Re: Cybersecurity
On Thu, 7 Sep 1995 hallam@w3.org wrote:
The UK laabour party is opposed to key escrow "we do not accept the "clipper chip" argument". The Tories have less than half the level of popular support an are barely recognisable as a government.
Phill
Wait till Labour finds out that crypto makes "The Caring Society" impossible. Perhaps they'll change their view then. DCF
Date: Thu, 21 Sep 1995 06:13:40 -0400 (EDT) From: Duncan Frissell <frissell@panix.com> On Thu, 7 Sep 1995 hallam@w3.org wrote: > The UK laabour party is opposed to key escrow "we do not accept > the "clipper chip" argument". The Tories have less than half the > level of popular support an are barely recognisable as a > government. > > Phill Wait till Labour finds out that crypto makes "The Caring Society" impossible. Perhaps they'll change their view then. Ok, I'll bite. What do you mean? I'm guessing that you're talking about the fact that fully applied crypto (e. g. fully anonymous digital cash) makes it essentially impossible to base a tax system on income. With full application in place, a government would be forced to shift the basis of the tax system toward `real assets' and the receiving of goods and services within its borders. However, outside of transactions involving pure information exchange, this simply shifts things from one side to the other in a relationship where the basic ideas behind capitalism suggest that both sides should be more or less equal. That is, you're not taxed based on money changing hands, but rather on the more tangible things that are the reason for the money changing hands. To use the over-used grocery store example, you're taxed on what you carry out in your basket, without regard to any money that may or may not have changed hands before during or after you went to the store. Earnings tend to correlate reasonable well with receiving goods and services, at least over long periods of times. Also most people are more or less tied to a certain area of the world. Certainly there are exceptions, but the average case is more relevent when considering what sorts of governmental policies are possible. Given this, I think that crypto is more likely to result in a readjustment of the details than a fundamental change in the relationships between various elements of society. I don't mean to suggest that these relationships can't or won't change, just that strong crypto is not a magic pill that can transform everything by itself. Fundamental changes are the results of the interplay of a wide array of forces. -- Rick Busdiecker Please do not send electronic junk mail! net: rfb@lehman.com or rfb@cmu.edu PGP Public Key: 0xDBD9994D www: http://www.cs.cmu.edu/afs/cs.cmu.edu/user/rfb/http/home.html send mail, subject "send index" for mailbot info, "send pgp key" gets my key
On Sun, 24 Sep 1995, Rick Busdiecker wrote:
I'm guessing that you're talking about the fact that fully applied crypto (e. g. fully anonymous digital cash) makes it essentially impossible to base a tax system on income.
Yep.
With full application in place, a government would be forced to shift the basis of the tax system toward `real assets' and the receiving of goods and services within its borders. However, outside of transactions involving pure information exchange, this simply shifts things from one side to the other in a relationship where the basic
I am also projecting a transition from physical to non-physical goods and services. Thus most entertainment, financial services/investing, professional services, and indeed the rest of employment services will tend to be non-physical. We see a lot of unbundling already in which services are split off from the more physical parts of a transaction. Drop shipping, contracting out, etc.
Earnings tend to correlate reasonable well with receiving goods and services, at least over long periods of times. Also most people are more or less tied to a certain area of the world. Certainly there are exceptions, but the average case is more relevent when considering
Say that it was 1750 and you were a French Physiocrat. You might say that land and agriculture should be taxed because that represented the only important part of the economy and the nation's wealth. The making of goods was insignificant. You would have ignored what was to become a big part of the economy. It is possible that the non-physical part of the economy will become much bigger than the physical. Note that most money itself is non-physical. And if the physical part of the economy is taxed and the non-physical isn't the market will be skewed in favor of non-taxed activities. Also even though most people are geographically bound, if their consumption switches to non physical goods, they can acquire these goods anonymously or securely from any place on earth. So even if you don't travel, the locus of your transactions can. DCF
On Sun, 15 Oct 1995, Duncan Frissell wrote:
On Sun, 24 Sep 1995, Rick Busdiecker wrote:
I'm guessing that you're talking about the fact that fully applied crypto (e. g. fully anonymous digital cash) makes it essentially impossible to base a tax system on income. Yep. [....] Hold on. This is more "factoid" than "fact": recall that income is PAID by people as well as EARNED by people. Most payers have easily detectible physical presence and assets that can easily be attached by regulators. It will be a cold day before, e.g., my employer agrees not to report my earnings. And the same is true for most employers in most industries.
