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Author Topic: Bitcoin economy without fiat vs government force  (Read 1032 times)
AZwarel
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June 05, 2014, 11:37:15 PM
 #1

Hello!

The subject is really simple. Let us say, that there is a grocery shop in the corner in your city. Hypothise :  We are in the future, and this shop decides to go full on btc, so no fiat-> bitcoin conversion in business. It (tries to) buys products in it, pays bills/rent/employees in it, and accepts bitcoin ONLY from customers.

After all, that would be the future perspective and goal of this whole "experiment of betterment of the world"  Smiley.

My problem is (well actually i am fine with that scenario above): Government.

All the dealings of these hypothetical business are made in bitcoins. The ledgers are only on the blockchain. How the government can coerce taxes out of such a business? How can/will they control, regulate, "bureaucratise" the everyday working of such a business, since the whole operation is out off control (no dollar ever make an exchange, so how do they deduce taxes? How they enforce regulation, since this business is "not existing" in the dollar world). They can not practically enforce the huge blob of regulations and fines etc., with such a company, since it is dealing in an "alternate dimension". Well, regarding the finance part.

They still can call some cops/commando, anything to seize the shop, or arrest the managers, let us say, for money laundering or illegal trading etc..
Remember, the government has the monopoly on initiating force, and ofc they going to use it - after all, that is how they can get your stuff, by threat of force.

I am thinking about the solutions for this rather pragmatic question, because, while money/currency can be fully digitized, the actual physical goods can not be, alas, can be the object of physical force.

One scenario is ofc, that by the time the above mentioned shop reaches bitcoin only status, the government already crumbled, USD hyperinflated, etc etc.

I am looking for suggestions, and theories, because i think this is a rather pragmatic and utmost important question. Looking forward for a fruitful conversation!

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June 06, 2014, 12:20:57 AM
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This is my view: Once the economy is mostly converted over to bitcoin then businesses and individuals will still pay taxes like they do today. *Until* they realize they don't have to if they don't want to.

A Bitcoin economy makes possible something that isn't possible today: a tax revolt. Individuals can refuse to send their tax funds to the government and businesses can refuse to deduct taxes from their employees wages, charge taxes on sales, etc.

At this point the government is in a sticky wicket indeed. They would be faced with the prospect of enforcement without funds to do so. They would no longer be able to print money to pay for enforcement; and, most likely, would not be able to borrow from other countries to do so, as the other countries would be in the same situation.

Also, even if the government full-out tried to enforce taxes while it could in any way, it would *not* be able to seize financial assets. It would only be able to seize physical assets, which is grossly inefficient from a tax revenue standpoint: physical assets need to be sold.

Brave new world.
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June 06, 2014, 12:26:34 AM
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I think that the IRS will have adjused how it looks at Bitcoin by the time a store is able to do all its business in that currency.

I'm sure this already happens. There are certainly "corner markets" that do everything (or a lot) in cash and don't report their total earnings.
AZwarel
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June 06, 2014, 12:48:32 AM
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Yes, critterfidget, that is exactly my optimistic scenario for the swift!

I agree, that the tax revolt must come. The US only "rolled in" income tax in with the Ratification of the Sixteenth Amendment in 1913, and people today think taxes are "natural". No, they are not. Most of the roads/railroads, hospitals, schools were built by private institutions in the US, and many more places elsewhere in the world. Government spending was like 2-4% of GDP (!) in the late 1800s, and still the US was the most advanced and sought after to live in country in the world at that time!

But, on the subject, i still can not see how the "switch" will come. Maybe your - hoping -, reasoning will hold. I spoke with a friend and told him that if suddenly a significant % of the economy will became "corner markets", they will just lack the manpower to visit and close/regulate them all :-)

But my pessimistic version is scary:
I am just very alarmed, as someone who examine history, the main cause of death/imprisonment for a citizen is his own government, no exception! Just in the US, 1% of the populace is imprisoned, the persons incarnated is more than ALL the other countries prisoners in the world combined! And in the 20th century there are ~4 times of people were killed by their own countries than all the wars combined!!!

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June 06, 2014, 03:19:16 AM
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We would have to transition to a national sales tax. If they keep it too high people will barter and trade amongst themselves and business will suffer and the government will see less revenue.

The added bonus is that these funds we give the government will be traceable in the block chain giving us unheard of transparency. 

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June 06, 2014, 03:42:15 AM
 #6

Free choice vs coercion.

If history is any guide, coercion usually win at the end.

Anyone betting on bitcoin with their saving should consider diversification.


Ron~Popeil
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June 06, 2014, 04:17:25 PM
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Free choice vs coercion.

If history is any guide, coercion usually win at the end.

Anyone betting on bitcoin with their saving should consider diversification.



