(It's an unfortunate feature of the weightlessness of modern money, crypto or otherwise, that proportionate privacy is now hard. In the old days, if you wanted to move a lot of money, especially internationally, you had to go to a lot of physical trouble: https://www.rte.ie/news/newslens/2019/1204/1096878-poland/ ; this was hard to hide and easy to intercept. Nowadays you could theoretically move billions with a brainwallet. The binance cold wallet is twice as much as the Polish wartime gold: https://bitinfocharts.com/top-100-richest-bitcoin-addresses....
So we end up with a situation in which in order to track the large transactions a system is built which tracks all transactions.)
Mining is a core function. None of it works without that (or staking, which is equivalent). A miner is not able to know who you are, since the regulated exchanges are not reporting their KYC to all the miners. Making miners responsible for sending 1099s would effectively make it illegal to run public blockchains.
A very rough sketch of such a system:
- Any exchange that wishes to offer crypto services to US citizens must do KYC according to the existing regulations.
- Those exchanges make available each day a file with all the KYC-ed wallet adresses.
- Miners can theoretically choose which transactions to include and which to reject, but at the moment the main (only?) criterion is how much fees are attached to the transaction. You could mandate that they also do a lookup into the KYC data and only accept the transaction if the sending address is present in the list.
- I could even see the SEC or some other central body (perhaps one per country) maintaining such a list, exchanges submit their lists and miner can download it. This is already done in several other sectors of the economy.
And why would you do this? The KYC you're making public is already available to the government, and the on-chain transactions are already public.
One cold hard look at https://usdebtclock.org/ is enough to convince me that paying taxes to the US government is not a moral imperative. Every penny I pay is going towards paying off a massive ever-expanding black hole of debt that is mathematically impossible to ever pay off, the government is going to spend the same amount regardless of the revenue it collects since the Fed just prints it all anyways. So what's the point in "paying your fair share" in such a system? You'd be a fool not to evade as much as you possibly can.
There are definitely bad tactics and real loopholes, but this isn't the main problem. The real problems are more subtle and they require trade-offs.
These problems won't be solved as long as the tax code remains as complex as it is.
Massive tax regulation is a surprisingly recent invention.[1]
[1] https://www.politifact.com/factchecks/2017/oct/17/roy-blunt/...
EDIT: the parent author's very strongly worded statement isn't true. I'm trying to add clarity to a vague statement, not wage an ideological battle.
And nothing of value will be lost
Progressive taxation benefits society at large.
... claim the poor and the people who make their money off capital gains.
Who gets to decide what "good for society" means in context of taxation is possibly the most political question out there. It is not at all obvious that making the most productive people pay most of the burden gets to the best outcome.
It is one philosophy that there exists some line, some fuzzy DMZ that gets crossed between being merely "wealthy and more prosperous than others" and obscene. Colloquially that seems to be "billionaire" but I bet a lot of people on the farther-left would define is somewhere north of $10 million.
Especially in a country so far behind the rest of the developed world with regards to access to health-care and housing for so many millions of people.
the opposite arrow is not necessarily true, but one wonders if there isn't a 'baby with the bathwater' effect with progressive taxation.
As a software dev that can be a hard pill to swallow.
Not to mention there are many efficiencies that come with this system which would likely cause prices to even out over time near their current levels or just slightly higher.
Though, of course, you then need even more reporting than we already have, but it would have the upside of no longer disincentivizing work like the current system does, and rewarding savings over spending too.
And from the perspective of someone who actually works in tax: the "FairTax" simply pushes all the complexity to everyday transactions, instead of minimizing it to periodic transactions occurring 1-2 times a month (with reporting once a year). It would hugely disincentive paying for actual things, and artificially incentivize (untaxed) services over (heavily taxed) goods.
Moreover, the "FairTax" rate would be 30% or more on all purchases. Not only would the FairTax would obscenely regressive in effect, but a tax rate that large would push a substantial portion of the economy underground!
There's so much wrong with "FairTax" that it should be called "Ridiculous Tax."
While I agree with much of your post, current taxes on income (featuring reduced taxes on capital income, exclusion of most income from gifts/inheritances, and supplemental taxes on labor income [“payroll tax”]) absolutely disincentivize working for income if you have choices of how to get income. Now, lots of people don't have choices and are stuck with work, but that doesn't mean there is no disincentive effect.
