Encryption will have a profound impact on society as we move further into the information age. In particular, some things that are currently taxed will be very hard to tax in the future. Encryption lets non-tangible things move around like the ghosts they are. Since this movement is ininvisible, it will be impossible to tax. So things which can exist in cyberspace will tend to move around tax free. This will include things like: Securities - stocks, bonds, mutual funds Savings - cash Profits - Information - newsletters, magazines, databases Software - This non-taxability comes from the fact that only the parties exchanging something in cyberspace even need to know about the exchange - and they can encrypt everything so that nobody else knows. It also comes from the fact that the entities involved in commerce in cyberspace can be located anyplace in the physical world and there are many places that do not tax companies. Tangible things within the territory of some government will always be taxable by that government. This is especially true for things where it is desirable to have a government issued "title". Major tax categories will still include: Real-estate - land, houses, buildings, factories Vehicles - cars, boats, planes Tangible goods - any objects bought or sold Fuel - gas, diesel, jet fuel People - poll tax Companies - annual registration of corporations Income for self employed information workers will be hard to tax. However, for a number of years yet, most incomes will still be taxed. So governments will have to rework their tax base. National sales taxes or VATs will probably be more common. Taxes on dividends, interest, capital gains, etc., will fade away. This change will be difficult, and probably the technology will move faster than the governments can comfortably react. Instead of adapting to the changes, many governments will probably try to prevent them. These attempts will fail - probably not even slowing things down much. The cyberspace economy will be very close to pure capitalism. Regulation of cyberspace trade will be impossible. It will not be possible to even determine if two parties are doing business, let alone to stop them. Initiation of force in cyberspace should be less and less of a problem as computer systems get more secure. Impersonation is easily prevented with digital signatures. This new tax base may not let governments operate in the manner to which they have become accustomed. Each government will be faced with the choice of either printing more money (causing painful inflation), or making painful cuts in programs. This will no doubt cause some protests and unrest, but certainly need not result in anarchy. -- Vince Cate This file should end up in: ftp://furmint.nectar.cs.cmu.edu/security/cypheressay