The Information Policy Case For Flat Tax And Basic Income

I’ve spent the last week experimenting with Bitcoin. Like with any new technology that fundamentally shifts perspectives, there are both zealots and luddites, there are Pollyannas and there are Valentis.

I will be returning to deeper analysis in a series of posts. For now, I will just say that it stands beyond a shadow of a doubt that distributed cryptocurrency is here to stay. Its use case is so hands-down attractive that it beats the legacy banking and transaction systems on walk-over on point after point. What bank holidays? What frozen assets? What taxes? What bank fees? All these are concepts that become as irrelevant and anachronistic as, say, the union rules of stablekeepers.

It may not be Bitcoin that comes out as the ultimate cryptocurrency standard, but that doesn’t matter, just like it doesn’t matter if we use BitTorrent, OneSwarm or something more resilient for distributed file sharing. It’s the file sharing on the conceptual level that is interesting, not BitTorrent. The same thing goes for distributed cryptocurrency.

The “aha!” moment you experience when you transfer a few bitcents to somebody on the other side of the planet, and they have it instantly, without any single being knowing that you just sent that money or that the receiver got it, and with no single being being able to stop you from doing the transaction with anything less than physical restraint in your home — that feeling is profound. As are the ramifications. In this post, I will focus on the political implications, and subsequent posts will go deeper.

The use case is limited by the networking effect for now. You can’t use Bitcoin for, well, anything practical. But as I said, I’ll be returning to that.

From a political perspective, this development means that taxation and welfare systems must be rethought and rewired considerably and immediately.

Rethinking taxes in a world with cryptocurrency

Cryptocurrency brings new challenges to the table. The government can’t see the wealth of an individual, nor their inflow or outflow of funds, not with any amount of applied force.

I know a lot of individuals in government will react with normalcy bias to this statement and say “but we have to!”. It doesn’t matter if you have to. You can’t. Period.

This means that neither taxes nor social support systems can be based on income or wealth. It doesn’t matter if only 5% of the population use cryptocurrency; the tax morale is dependent on a sentiment in the general population that everybody is pulling their own weight and that there is a significant risk associated with trying to get a free ride. When just a tiny portion use cryptocurrency, this breaks down and snowballs.

We’ll arrive at this point within a decade. There is no time for ostriching.

So taxation first, then. Taxes can neither be based on income nor on wealth. All income taxes go out the window, both those that the employer pays and those that the employee pays. (As a positive side effect here, illicit untaxed work ceases to exist by definition.)

This leaves us with a couple of other things we can tax. We can tax land, like they did in the 1800s. But then, isn’t that, like… 1800s? What else is there? We can tax buildings, homes, cars, fuel… all very impopular tax targets. Very much so indeed.

Oh, and we can tax consumption.

The value added tax (VAT) is already one of the largest sources of revenue for the European governments. It is different from a sales tax in that it is applied to every step of the way in the sales chain: assuming we have a VAT of 25%, the original manufacturer adds this tax to his wholesale price. In the next step, the retailer gets this tax back from the government (“inbound VAT”) when buying from the manufacturer, but needs to add 25% tax on his own outgoing price (“outbound VAT”).

This has the nice effect of adding an incentive for every step in the chain to report taxes, as they will want their inbound VAT back.

Using numbers from Finland and France, if we roughly double the VAT, we can abolish all other personal taxes. The tax pressure would be the same, as would the governmental income: it would just be based on consumption and not on income. Usually, these correlate to a high enough degree.

This has two other nice side effects: first the obvious advantage of abolishing personal taxation. No individual going about their daily business needs to have anything to do with the Tax Authority again, ever. It’ll just be a thing for corporations (although the tax is taken from personal consumption, corporations collect it, just like today).

The second advantage is that all the infrastructure and bureaucracy already is in place. We just have to adjust a percentage. Once that is done, a whole lot of bureaucracy (the part with all the other taxes) can just go out the window.

But there are also drawbacks, of course. The major one is that this means taxation is entirely flat. It would hit hard against the least fortunate, which is something we want to avoid. Progressive taxation is generally seen as a good and fair aspect of a functioning society.

The normal way of doing this would be to have a basic tax deduction. But we can’t do that with VAT. We can’t argue that the kiosk clerk should deduct the VAT from the bottle of coke because here, look at this certificate, I still have some part of basic deduction left. So we’ll need to turn it the other way around.

Rethinking welfare in a cryptocurrency world

Welfare systems have always been based on a lack of income, a lack of wealth, or both. So when you can’t measure or inspect any of them, what do you do?

I would argue that you only have two options: you can give welfare to nobody or to everybody. Since giving it to nobody isn’t really an option, all that remains is to give it to everybody, completely without condition. The basic unconditional income case. Citizen’s salary.

This kills two birds with one stone, as it also solves the progressive taxation case: a basic unconditional income for every citizen is basically the same thing as a basic tax deduction before taxes start to apply plus a guarantee that you have minimum sustenance. We already have those two anyway.

This also has the nice side effect of killing the need for all other welfare systems, from unemployment benefits to student loans, and the bureaucracy that comes with them.