(Of course, “treat income as income” makes this much fairer than the status quo, much less the laughably misnamed “FairTax”.)
(Note: payroll taxes such as FICA, etc., actually phase out pretty quickly after $100k in earnings, so they're regressive in nature. There is the high-wage supplemental tax, but this is offset by the cap on income subject to SSI tax, so workers earnings more than $140k actually pay less in payroll tax.)
That being said, I agree that capital gains should be treated as regular income (as it was historically, pre-Reagan) and that income received via gift/inheritance should not receive a FMV cost basis.
I think the people who argue for higher taxes on wealthier brackets also argue for capital gains to be taxed at a similar/equal rate to income.
The actual effect is that you need to actually have a huge wealth disparity between partners' earnings for the so-called marriage penalty to kick-in. Fox News notwithstanding, the overwhelming majority of married couples will not see a marriage penalty.
Even if you did not mean to suggest FairTax and you mean something very different, your proposal still ends up being significantly more complicated than an income tax, since now taxpayers must track all purchases made over the year rather than the relatively limited sources of income they have. Your proposal would increase the compliance burden on buyers, sellers, and the government.
By not tracking purchases individually, and only inferring the total amount of money spent by subtracting savings from income, you can also apply brackets to purchases, and thus avoid the regressive nature of a "simple" flat sales tax.
There will always be a black market, but eventually that money has to flow back into the regular economy (food, housing, etc...) and will be taxed.
Savings: unknown (held in cryptocurrency, private)
Tax: divide by zero error
Besides, doesn't the US already have sales taxes? Or are they state-only? I'm starting to favor a tax on real estate and/or land value, since that's physically impossible to hide.
State. City. County. Sub-divisions of same that are special sales tax districts and have extra sales tax applied. Not every instance of those entities applies a sales tax, but any could and many do. Basically everything except federal. The sales tax where I am, in a "red" state, is about 11% (we actually have a really high effective all-inclusive tax rate in this state, for how entirely shitty government services and infrastructure are)
> I'm starting to favor a tax on real estate and/or land value, since that's physically impossible to hide.
The challenge with that is the system for assigning value—everything else about it is easy. We already have something close to what you'd need in the US because real estate property taxes are common. That system's not perfect but it may still be good-enough, despite its flaws. It seems to work kinda OK. That might change if that became a more important revenue source, and for more levels of government, though.
Citation needed.
Also, why do you think crypto people think that rich people should pay no tax?
Anyone who believed governments of the world would sit by and say “oh, a technology that can greatly aid in tax evasion, we’ll just let this grow with zero input from laws” are fooling themselves.
If adopted, a cryptocurrency can perfectly serve an ecosystem as an exchange of value, without ever crossing the barrier to the mainstream monetary systems. I.e. a loaf of bread for a certain fraction of a Bitcoin.
Sure, most minor barter transactions are ignored as de minimus, but that does not make it legal (i.e., not tax evasion).
So paying your neighbor for a loaf of her home baked bread with a wad of coupons for the local store (or Satoshis) is probably ignored because she is not an official business, but if you do the same at the store, or she grows to anything beyond casual home cooking, the store and your neighbor will need to pay both sales tax and income tax - in fiat - on those transactions.
Same goes for us trading anything large, say we barter my car for your boat (or a bunch of BTC, gold, gift cards or whatever), we'll have to pay taxes on the transaction, in fiat. And we may have the additional pleasure of needing to get an appraisal too.
So the idea that crypto currency could never touch fiat was never anything more than a lovely figment of the internet imagination.
Meanwhile, in the real world, without such wealth taxes, the problem is not' how do we accept all these donations and what do we do with the surpluses?'. The problem is that the wealthy spend enormous sums both capturing regulators to minimize tax, setting up legal structures to avoid tax (trusts, corps, etc.), and setting up outright illegal global tax evasion schemes.
What you propose does not even work on the scale of a condo building. That Miami building that collapsed couldn't even get agreement for years in time to expedite critical repairs, and it killed like half the residents.
Even myself, I'm proud to pay my taxes, understand that in every large complex endeavor or system there will be significant things that can be called out as 'waste', yet I also take advantage of every tax break my accountant recommends.
Enjoy your fantasies, and let us know when you are interested in joining the real world.
That's why bundling taxes in a few non-optional packages is so important. Otherwise people will try to selfishly evade paying for services they believe they don't need, and needlessly pry into public finances despite having no expertise in it.