igor Chudov @ home wrote:
Hi
Suppose that digital cash becomes easy enough to use and becomes the mainstream medium in most [or at least many] economic transactions.
The question is, how can the government TECHNICALLY collect taxes? I do not mean to start `libertarianism vs. socialism' discussion, I am more interested in the technical aspects of tax collection when transfers of money are protected by strong crypto..
Let's say, maybe this tax would work: every time someone verifies that a piece of digital cash is valid, s/he has to pay the government a little percentage of the amount. Since digital banks are easier to control than other participants of the market, this kind of tax legislation is easier to enforce.
Of course these banks may be offshore, and then such collection becomes problemstic.
Another alternative that I see is property taxes and poll taxes,or taxes on some commodities such as oil. But incomes seem to be hard to track.
What else?
- Igor.
Governments consume a certain percentage of their nations gross domestic product. They will do whatever it takes to make sure their "cut" doesn't go down. The world will never live on information alone. There is always going to be a need for physical transactions. The government will just raise taxes on anything tangible. The lower class will end up paying a larger percentage of taxes because they utilize information/service technologies less then the middle and upper classes. The government and its "distributed wealth" ideals, will raise property taxes to try to even the load over the populace. Another idea is that the government will start taxing shipments. You buy a CD with your e-money, but it still has to be shipped. They can force the shipper to declare the value of the contents and collect the tax when the box arrives at your doorstop. This would be very hard to implement, but I wouldn't rule anything out at this point. When information and service becomes untaxable, you will see some very creative new taxes emerge. I have an idea for fully anonymous, offshore accountless electronic cash, but feel that the effort to implement it might be futile if the government were to ban any such successful technology. *** .sig under construction ***
participants (4)
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ichudov＠algebra.com -
Kevin Stephenson -
Robert Hettinga -
Sandy Sandfort