Will Cryptocurrency Alter The Need To Tax?

in LeoFinance8 days ago

Taxes. This is a topic few like to discuss.

Elon Musk made news lately which his complaint about the proposed increase in taxes. Leaving aside whether he can afford it or not, it just shows that nobody likes taxes. In fact, many consider it legalized thievery.

Whatever the degree of one's stance, it is safe to say that few of us can avoid them. They are everywhere. Even if one does not make enough to pay income taxes, they come in other forms. Whether it is VAT, sales, property, or just the fees we have to pay for different things, this is something that affects all.

At the national level, many are starting to question why governments even tax at all. They showed a willingness to engage in deficit spending, running up enormous debt loads. If the US Government is going to adds trillions a year to the debt, why indulge in the game of income taxes? After all, what is another couple trillion on an amount that will never be paid back? Perhaps with the money in the hands of the population, there is a chance the growth rate might accelerate.

Either way, taxes are not going away anytime soon. Is there, however, another system that could be constructed for funding? There is a chance we could be seeing it.

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Crypto-Funding

Cryptocurrency is a wealth generation tool. Some believe it will cause the greatest amount of wealth the world ever saw. Considering where things were a couple years ago, it is hard to argue this viewpoint. Things are absolutely exploding and we are still in the very early stages.

Of late, we are seeing governments starting to step in. Obviously the regulators are looking at everything that is taking place. That is, however, not what we are referring to.

A number of governments around the world are starting to embrace the opportunities cryptocurrency offers. We have CityCoin which brought MiamiCoin and NYCCoin to market. This is allowing these cities to generate revenue through the mining operations. The goal is to establish a use case around the tokens which will help to give them value.

Then we have the infamous President of El Salvador, Nayib Bukele, who pushed through the idea of making Bitcoin legal tender in that country. This set off a whirlwind of speculation of what could be accomplished.

Not one to rest, the President is now in the process of announcing Bitcoin City. To do this, $1 billion in Bitcoin Bonds are going to be issued out. This is a new twist on funding.

In an announcement by Blockstream, Mow also said that the $1 billion will be split into two parts. $500 million will go towards building energy and Bitcoin mining infrastructure in the region. The other $500 million worth of BTC will be locked up for five years. Mow further stated that after the five-year lock-up period, El Salvador would start selling some of the bitcoin used to fund the bond to give investors an “additional coupon,”

Here we see Bitcoin being used as collateralization on the debt. It also provides an added incentive to bond holders, which should help to increase their return.

Hence, it appears the mining operations are going to be a part of funding the foundation of this city.

Alternative To Taxes

As government entities start to realize how they can be funded via different cryptocurrency projects, more will start to roll out. We can surmise this is only the beginning.

If, however, governments do engage in this manner, netting tidy sums of revenue for the treasury, will we see a replacement of taxes?

Once again, we turn to the esteemed President of El Salvador:

According to Bukele, Bitcoin City will be a full-fledged metropolis with residential and commercial areas. It would also have shopping centers, restaurants, a port, an airport, and railway services. There would be no income, property, capital gains, or payroll taxes. Residents would, however, be subject to just value-added tax (VAT). This tax will go towards paying for the municipality’s bonds, public infrastructure, and city maintenance.

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Emphasis added

Obviously, we still see taxation, but we have to keep in mind, this is the initial foray into this area. We do have to like the fact that all the other taxes are rolled back.

In spite of the VAT, does this sound like somewhere you might want to live?

The reason for this question is to show how something else is starting to arise. We are starting to see the onset of what will be competition for residents. Certainly, this was always the case to a degree yet it will accelerate in the next couple decades.

Without going into details, since they are outside the scope of this article, basically governments are going to have to get creative with what they are offering. It will no longer be enough to say we have good schools, a tropical climate, and a wonderful night scene. People are going to demand more.

Since technology is advancing so rapidly, what does the city offer in that regard. One aspect is likely to be cryptocurrency. Does a city use that as a funding mechanism? In fact, if we extend this out, we can see how it might get to the point where, to lure in residents, places start to promote themselves as tax-free.

Ultimately, politicians and bureaucrats might have to find other ways of funding the services they want to implement as opposed to just taxing the population. If they do not, people might start to migrate elsewhere.

Cryptocurrency is radically altering many different aspect of the world. It is fascinating to watch a lot of this unfold before our eyes. As with everything, there is usually the law of unintended consequences. Here we see some thing that were not planned yet are possible in the future.

In other words, we do not know the full impact that cryptocurrency can have. Who knows, perhaps it replaces our tax systems.


