CryptoAnarchy: What's wrong with this picture?

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.  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.?

					---  mkj

mkj@october.segno.com writes:
> 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.?

I don't believe those "brutal" forms of taxes ever disappeared in the
first place. Tolls, real estate taxes and indeed virtually every tax
that has ever been thought of are all in place today.

Personally, I feel that being force to "revert" to something like
sales taxes would be of dramatic benefit because savings would no
longer be penalized in our economy, but thats another story.

I think that the cryptoanarchy types are arguing not so much that
government is impossible as much as that cryptography and the changes
that massive loss of central authority will bring are impossible to
stop. Forms of government control based on things like stopping the
free flow of information or preventing people from engaging in many
forms of peaceful association cannot continue in a world such as we
are almost inevitably facing. The question is really one of how much
damage and chaos governments create while trying to fight the
inevitable.

Perry

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
                          SANDY SANDFORT
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C'punks,

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

> ...
> Certainly the widespread use of cryptography will frustrate modern
> systems of taxation, such as **income taxes**, sales taxes, etc., 
	[emphasis added]

Income tax is the Godzilla of taxes.  It is THE TAX when it comes
to the US.  (Perhaps VAT has a similar status elsewhere, but both,
as pointed out, are subject to crypto-anarchistic subversion.)

> ...taxes existed, and governments sustained themselves perfectly
> well, long before these systems arose.

But at nowhere near the voracious levels of modern states.

> 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.?

For the same reasons they were dropped in the past.  They have
only a limited ability to extract tribute from a defenseless
populace.  Today's citizens have far more power vis-a-vis the
state, and far less deference for authority.

HEAD TAX--This "regressive" tax would really piss off those on
the lower end of the economic ladder if the price-per-head were
anywhere near what is needed maintain a government.  The amount
of social control needed to make sure most people had complied
would be beyond anything a modern state could field.

LAND TAX--Might be better than a head tax, but the unintended
affects would still piss off the poor.  It would give the 
relatively few land owners enormous motivation to buy off 
assessors and, ultimately, higher government officials.  To
the extent land taxes could be collected, they would be 
enormously economically destructive.  The net effect would be
similar to Soviet collectivisation.  The land, the productive
base of a nation's economic health would be constantly eroded
until everyone was impoverished.

TRAVEL TOLLS--Yeah, right.  The Soviets required VISAS, to 
travel between cities, yet they couldn't even stop students 
from taking unauthorized jaunts.

The MODERN state is doomed and, thanks to technology, the people 
have too much power to permit more "traditional" governments to
control them.  States may not go quietly into that gentle night,
their death throes may be very bloody, but go they will.


 S a n d y

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

>The MODERN state is doomed and, thanks to technology, the people 
>have too much power to permit more "traditional" governments to
>control them.  States may not go quietly into that gentle night,
>their death throes may be very bloody, but go they will.

the question is of course, what will the "modern" state be 
replaced with? imagine a system in which everyone coordinates
their public or community projects via web pages, or groupware,
or the internet, or cyberspace, or something like that.
would this be a "government"? to cryptoanarchists, "government"
is a four-letter word, even though there may be other systems
that they embrace that effectively perform similar functions.

the cryptoanarchists tend to define government in weird ways
that most people don't agree with. "government is the entity
that collects taxes with the threat of force". "government
is the entity with a monopoly on force". "the only purpose
of government is to prevent people from hurting each other
and to protect private property". 

what amazes me is that many so-called "cryptoanarchists" are
committed to their communities and interested in the welfare
of their peers. when you formalize this, you have government.
granted, it often goes astray, but in my view our government
is out of control not because of the evil of politicians, but
because of the apathy and resignation of the public, which 
could have checked it before it got out of hand.

instead the attitude in this country is, "here is my tax money,
20% of my earnings. did I send you the right amount? are you
not going to audit me? good. then please leave me alone".

if the attitude were instead, "what the @#$^%^&* are you doing
with MY MONEY?!?!?" we would have had a different system. I
intend to write an essay on that here.

what I think everyone can believe is that our current system
is broken and it being replaced with something better is
fairly inevitable. but labelling the inevitable alternative
"anarchy" doesn't quite make sense to me nor do I think that
is really what some anarchists are advocating. small 
self-governed communities that are in themselves autonomous,
and aren't manipulated by an outside authority, is what most
people have in mind.

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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> 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.?

That's easy to get around- move to another country with another 
government. I've read here that the US government would try to tax you 
anyway, but it would be very difficult to collect... You could still 
anonymously work in the US or some other strong economy, by telecommuting.

Also, you can get around head taxes by not letting the government know 
where you are (easy with the anonymity thing). Travel tolls can be 
avoided by not traveling (telecommute instead). Land taxes are more 
difficult, since you kinda need a place to live, so maybe best to move to 
another country.

I'm not advocating tax evasion, I'm just saying it could become possible.

There's no guarantee that crypto-anarchy will come to be... I think the
crypto genie is permanently out of the bottle (or at least will be soon),
but if anonymous digital cash doesn't catch on, crypto anarchy won't be 
the same. 


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