And if it ever stops being true, we'll just get VAT, and VAT inspectors. So the line about death and taxes remains as true as ever, crypto or no. A. Michael Froomkin | +1 (305) 284-4285; +1 (305) 284-6506 (fax) U. Miami School of Law | froomkin@law.miami.edu P.O. Box 248087 | http://www.law.miami.edu/~froomkin Coral Gables, FL 33124 USA | New address, but it's still just as hot here.
On Sun, 15 Oct 1995, Michael Froomkin wrote:
On Sun, 15 Oct 1995, Duncan Frissell wrote:
On Sun, 24 Sep 1995, Rick Busdiecker wrote:
I'm guessing that you're talking about the fact that fully applied crypto (e. g. fully anonymous digital cash) makes it essentially impossible to base a tax system on income. Yep. [....] Hold on. This is more "factoid" than "fact": recall that income is PAID by people as well as EARNED by people. Most payers have easily detectible physical presence and assets that can easily be attached by regulators. It will be a cold day before, e.g., my employer agrees not to report my earnings. And the same is true for most employers in most industries.
Were I an overseas employer, I would be quite happy to work in a "disinterested" jurisdiction and hire American workers to telecommute and issue their pay blindly to the number only or crypto bank account of their choice and promptly encrypt or lose the records. Remember, there is an incentive for employERS as well as employees to flee the tax system of a nation that is manipulative of it. Employers who work in tax free ways will be able to pay their employees less, quite a bit less. Given a 32% tax rate, an employer with the advantage of no income reporting on employees will easily be able to drop a given salary 25% and attract employees quite easily. Who are you going to work for? The publisher who is based in New York and reports all payments, or the publisher who works in the Cayman Islands, reports nothing, and merely sells the manuscript to the big name publisher in New York after purchasing it blind from you?
And if it ever stops being true, we'll just get VAT, and VAT inspectors. So the line about death and taxes remains as true as ever, crypto or no.
I believe it will be extremely hard for VAT inspectors, in future, to determine one of a few things needed to assess VAT taxes. 1> Identity of employers within their jurisdiction 2> Identity of employees within their jurisdiction 3> Who is working "IN" their jurisdiction 4> Who is a U.S. citizen How can you say that the 2 meg random data file that Mr. X sent to Publishing Company B is worth $2mil? That the encrypted letter to client Q is the sum of legal work worth $80,000 in services and research? These are particularly difficult to determine when the bank transaction are made with truely anonymous e-cash and overseas accounts. It's simply not possible unless: 1> The state has enforced toy crypto 2> The strong crypto the parties use is broken 3> The parties tell. At some point, the only thing your going to be able to tax is "Goods." As in solid and measureable. When this is true, the most profitable venture in the United States will be retail smuggling. And as taxes are raised again and again, compliance will drop and drop until the largest portion of the national budget will be enforcement of the Value Tax Reform and Retail Laundering and Terrorism Act of 2002. Again, the more difficult it gets to do business in the United States without taxation far out of proportion to other nation states, the fewer companies will stick around. I might add that as technology progresses, fewer and fewer companies will NEED to work in the United States. What I have not discussed here are the various political problems involved. I admit they exist, but I haven't quite come to a conclusion of how the balance between government self preservation and blind and secure transactions will balance out. I believe in part it rests on how much the United States will be willing to abide by various constitutional provisions. Americans are going to have to decide if they really believe in free speech and freedom, a question which has begun to surface quite obviously of late. It will literally take a dictatorship to enforce taxation in any real way in 15 years, if not sooner. VAT, income, sales tax, or otherwise.
A. Michael Froomkin | +1 (305) 284-4285; +1 (305) 284-6506 (fax) U. Miami School of Law | froomkin@law.miami.edu P.O. Box 248087 | http://www.law.miami.edu/~froomkin Coral Gables, FL 33124 USA | New address, but it's still just as hot here.
--- "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
On Sun, 15 Oct 1995, Black Unicorn wrote:
Were I an overseas employer, I would be quite happy to work in a "disinterested" jurisdiction and hire American workers to telecommute and issue their pay blindly to the number only or crypto bank account of their choice and promptly encrypt or lose the records.
