1996-12-17 - Hard to Tax Scenario

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From: hanson@hss.caltech.edu (Robin Hanson)
To: cypherpunks@toad.com
Message Hash: b72359314cd20af4afef7325593066ca2bf77590be7e94e27f4422b2ee049f16
Message ID: <199612170128.RAA10929@hss.caltech.edu>
Reply To: <199612170047.QAA04752@crypt.hfinney.com>
UTC Datetime: 1996-12-17 01:28:27 UTC
Raw Date: Mon, 16 Dec 1996 17:28:27 -0800 (PST)

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From: hanson@hss.caltech.edu (Robin Hanson)
Date: Mon, 16 Dec 1996 17:28:27 -0800 (PST)
To: cypherpunks@toad.com
Subject: Hard to Tax Scenario
In-Reply-To: <199612170047.QAA04752@crypt.hfinney.com>
Message-ID: <199612170128.RAA10929@hss.caltech.edu>
MIME-Version: 1.0
Content-Type: text/plain

Hal Finney writes:
>> Imagine Ann is a doctor who wants to ply her trade without taxation.
>> Patients go a local high res medical net booth, which Ann runs from
>> long distance using several real time digital mixes.  To do this, Ann
>> spends most of each day in her expensive home VR room.
>So we are imagining a future scenario in which medicine is commonly if
>not universally practiced via these remote means?  Or do we have two
>classes of doctor, the anonymous virtual ones and the identified ones
>that you go and see in person?  I ask because at least some of the
>difficulties Ann faces seem due to her virtual practice.

Non-anonymous docs would choose virtual or real based on
travel/intimacy tradeoffs.  Urban general practicioners might see most
people in person, while rural docs and specialists would have more
virtual customers.  

Btw, how hard is it to have real-time digital mixes?  I imagine you
could learn a lot about virtual/real mappings from lots of "random"
communication lines failures.  Imagine all "leaf" lines into homes can
be broken on command from long-distance.

>> Patients pay Ann in untraceable cash, which she uses to pay for
>> groceries and other net services.  Her cover story about why she
>> spends so much time in her home VR room, and how she pays for
>> groceries, is that she is a receptionist for some sham company.
>The need for a cover story raises the question of from whom Ann has
>to keep her secrets.  In a society where (we will stipulate) 30% avoid
>taxation, the moral significance of not paying taxes will be different
>than it is today.  We had some interesting posts in an earlier discussion
>on this list describing the situation in Italy ...

I think the question is whether 30% income tax evasion via crypto is
realistic given that the authorities aggressively try to prevent it.
Of course with lax enforcement evasion may be high, but as in your example
that has nothing to do with cryptography.

>> Ann has many collegues which she does business with regularly,
>> including equipment suppliers, a pharmacist, a nurse practitioner,
>> emergency substitutes, and various specialists.  Ann has never met any
>> of these people in person, and they all show each other fake faces,
>> voices, and even rythms of walking and speaking.  Ann's social life
>> outside VR is entirely divorced from her work life. 
>Well, that last part is true for me already; I telecommute to a company
>300 miles away and have no social life with my co-workers. 

For some people, such as yourself, the cost of this may be small.  For
many other people I know, who socialize mostly with co-workers, the
cost would be very large.  The question is whether it is realistic to
think that 30% of workers would find this cost low enough to tolerate.

>The other part of this scenario, where Ann interacts with her co-workers
>via fake faces, does seem disturbing.  I could imagine, though, that this
>might be common in such a culture.  Maybe everyone pretties themselves
>up when on the videophone.  If there is widespread understanding that
>most faces are at least somewhat false, then perhaps going all the way
>to a completely faked up face would seem more acceptable.  But to someone
>from my generation it will be hard to accept.

It would be hard to accept for me as well.  It would be a further
alienation of the workplace from what feels comfortable and natural.
Not only couldn't you show your face or voice, you might be afraid to
tell them new jokes you heard via your public persona, or recommend a
restaraunt or play you went to.

>It is possible that we might see a more performance-based certification
>rather than a recommendation based one.  My wife is a physical therapist,
>and she had to pass a licensure exam given by the state which qualifies
>her to practice. ...

This scenario does seem possible for jobs where you do lots of very
similar tasks.  In this case a tester can just watch you do a dozen
random such tasks (assuming they can verify that you don't keep
repeating the test till you get a random result you like).  But for
most jobs, I think, the tasks are longer term, so that it is important
to see your actual performance over many years.  And even with small
jobs sometimes it is their ability to handle rare events that is most

>The risks of being caught will depend on factors we don't know,
>like the technology and legal system.  Rather than assuming that tax
>rates are the same, it might be more plausible to assume they have gone
>up in order to keep revenues stable.

The question I pose is whether agressive enforcement can prevent this
30% evasion scenario.  If yes, the evasion is << 30%, so assuming
constant taxes is appropriate.

>This problem may be somewhat specific to the medical scenario, but I
>suspect that many other professions are going to have trouble switching
>to a cash basis.  Anyone whose customers are businesses, for example,
>will face the problem that the businesses' books will need to show that
>an expense is justified in order to deduct it.  This will be a major
>problem for the "anonymous firm" we have discussed occasionally.

A very good point.

Robin D. Hanson  hanson@hss.caltech.edu  http://hss.caltech.edu/~hanson/