From: Bill Stewart <stewarts@ix.netcom.com>
Date: Sun, 5 Nov 1995 02:58:28 +0800
To: cypherpunks@toad.com
Subject: Re: Crypto & Taxes [WAS Re: Cybersecurity]
Message-ID: <199511030524.VAA03406@ix5.ix.netcom.com>
MIME-Version: 1.0
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A couple of weeks ago, Michael Froomkin <froomkin@law.miami.edu> wrote:
>> > fully applied crypto (e. g. fully anonymous digital cash) 
>> > makes it essentially impossible to base a tax system on income.

>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.  

Unfortunately, this is true, at least for people whose employers are
subject to income tax somewhere.  Taxing businesses doesn't make sense
economically - you could collect almost as much money with far less disruption
to the underlying economy by taxing it as wages for workers and
dividend or interest payments to owners* rather than inside the business itself,
substantially reducing the accounting workload of businesses**.
But it's still very attractive to governments, not only as a lever for
implementing social policy and extracting cooperation, but as a critical tool
to force businesses to report wages payed to employees - I don't know if
law.miami.edu is a taxable business, but for most employers, if they don't
report the wages they paid to their employees, but do report all their
revenue, they get taxed on the additional profit, instead of the employee
getting hit with the tax; most people I know who've been paid "under the table"
have been working for small businesses that are also not reporting cash
revenues.

Of course, if a business isn't _spending_ money on employees, but is just
contracting for work performed by an Anguillan corporation, they still have
receipts for expenses, and the financial arrangements between the Anguillan
corporation and any of its US employees aren't really their concern....

>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.

Value is really hard to measure in a service economy.   Most of my work over
the last N years has been talking to people, typing on keyboards,  
going places on airplanes to talk to other people and type on other keyboards,
and occasionally handing people piles of collated and stapled dead trees,
a racket for which people pay my employer lots of money***.  Where's the value?
When was it added?  If the Tax Collectors don't see people handing my employer
lots of money, can they demonstrate how much money they can confiscate?



- - - - - -

* this misses payments to foreign owners and taxes on foreign customers,
but any government foolish enough to discourage investment by foreigners
and sales to foreign customers deserves to be blamed heavily for lost jobs..

** US businesses spend approximately 40% as much calculating taxes as they
do _paying_ them...

*** My previous employer was very good at taking metal, sand, and fermented
dinosaur parts, and shaping them into boxes and strings that people would 
give them money for; they were extremely optimistic that they could get lots
of people to also pay them money for sending them people to talk about boxes
and strings and getting other people to pay _them_ for talking and banging
on keyboards.  They shouldn't have been quite so optimistic, and now
I'm in the racket on my own, having not yet acquired overseas corporations
to shelter my income through :-)
#---
#                                       Thanks;  Bill
# Bill Stewart, Freelance Information Architect, stewarts@ix.netcom.com
# Phone +1-510-247-0664 Pager/Voicemail 1-408-787-1281
#---