Why the Crypto War is Coming, and Why We Have to Win It. Part 1: The Tax Man

The war, in case you hadn’t noticed, has already begun. Unlike the wars of the past, which involved swords, pistols and explosives, this war will be fought almost entirely with legislation, propaganda and political coercion. On the surface this may create the impression that this war is less important or transformative that previous wars. But make no mistake. This is perhaps the most important war that the free peoples of the world have ever fought, and more than any other war, this war, if we win it, could actually make a difference.

I’m talking of course of the war on crypto-currency from the status quo. Not surprisingly many governments have had a knee jerk reaction to ban it outright. Ecuador was the first, and there will be others. The reaction is of course predictable given that governments throughout all of history have presumed that money is something that only they have the right to create and control (and with it control the populations they are supposed to serve). Until now the free peoples of the world have had no alternatives.

But, in the last few months this has all changed.

With an explosive speed never before seen in history, the very definition, structure and movement of money has been entirely re-imagined, and, almost by accident, the resulting shift in society could be bigger and more transformative than even the industrial revolution.

Many visionaries have already compared Crypto-currency to the internet and the printing press in terms of just how much it is going to disrupt the current status quo. In my opinion, the only flaw in this statement is that it still does not quite capture just how extreme those changes could be. More than any other discovery or invention in history, crypto-currency has the ability to create equality, prosperity and fairness in a world that up until now (with very brief historical exceptions) has been dominated and controlled by an aristocracy, or elite ruling class who have consistently maintained their power and control largely through the manipulation of wealth – vast, awesome amounts of wealth.

These manipulations of power have involved many varied strategies, but at the heart of most of them has been the simple and universally accepted idea of taxation. Despite its bad reputation, in a fair society taxation is not such a bad idea. At its heart it is even a socialist idea, where everyone agrees to contribute a stated amount for the common good. However, the problem of course is simply that we have not yet ever lived in a fair society. Instead of being able to direct our tax dollars where we want them to go, they are collected and distributed on the whims of whoever happens to be in power at any given time. Most people’s experience of taxes are that they are punitive and unfair. In Thomas Piketty’s exhaustively researched book, Capital, he clearly demonstrates how taxation (or the lack of it) and the larger rules of economics have continually and efficiently channeled wealth to the top. In fact he sums up his findings by suggesting that major tax reform is the only way to salvage a dysfunctional economy.

And this is where the crypto-currency revolution enters the unfolding drama. In his book, Piketty makes no mention of digital currency, because it did not exist in any significant way when he was embarking on his main research, but the truth is, it could very well be the cure we are all looking for.

One of the main reasons governments are afraid of crypto-currency is that it is particularly difficult to track. In fact many coins are designed to be “fungible” which is Crypto speak for, untraceable. Almost every news and media announcement about this states that fungible money can be used for terrorism. But the word “terrorism” has simply become a hyped up political buzzword that governments use as an excuses to do whatever they want -- The Patriot Act being only the tip of the iceberg. The truth is, there was no Bitcoin when the twin towers came down, and traditional money, and the banks that process it, have thus far been perfectly effective in supporting drug cartels, gun runners and any other industry from which they can profit. Nixon’s “war on drugs” was waged and lost long before the internet even existed, let alone Bitcoin.

The truth is, money laundering and terrorism are not what really bother governments. The only real reason governments dislike crypto-currency is because it could, in theory, be the perfect tool for would be tax evaders. The governments’ thinking here is that if people can avoid taxes, they will, and therefore any technology that supports this must be banned. But this logic is deeply problematic both on a sociological and philosophical scale. Though we have moved very rapidly from a cash society into a primarily debit/credit card society, where our transactions are no longer private, it was not too long ago that all transactions were cash, and thus, they were private. The very concept that our monetary transactions should not be completely private is thus relatively new, and crypto-currency is simply resetting the clock to the late 80s when money was still money. The concept back then that anyone could see the way I chose to spend my money was unsettling at best and Orwellian at worst.

The real problem here then is not this new, exciting and potentially world altering technology, it is in fact the old, medieval approach to taxation and the way governments subjugate, instead of lead, the people they are supposed to serve. When governments presume that most people would avoid taxes if they could, they are likely making the correct assumption. However, this in itself is a clear indication of a society that has failed. The phrase “I pay my taxes,” used to be delivered with some pride. It involved participation in a nation or society that one was proud of. But this is almost never the case any longer. With the globalization of money and debt, we no longer feel our taxes are going to our schools and hospitals, nor even to anyone who even lives in our country. Nor do we feel that the larger corporations are paying their share.