Thanks for responding, Black (if I may call you Black), it means I don't have to.
Remember, there is an incentive for employERS as well as employees to flee the tax system of a nation that is manipulative of it. Employers
Also an incentive for jurisdictions to engage in a beneficial "Dutch Auction" in which they offer lower and lower tax rates to attract employers and employees.
Who are you going to work for? The publisher who is based in New York and reports all payments, or the publisher who works in the Cayman Islands, reports nothing, and merely sells the manuscript to the big name publisher in New York after purchasing it blind from you?
And as the intellectual components of goods and services are increasingly unbundled from the physical for efficiency reasons (greater range of competitors made possible) more work can be done at a distance.
When this is true, the most profitable venture in the United States will be retail smuggling. And as taxes are raised again and again, compliance
Fairly easy these days with drop shipping of goods by third parties and the bypassing of retail distribution chains for more and more goods. In any case, if goods end up being a smaller portion of Gross World Product, taxes on them become less significant. The existence of taxation of physical goods certainly tips things in favor of the untaxed non physical goods and services. Note that agriculture once made up 95% or more of GWP. It doesn't any more. Non physical goods like entertainment, financial services, etc can grow to dominate the world economy because they adapt well to cheap distribution over the nets. In the Progress and Freedom Foundation's Friction Free Capitalism, taxes are a big part of the "friction" that is disintermediated. DCF
On Sun, 15 Oct 1995, Duncan Frissell wrote:
On Sun, 15 Oct 1995, Black Unicorn wrote:
Were I an overseas employer, I would be quite happy to work in a "disinterested" jurisdiction and hire American workers to telecommute and issue their pay blindly to the number only or crypto bank account of their choice and promptly encrypt or lose the records.
Thanks for responding, Black (if I may call you Black), it means I don't have to.
'uni' sounds a lot less charged, but it doesn't matter much to me. My pleasure.
Remember, there is an incentive for employERS as well as employees to flee the tax system of a nation that is manipulative of it. Employers
Also an incentive for jurisdictions to engage in a beneficial "Dutch Auction" in which they offer lower and lower tax rates to attract employers and employees.
"Race to the bottom" this is usually called by statists who dislike the effect. It's also applied to things like environmental regulation, where (for example) many businesses in Illinois moved to Indiana when it became clear that Indiana was much more corporate friendly because their 'office paper' disposal "tax" was zero, and Illinois was significant enough to make small business feel the pressure. (No, I'm not kidding) Of course, losing the business, Illinois uped the ante and eliminated the tax all together and coupled it with some kind of incentive. Indiana countered and so forth. Everyone won, of course, in that the total number of small businesses in both states outgrew economic growth over the period, but the leftists had a fit. Wealth maximization is not a concept that is easily understoof by greedy statists who want MORE and want it NOW. I am amused that this strata of market forces is never recognized as market forces, but just dirty nasty states shooting important regulation down.
DCF
--- "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
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SANDY SANDFORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C'punks, On Sun, 15 Oct 1995, Black Unicorn wrote:
At some point, the only thing your going to be able to tax is "Goods." As in solid and measureable.
When this is true, the most profitable venture in the United States will be retail smuggling. And as taxes are raised again and again, compliance will drop and drop until the largest portion of the national budget will be enforcement of the Value Tax Reform and Retail Laundering and Terrorism Act of 2002.
There is an article in this week's issue of THE EUROPEAN about cigarette smuggling in Europe. There is some regulatory arbitrage from south to north because of disparities in the local taxes on tobacco, but the big "problem" is American cigarettes. Since even in the lowest tax European countries taxes make up 70% of the retail price of cigarettes, there is huge incentive to smuggle in US smokes. Makes me proud to be an American. S a n d y ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
On Sun, 15 Oct 1995, Sandy Sandfort wrote:
cigarettes. Since even in the lowest tax European countries taxes make up 70% of the retail price of cigarettes, there is huge incentive to smuggle in US smokes. Makes me proud to be an American.