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It will be diffcult to tax crypto I hope (it is diccult to pay taxes also, just take Hive as an example). In US and in the rest of the Western world the monetary policy makers are very into MMT (aka magic money tree), and the main purpose for taxation is to create "demand" for fiat.

The problem I see is that the US can't use this system since the government will obviously keep spending more than people can afford. After all we know obviously how the taxes is just to fund the wealth gap. The rich get richer while the middle class and everyone else gets poorer.

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There will always be poor and rich. There will be a great divide between them. Fortunately, there is also a pathway for those in the poor ranks to move up to the rich ranks. It's not an unconquerable divide. I wouldn't say taxes are just to fund the wealth gap, but I do recognize your right to think that. You are right about the US keeping on spending more than what people can afford or what they actually pay in taxes, though...


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I enjoy paying taxes because the roads are repaired, the garbage is taken away, free health care, schools, police, parks and all the other things that tax dollars cover.

I dont think people mind paying taxes for the basics. However, few countries claim they tax only for those purposes.

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My bad to assume the location! Thanks for correcting!

Water taxes, land taxes, income taxes and sales taxes are thought to be used to support the government and develop the country. In fact, not everyone likes to pay taxes to the government. Cryptocurrency ownership is tax free. Unfortunately, the holding of cryptocurrency is banned in our country. This is a seven-year prison sentence.
!PIZZA !LOLZ

That is incredible, I could not imagine crytpo ownership being such a serious crime.

Imagine if they only gave out 6 years for murder.

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That thought did not even occur to me now I see the Sci-Fi flick of the summer of 2022 "Crypto Craze" 5 scrappy youngsters buck the system when they commit high treason by owning and dealing cryptocurrency.
I am being silly at this point, but there seems to be a fine line between government and tyranny.

Unfortunately, the holding of cryptocurrency is banned in our country. This is a seven-year prison sentence.

It is sad to see countries take that approach. But it is part of the process it seems. We really need to keep this growing so all, including oppressive governments, cannot resist getting involved.

Plus we need to decentralized and add a privacy layer that enables participation by those who are under governments that wont play along.

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That's awful. Countries choosing this path will have a lot to suffer from doing that.

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The government probably has banned crypto ownership because of this thought that owning and spending crypto is tax free. An economy that funds it's citizens and at the same time if said government is there to fund for roads, schools and healthcare (good governments), how then do they fund these if its citizens are participating in a system touted as being tax free.

The concept of crypto should be wealth creation, not tax evasion.

Wow. In what country is this happening?

Myanmar Old Burma

False this is happens in El Salvador Central América lady.
with nayib president.
here i am and i see it in first line.

I can remember back to 1984, I had a TRS-80 Model 4 with a 900 baud modem. Michigan State University had a Bulletin Board System or BBS and an access number that was local. I thought this was the coolest thing in the world.
I had an email account and the admin approval to play both Leisure Suit Larry and Hitch Hikers Guide To The Galaxy both text-based games.
It amazes me how the internet grew to what it is today from those humble beginnings. The BlockChain will surprise us all.

People tend to overlook how much things progress. You are talking 37 years and look at how much they changed. That means the next 37 will be radically different.

To me, technology is speeding up. Hence the changes over the net 4 decades might mirror what took place over the last two centuries.

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The problem about this El Salvador president is, upon everything his doing,his people hate him, talkless of now he just implemented tax. We heard when his citizen did riot and broke all the crypto currency ATM machine. To tell you that the country is making money in Crypto currency but the president need to listen to his people.But what El Salvador president is doing in the country is good.

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If you asked people 100 years ago what they wanted, they would have replied "faster horses".

Plus, how many of those involved in the uprising were paid by the international banking system?

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I think taxation will continue to be a thing like you said because of how inevitable it is to everyday Spending, I don't know if Crypto will of course tilt government to want to offer more then their civic responsibilities especially with tax payer's money or something of that that sort in most African countries. Due to the way the economies are redundant, the system isn't equitable enough. Nevertheless, old government in many ignorant and stagnant African states will eventually die. It might just take time.

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Nevertheless, old government in many ignorant and stagnant African states will eventually die. It might just take time.

In my opinion, all national governments are going to die off. The Nation-State as a system is quickly becoming obsolete.

That means we are going to see Networked-States emerging as the modes of governance. This will likely take the rest of this century to pan out. Yet it makes sense in terms of the evolution of the digital world.

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Since this might actually take time, the ultimate/long-term goal is to actually move, probably to where it'll become better and where the system will allow the dynamism of crypto to influence lives in massive proportion.

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It will take time, no doubt. That said, we already have Networked-State through the likes of Facebook. The difference is we need decentralized ones. We can only keep pushing things forward each day like we are.