It is important at this junction in history that we understand that tax, especially income tax, is by no means a necessity for running a nation. Nor is it something that we as citizens should accept lightly—especially not in its current form where the wealthier pay tiny fractions of a percent on their wealth, compared to those living hand to mouth, who in many nations are still subject to 20 -30% income tax. It’s important to note, and to make very clear that income tax is not inevitable.

Though it’s difficult for us in our current paradigm to imagine it, the truth is that income tax is a relative new-comer to the capitalistic world. It did not exist in any known form until the 1700s, when the idea spread rapidly through Europe, Britain, and Prussia. So while our current leaders would have you believe that income tax is a necessity for a smoothly functioning world, it has in fact only been around for about 300 years.

The problem with income tax is that it means that by default EVERY penny you spend will get taxed multiple times. You will lose 30% of it when you earn it, another 15% when you spend it, and, depending where you live in the world, as much as 50% of it when you to leave it to your children after you die. In fact a new layer has been added to this recently with countries claiming taxes on world incomes, even though that means that incomes often get taxed twice.

On the whole, the system was much fairer before income tax. In those times, taxes were mostly levied on trades, or even direct payment for services (think of road and car tax). As such the burden of taxes fell on those who had wealth in some form or another to begin with. If a merchant had a hundered bales of wool to sell, then you almost certainly owned land, and sheep and all of the trappings of wealth that accompanied that, so it was likely true that you could afford to pay taxes. However, if you were a servant, working for the landowner, perhaps shearing his sheep, then you would be paid in cash and pay no taxes because you likely didn’t have much wealth in any case. Cash, was not considered to be a taxable commodity. Only lands, properties and trade itself were considered to be points of taxation.

The solution then is in fact obvious. If crypto-currency is difficult to track, then let’s not bother to track it. Let’s remove income tax altogether and revert to the old ways of allowing money to be entirely private, and tax only trade itself. This means that by necessity the governments will be looking to the larger corporations to finance the nation’s plans. It also means governments will be less inclined to grant huge tax breaks for multi-national corporations, and they will even begin to look very differently at the way international trade deals are formed.

Certainly taxes make sense in terms of contributing to a pool or the common good, but unfortunately this model has only ever been a fantasy, sold to us as the way it was supposed to work after monarchies switched to democracies. But in fact, we are still far from any equitable tax structure.

As mentioned earlier, the truth behind your current taxation strategy is that a substantial percentage of it goes to financing the interest on deficits, which are international debts. This interest payment, through a complex series of channels, usually ends up in the pockets of wealthy oligarchs who have so much money that they need to park it somewhere stable, and parking it in the long term future of nations, where its citizens keep paying interest, essentially forever, is the best of all possible worlds. It is generally accepted that the US, for example, will never actually be out of debt, which is actually insane given that it is the wealthiest nation on earth. Clearly this will work for any of the oligarch families reaping the benefits of interest on a loan that will never be paid off, and will ultimately bankrupt the rest of the world. It is no exaggeration to say that with our current financial rule set we are in fact playing a giant global game of Monopoly, and in Monopoly, there will ultimately always be one winner.

The truth is, we don’t actually need to pay off the deficit. The combined nations of the earth could quite simply come together and agree to let it go, without any real impact on the day to day running of business on the planet. Not even the wealthy investors who benefit from this structure would suffer because, to paraphrase the now infamous 90’s movie, Wall Street: “how many yachts do you need?” I can waste no sympathies on wealthy people who may be forced to sacrifice the private jet and make do with first class flights.

The global deficit drama is just one of the financial misdirections that are playing out on the world stage. This and the other obvious signs of inequality are pushing people who have long known that money is a game in which they never get to see the rules, into the newer universe of crypto-currency. This universe may not be perfect yet, and it’s players are skittish and very much amateurs in the world of finance, but they prefer the nerdy programmer visionaries, who have grown up in our neighborhood and attended their schools, to the old school bankers who have emerged from a long line of banking aristocracy, for whom money is might, and might is right.

In the end, we have to remember, we are the free peoples of the world, and we vote in our governments, not the other way around. Crypto is a powerful economic and political lever, and now is the time to wield that lever to insist on the deep financial changes that this world needs. We have to be ready to fight for that change now, before the lawmakers find ways to push the people back down into the trenches of fiat imposed poverty.

I think it is telling that in Korea, within hours of the government publicly considering shutting down the Crypto exchanges, the people rallied together and drummed up 200,000 signatures and sent in a petition to the government. The petition read:

“Has the government ever allowed the people to dream a happy dream?”

Either by instinct or intelligence, the people know that taking control of their own money is the right thing to do. So, for all the Bitcoin billionaire stories, and trading frenzies and hacking scandals, don’t forget, all of that is just the sideshow. The real play here is for a better world, where our money is a programmable computerized system that is working constantly to establish equality and fairness, something that at last we may have the technology to achieve.