Wrong. History is littered with the corpses of coercive systems. They keep trying but humanity inevitably throws off the yoke.

murraypaul
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June 06, 2014, 04:21:11 PM
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All the dealings of these hypothetical business are made in bitcoins. The ledgers are only on the blockchain. How the government can coerce taxes out of such a business? How can/will they control, regulate, "bureaucratise" the everyday working of such a business, since the whole operation is out off control (no dollar ever make an exchange, so how do they deduce taxes? How they enforce regulation, since this business is "not existing" in the dollar world). They can not practically enforce the huge blob of regulations and fines etc., with such a company, since it is dealing in an "alternate dimension". Well, regarding the finance part.

How is any of this different from a cash-only business? (Apart from being massively easier to trace, as every transaction is recorded.)
The grocery shop will be required to account for its income, expenses and profits. It will be required to pax taxes on those numbers.
If it either doesn't provide those accounts, provides false accounts, or fails to pay its taxes it will subject to punishment.

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Ron~Popeil
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June 06, 2014, 04:26:40 PM
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All the dealings of these hypothetical business are made in bitcoins. The ledgers are only on the blockchain. How the government can coerce taxes out of such a business? How can/will they control, regulate, "bureaucratise" the everyday working of such a business, since the whole operation is out off control (no dollar ever make an exchange, so how do they deduce taxes? How they enforce regulation, since this business is "not existing" in the dollar world). They can not practically enforce the huge blob of regulations and fines etc., with such a company, since it is dealing in an "alternate dimension". Well, regarding the finance part.

How is any of this different from a cash-only business? (Apart from being massively easier to trace, as every transaction is recorded.)
The grocery shop will be required to account for its income, expenses and profits. It will be required to pax taxes on those numbers.
If it either doesn't provide those accounts, provides false accounts, or fails to pay its taxes it will subject to punishment.

Yes, people seem to think that a bit coin economy would somehow take us back to the wild west.

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June 06, 2014, 08:49:47 PM
 #10

Hello!

The subject is really simple. Let us say, that there is a grocery shop in the corner in your city. Hypothise :  We are in the future, and this shop decides to go full on btc, so no fiat-> bitcoin conversion in business. It (tries to) buys products in it, pays bills/rent/employees in it, and accepts bitcoin ONLY from customers.

After all, that would be the future perspective and goal of this whole "experiment of betterment of the world"  Smiley.

My problem is (well actually i am fine with that scenario above): Government.

All the dealings of these hypothetical business are made in bitcoins. The ledgers are only on the blockchain. How the government can coerce taxes out of such a business? How can/will they control, regulate, "bureaucratise" the everyday working of such a business, since the whole operation is out off control (no dollar ever make an exchange, so how do they deduce taxes? How they enforce regulation, since this business is "not existing" in the dollar world). They can not practically enforce the huge blob of regulations and fines etc., with such a company, since it is dealing in an "alternate dimension". Well, regarding the finance part.

They still can call some cops/commando, anything to seize the shop, or arrest the managers, let us say, for money laundering or illegal trading etc..
Remember, the government has the monopoly on initiating force, and ofc they going to use it - after all, that is how they can get your stuff, by threat of force.

I am thinking about the solutions for this rather pragmatic question, because, while money/currency can be fully digitized, the actual physical goods can not be, alas, can be the object of physical force.

One scenario is ofc, that by the time the above mentioned shop reaches bitcoin only status, the government already crumbled, USD hyperinflated, etc etc.

I am looking for suggestions, and theories, because i think this is a rather pragmatic and utmost important question. Looking forward for a fruitful conversation!



Solution: If this becomes a big enough issue, the IRS will just accept Bitcoin to settle Tax debt Wink

Nicolas Dorier
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June 06, 2014, 10:42:17 PM
 #11

In 1999 Milton Friedman predicted Bitcoin. (Check https://www.youtube.com/watch?v=fYD17h6hlCs)
Most of you know that video, but most internet video sadly cut the end of his discussion.
His prediction was that once adopted, people will stop paying taxes, which will shrink government power and influence.
Quote
The tendency to make it harder to collect taxes will be a very important positive effect of the internet
As a libertarian, he is delighted of it.

I think the government force will shrink, meaning probably less minimum social services and surveillance of its citizen, corruption on a smaller scale, and less regulation.
I find it likely that the government will protect his eggs with more regulation.
But the backed-in impossibility to stop crypto from being used (thanks satoshi), will incentivize ordinary people to "go dark", as NSA says.

Maybe the black market will grow for a while, a tendency that can reverse as soon as the government stop regulating cryptos.
The net effect is that economic forces will push government power down whatever they do.
Good or Bad ? I feel that most of the population is happy about it, but maybe I am biased by this forum. Wink


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Ron~Popeil
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June 06, 2014, 11:12:40 PM
 #12

In 1999 Milton Friedman predicted Bitcoin. (Check https://www.youtube.com/watch?v=fYD17h6hlCs)
Most of you know that video, but most internet video sadly cut the end of his discussion.
His prediction was that once adopted, people will stop paying taxes, which will shrink government power and influence.
Quote
The tendency to make it harder to collect taxes will be a very important positive effect of the internet
As a libertarian, he is delighted of it.