Canada had exactly the same tax and had to eliminate it two years ago after massive smuggling (supposedly in large part through native reserves that straddle the border). The cigarette companies were actively (I won't say alleged, it was definite) involved in the process, as they exported their goods to a non-existant US market and let the packs sit in cargo trailers to be picked up. Needless to say, there was no tax on exports. The previous gov had imposed one but had to drop it after massive cig. co lobbying alleging that Americans (who never even received the Canadian cigs) would switch to their own brands and jobs would be lost. Cigarettes are a rather large industry and at the time were basically operating a black market. One wonders how much easier this will become once someone gets around to setting up a hard credible anon payment scheme. The corporate willingness is certainly there. And I really don't see the securities industry (specifically currency markets) sticking around once some competitive and sufficiently anon alternatives to the SEC go online and offshore. Some sort of market regs enforcement is essential though, you'll never have enough investor confidence for economically significant blacknet exchanges otherwise.
-----BEGIN PGP SIGNED MESSAGE----- Date: Sun, 15 Oct 1995 08:06:13 -0400 (EDT) From: Duncan Frissell <frissell@panix.com> I am also projecting a transition from physical to non-physical goods and services. Thus most entertainment, financial services/investing, professional services, and indeed the rest of employment services will tend to be non-physical. We see a lot of unbundling already in which services are split off from the more physical parts of a transaction. Drop shipping, contracting out, etc. I agree with this projection as a shift in weight. Presumably we can also agree that the transition could never be total. People will continue to need and/or desire a significant number of physical goods as well as services which involve the physical interaction. Say that it was 1750 and you were a French Physiocrat. You might say that land and agriculture should ^^^^^^ This single word represents a significant shift in the discussion. Up to this point, my understanding is that we were discussing what is, and what we believe is possible in the future. With the introduction of `should' we veer away from that direction toward the more philosophical. While I enjoy philosophical discussions a great deal, I doubt that we could find nearly as much common ground as we might if we focussed on what is possible. While I am a civil libertarian, I am not an economic libertarian, as I believe you are. I would expect economic issues to be the focus of our differences in a philosophical discussion, but they need not divide us in discussions outside of philosophy. It is possible that the non-physical part of the economy will become much bigger than the physical. I agree that this is quite possible. Note that most money itself is non-physical. Agreed in part. However, as we have seen already, non-physical representations of money are not taken very seriously when it is impossible, or even very difficult, to exchange them for physical goods and services requiring physical interactions. Very few people would accept CyberBucks in exchange for a car. And if the physical part of the economy is taxed and the non-physical isn't the market will be skewed in favor of non-taxed activities. Agreed. This is at least partially true already. Certainly there are investment instruments which are treated differently by the various tax codes. These differences certainly affect investors' decisions. Still, there seem to be investors willing to purchase instruments based on features other than taxability. Also even though most people are geographically bound, if their consumption switches to non physical goods, they can acquire these goods anonymously or securely from any place on earth. So even if you don't travel, the locus of your transactions can. Agreed. As I said originally, I believe that ready access to strong cryptography will eventually make government tracking of purely information, i. e. non-physical, transactions infeasible. At that point, any feasible system of taxation will have to focus on physical goods and services which involve physical interaction. -----BEGIN PGP SIGNATURE----- Version: 2.6.2 iQCVAwUBMIEzZJNR+/jb2ZlNAQFZhgQAwvhVdXndL0qoRJL3O4QttBfeu3ebJmSk ZPnFFL2kyUvUL+efsym0xVLmjtrLYf+P2OUJJ5puJf7LkNInqdH9+64juRynfqbT lqamnDoj3QXXDcn8DMWhd8oMwXN0a+1+sIvI2c0xfkDZs8H7NBbsph6pFJSEgIf7 QrtCqn6utkc= =ke/Q -----END PGP SIGNATURE----- -- Rick Busdiecker Please do not send electronic junk mail! net: rfb@lehman.com or rfb@cmu.edu PGP Public Key: 0xDBD9994D www: http://www.cs.cmu.edu/afs/cs.cmu.edu/user/rfb/http/home.html send mail, subject "send index" for mailbot info, "send pgp key" gets my key A `hacker' is one who writes code. Breaking into systems is `cracking'.
participants (6)
-
Black Unicorn -
Duncan Frissell -
Michael Froomkin -
Rick Busdiecker -
s1018954＠aix2.uottawa.ca -
Sandy Sandfort