Re: CryptoAnarchy: What's wrong with this picture?

[Black Unicorn <unicorn@schloss.li>]

On Sat, 27 Apr 1996 mkj@october.segno.com wrote:

> Please forgive what may be a stupid question, but I've been wondering
> about this for a long time, and today I'm tired of wondering.
> 
> A consistent theme here is "crypto-anarchy", which appears to be
> essentially the idea that widespread cryptography will make tax
> collection impossible, bringing down governments.

Well, this is merely one aspect of what I consider "crypto-anarchy" to
mean.

> I don't see how
> this will work.  The logical flaw in this argument seems so obvious
> (and at least some of the people who buy into it seem so obviously
> intelligent), that I can't help but think I must be missing something.
> 
> Certainly the widespread use of cryptography will frustrate modern
> systems of taxation, such as income taxes, sales taxes, etc., which
> are based on the monitoring of financial transactions.  But these
> systems are a mere flash in the pan; taxes existed, and governments
> sustained themselves perfectly well, long before these systems arose.
>
> Why then shouldn't we expect that modern governments, in the face of
> widespread cryptography, will simply revert to more traditional (and
> brutal) systems such as head taxes, land taxes, travel tolls, etc.?

Now, how are you going to impose taxes on heads if it becomes impossible
to track down a person?  You have to find them to tax them.  With secure,
anonymous communications, people can exist without giving away their
location, business interests, property holdings, etc...etc...  Travel
taxes?  Well, that's equally difficult to enforce.  Particularly in large
states.  Consider the difficulty of charging $1 for crossing the
Mexican-U.S. border.  Any guesses as to compliance rates there?

The only option for government becomes forcible seizure of land and or
persons to enforce taxation.  Note that even today property in
the United States owned by tax evaders is difficult to seize if
one cannot prove tax evasion.  (Taxation is merely one example of
regulations that become difficult to enforce with proper cryptography in 
place by the way).

This being so I think it obvious that a manner of market economy among
political systems will emerge.  Some nation states will participate in
what liberal-economists call a "race to the bottom" where they will
continue to reduce regulations and so forth to attract businesses and thus
income.  Those on the far left somehow count this a _bad_ thing, citing 
typically environmental issues.  It never ceases to amaze me that they
don't get the message when 20% of the corporate population departs and 
they still don't realize that just raising taxes won't solve the problem.

Essentially this is what the expatriation tax is.  Money is fleeing
because taxes in the United States are offensively high in the view of the
citizens.  I know!  Let's impose regulation forbidding these traitorous
deserters and increasing taxes on them!  Uh huh.  Sure.  I invite those
considering expatriation to consult with me.  While I won't encourage tax
evasion, I can show you, for academic purposes, how impractical the
expatriation tax is to enforce.

Short of closing the economic and physical borders, I'm not quite sure
what you can do.  (Closing the borders is hardly a viable option either).

Much as secret banking emerged, I think it fairly obvious that some nation
states will recognize that they have an interest in deregulating and
charging nearly no tax.  Many already have.  It should come as no
surprise to you that the United States considers these jurisdictions
a threat.  (Note that compliance in low tax jurisdictions approaches
100%).  They will also recognize that they can attract several wealthy
citizens to their shores who will invigorate their local economies if they
pass laws with strict assurances of property rights.

Force is only the answer so long as the population has no other option.  I
think it's fairly clear that nation-states who insist on using draconian
means to enforce taxation in some last ditch effort to bail out their
sinking boats will find their borders are leaking wealth to capital flight
like screen doors.  The only populations left to oppress and collect from
will be those who cannot afford to flee.  Not much left to collect, in
other words.  Not much to collect, a poor and disgruntled population
probably nearing homicidal tendencies (especially in the U.S. example
where a culture of freedom of spirit is less likely to foster much
subserviance to a military type crackdown).  More and more problems at
home, less and less money to deal with it.  Sound like disaster to me.

Now, I don't think its going to happen quite that way.  I think your
assumption that draconian measures are going to be employed so easily is a
incorrect one.

Still, let's assume your correct for a moment.  Are YOU going to stick
around?

> 					---  mkj
> 

---
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