I think the government force will shrink, meaning probably less minimum social services and surveillance of its citizen, corruption on a smaller scale, and less regulation.
I find it likely that the government will protect his eggs with more regulation.
But the backed-in impossibility to stop crypto from being used (thanks satoshi), will incentivize ordinary people to "go dark", as NSA says.

Maybe the black market will grow for a while, a tendency that can reverse as soon as the government stop regulating cryptos.
The net effect is that economic forces will push government power down whatever they do.
Good or Bad ? I feel that most of the population is happy about it, but maybe I am biased by this forum. Wink



Going dark is something people do when power gets too big. I don't plan to use dark wallet but would switch in a second if they start trying to regulate bit coin.

AZwarel
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June 07, 2014, 12:59:09 PM
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In 1999 Milton Friedman predicted Bitcoin. (Check https://www.youtube.com/watch?v=fYD17h6hlCs)
Most of you know that video, but most internet video sadly cut the end of his discussion.
His prediction was that once adopted, people will stop paying taxes, which will shrink government power and influence.
Quote
The tendency to make it harder to collect taxes will be a very important positive effect of the internet
As a libertarian, he is delighted of it.

I think the government force will shrink, meaning probably less minimum social services and surveillance of its citizen, corruption on a smaller scale, and less regulation.
I find it likely that the government will protect his eggs with more regulation.
But the backed-in impossibility to stop crypto from being used (thanks satoshi), will incentivize ordinary people to "go dark", as NSA says.

Maybe the black market will grow for a while, a tendency that can reverse as soon as the government stop regulating cryptos.
The net effect is that economic forces will push government power down whatever they do.
Good or Bad ? I feel that most of the population is happy about it, but maybe I am biased by this forum. Wink



Good point, black market somehow always gets stronger, when government regulation gets stronger. Even in the killing fields of Cambodia people started trading, exchanging goods and created pseudo currencies!
In the eastern block during soviet state control, we had the "2nd economy" which was essential for the populace to maintain everyday life, and those in power just pretended it does not exist (read: they even encouraged it, like in Hungary).
It is amazing how the party officials did not believe in the collectivized state machinery, while everyone had to say "comrade" in everyday talk.

Just read Murray Rothbard's Anatomy of the State, he had a very strong argument against the inevitability of the state as a regulator (basically he proofs how the state machinery is nothing more than a parasitic, coercive band supplied with ideology from the "intellectuals").

People tend to forget about the altcoins, and the non currency usages of the bitcoin protocol! Those are the real "killer apps" to come freeing our economy from coercion and taxation i think.

Kudos for the Friedman video :-)
Nicolas Dorier
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June 08, 2014, 12:49:22 PM
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Just read Murray Rothbard's Anatomy of the State, he had a very strong argument against the inevitability of the state as a regulator (basically he proofs how the state machinery is nothing more than a parasitic, coercive band supplied with ideology from the "intellectuals").

People tend to forget about the altcoins, and the non currency usages of the bitcoin protocol! Those are the real "killer apps" to come freeing our economy from coercion and taxation i think.

Kudos for the Friedman video :-)

I'll read Murray's book it seems interesting.

You are right about the non currency use of bitcoin.
I think the biggest killer app of bitcoin will be "colored coins", which will permit fund a company by emitting shares through "colored coins". No lawyer involved, no financial institution, no middle man required.
To me, once a tool that make it easy for everyone to see how much colored coins are issued by a particular company, track them on the bitcoin network, or emit some if you are the company, it will be huge. Maybe as huge as the currency and payment revolution of bitcoin.

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okthen
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June 08, 2014, 12:55:42 PM
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I'm sure governments will find some way to collect taxes. Maybe they'll be based only on the things you own, thus categorizing you and having several tax levels.
But I do agree that most businesses will prefer (for a while) to pay taxes anyway, "just in case".
Nicolas Dorier
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June 09, 2014, 12:22:42 AM
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I'm sure governments will find some way to collect taxes. Maybe they'll be based only on the things you own, thus categorizing you and having several tax levels.
But I do agree that most businesses will prefer (for a while) to pay taxes anyway, "just in case".


Most current business will accept to pay taxes for their BTC gains.

But expecting the future will be the same as now if crypto get mainstream is naive.
The incentives to go dark with crypto is insanely high.

Crypto can help gov to collect taxes only if one wants to pay taxes by publishing his public key. If one does not want to publish the public key, gov is toasted.

Businesses (legal or not) are becoming more and more knowledge based, so here are three incentives to go dark :
  • Impossibility to quantify knowledge work output
  • Impossibility to seize or trace crypto
  • Raising taxes

I am confident that knowledge output will always be impossible to quantify.
I am confident that seizing or tracing crypto will never be possible. (it is a math problem, not a law problem)

So the only lever the government will have to decrease "dark business" is decreasing taxes.
But less taxes clearly mean its power will shrink as a consequence.

Existing business will continue to pay taxes. But I highly doubt the new one in a crypto age will do the same. (especially knowledge work)


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