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I have always believed that if the US Federal government would just initiate a Federal Sales Tax and drop everything else that they would make a lot more money.

They would increase to point it was a drag on the economy. Politicians simply cannot help themselves.

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That is depressing only because it is true. Politicians need to understand their mission is to serve the public not themselves.

I've been thinking of relocating to ElSalvador ever since the announcement that BTC will be legal tender there.

I hadn't though about it in the terms you pointed out above, but I do like the idea of America begging me to stay and dropping perk after perk in front of me, but there's no point. It's over. It's better for both of us if we just end it now. 😁

The grass is always greener as they say.

Be careful about deeming things harshly. All countries have issues and warts. The difference is you are aware of those in the US. LOL

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This is true. Except I don't think I know all of those in the US... they seem to multiply faster than I can keep up...

very true !
We had a similar discussion with a famous liberal economist
Portuguese government offer 0% tax on crypto earnings for foreigners relocating there
Looked a fantastic deal , but when talking with portuguese natives they are screwed up from taxis
So it is kind of a trap , looks a great idea to relocate there buy the problem will probably arise when you want to leave the country

There is always a catch. One needs to truly be in a country, regardless of the tax rate. if it is crime ridden and a warzone, it probably should be avoided.

And all countries have areas that are like that.

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Not sure to get you..
"And all countries have areas that are like that"
you mean countries like USA or western Europe have cities and regions where the crime is the law?

Bitcoin is getting less volatile every year and Countries are daring to legalised and heading to build the economical structure on bitcoin as how El Salvadore is now extending to next level where Taxation will be gone forever.
This is what American need to think and pioneer the world instead delivery negative statement in the public forum like how former presidential candidate of USA Mrs Hillary Clinton did .

I am not sure the volatility is dropping yet. Do not forget, we have a pretty big drop in March of last year and earlier this year.

We can still get wild swings. In the end, as the entire market grows larger, it will settle down.

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I think the big cryptocurrencies will eventually face taxes one way or another, many companies are starting to accept Bitcoin, Ethereum and Doge for example and those same big companies will start paying taxes in these currencies, I always say that the government and the bureaucracy will find a way to take their share, they are effective at that

we do not know the full impact that cryptocurrency can have. Who knows, perhaps it replaces our tax systems.

I see this happening in the next 10-20 years in few physical countries while we see virtual countries emerge from Crypto

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I am not sure of your timeline, I think it will take longer to materialize. I figure we might see some start around 2050, and then the rest fall throughout the second have of the century.

By 2100, the Nation-State will likely be gone.

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Looks like we will have to wait and see what happens. I hope that a different way to pay taxes or get rid of taxes would be a good way to see crypto currency.

We will see more and more adoption of crypto within the next few years. It will be total mainstream within 5 years. That’s my opinion anyway

I would love to see alternative ways of raising capital for funding what taxes are designed for. Here they are even thinking of adding a take away or junk food tax as they just want to earn more from us poor consumers. Everything is a trick to line their pockets whilst everyone becomes poorer. If we saw that the taxes were being spent on and were controlled that would be at least better. With so much corruption happening all over the world we know why most governments would be anti this crypto alternative.

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It is never ending. What is likely to happen, for a while, is that government entities figure out ways to ge revenues through crypto and then still raise taxes.

Government is a never ending beast that needs to be fed. Unfortunately, it has an appetite that just keeps growing.

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My thoughts exactly as they want every revenue they can get their greedy paws on and will most likely end up with far less by not thinking smart.

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Truth is i dont mind paying taxes. As long as i get the services we taxpayers deserve and more. But where im from is a different story. Politicians use tax collected to further personal gain. Reason im on crypto right now is to avoid handing out tax to governement pfficials from extra earnings.

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Since technology is advancing so rapidly, what does the city offer in that regard. One aspect is likely to be cryptocurrency. Does a city use that as a funding mechanism?

That sounds good, but I wonder when my small town will adopt such a strategy. It makes sense, no doubt about that and if El Salvador is pushing forward with this concept, why wouldn't Romania work on it...

It matter a lot who's there leveraging opportunities. El Salvador came out of nowhere and it's so ahead of so many civilized countries.

The US and neither Germany are in that position.

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Just imagine making a city or a hospital with a Hive DAO, the possibilities are endless!!!

El Salvador will become the Crypto Switzerland.

Wow, wow, and wow. Good wows.

!BBH

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Yes! I think if the government embraces investing in crypto currency to help find the state or country the payment of tax will reduce, even if it does not stop.

El Salvador is going to be great because the government encourages crypto currency.

My country banned crypto currency and even with tab payments in VAT the road and schools are still poorly constructed.