Some people argue that a citizen’s salary will kill the incentive to work at all. I have previously explained why this is hogwash. Short version: GNU/Linux and Wikipedia.


Cryptocurrency is coming. It could be Bitcoin, it could be something else, it could be a new trading framework that incorporates many cryptocurrencies. The important thing is that in a decade’s time, governments will have lost the ability to look into their citizens’ wealth and income.

This, in turn, means that no taxation or welfare can be based on wealth or income.

I argue that the proper way to tackle this problem from an information policy perspective is to shift the taxation base entirely to consumption and therefore shift all income tax to VAT. To keep taxation progressive, and to keep welfare systems functional, you will also need to combine it with a basic unconditional income for every citizen that amounts to some level of minimum sustenance.

This is an article on bitcoin. You may also want to read about why I am putting all of my savings into bitcoin, and my first thoughts on the subject where I call it The Napster of Banking.

Rick Falkvinge

Rick is the founder of the first Pirate Party and a low-altitude motorcycle pilot. He lives on Alexanderplatz in Berlin, Germany, roasts his own coffee, and as of right now (2019-2020) is taking a little break.


  1. #BitCoin changes the game. Taxes and welfare need to be rewired, fast: #infopolicy

  2. soctrap

    Interesting article. But one major error…

    You state “…it would just be based on consumption and not on income. Usually, these correlate to a high enough degree…”

    That, unfortunately, is complete rubbish and much of your taxation philosophy rests of this assumption.

    1. Rick Falkvinge

      How do you mean? I would argue that the vast, vast majority of the population spend their income pretty much right away in consumption. There are exceptions in both directions, but they are just that – exceptions.

      And in either case, the article doesn’t rest on this assumption; it rests on the assertion that the government will be unable to see people’s income and wealth, and explores options for taxation and welfare in that scenario.

      1. Erik Hultgren

        Soctrap is completely right. It is a well established fact within economics that VAT is a regressive tax. According to UK national statistics (page 5) the poorest 20% of the population pays 10.5% of their income in VAT, while the richest 20% pays only 4,5% of their income in VAT. The reason, of course, is that savings and investments do not get taxed. So those people who can’t afford to save money, but has to use all their salary on food, rent etc. will be taxed very hard.

      2. soctrap

        The Marginal propensity to Consume is what I am referring to. High income earners don’t “consume” all their income and more importantly, not at the moment it is earned (goes to savings, assets, investments, inheritance). The difference isn’t small,

        You then state that governments will be unable to see wealth, such as property, investments, assets etc. That IS weatlh. The means of exchange (cash, krone, dollar etc) are not wealth, but simply the means we use to exchange wealth.

        The asset poor individual can only become asset rich by using personal wealth such as education, initiative, labour etc.

        I am not trashing your argument by pointing these things out. The “citizens salary” (or making basic food, shelter, health, communication, education, water, air, security etc all a basic human right for everybody) is spot on…

      3. Rick Falkvinge

        These are entirely different concepts than the stated assumption that most people spend their income, the conclusion from that being it won’t matter too much in which end you choose to tax it.

        I believe you are describing the problem with flat taxation to a high and accurate degree, which is also why I argued for a compensatory mechanism to offset this problem. The citizen’s salary would not only solve that problem, but other problems too.

      4. sigs

        VAT hits hardest those who earn the least; with or without a citizen’s salary. Consumption doesn’t correlate with income so much, those two are rich actually can do things more sustainably and economically in the long run. Most “extra money” people have is invested through wealth management instruments such as funds, stocks etc. on a financial instrument market. Redistributing part of that through the state is the only functional model of welfare so far.

        Another point: the marginal value of cash – i.e. the contribution of an extra cent of equity to one’s quality of life – decreases over higher wealth. Every extra coin you earn can buy you less and less valuable things. It makes sense to take the necessary wealth from the most-earning and most-having, to maximize the collective well-being.

        Still, I agree that simplicity of the system would be a good thing. Trouble is, anything we do (or Sweden does, or Europe does) won’t quite cut it unless we have international co-operation to extinguish tax havens and the like that paracite the welfare system.

        There’s no such things as absolute freedom of all human beings as long as there’s more than one. We need government, and governments need taxes.

        1. cjp

          Tax havens should not be a problem. After all, crypto-currencies are effectively a sort of a tax haven, accessible to all, and the whole point of this article is to find out how to deal with that. The whole assumtion is apparently that, while (monetary) property tax can be avoided by using tax havens, VAT can not.

    2. Georg

      On first sight, it may seem true that a Consumption tax mostly affects poor people. But you have to add the Basic Income (BI) to it.

      Everybody gets it. This means that if the Basic Income would be (for example) 1000 EUR and your salary also 1000 EUR – you would have 2000 EUR. If you spend all of it on consumption and given a VAT rare of 100%, then you would have paid 1000 EUR VAT. But since you already got 1000 EUR as BI, in the end you have paid no taxes at all.

      This is different when your salary is 5000 EUR – you would certainly consume more than 2000 EUR. Hence, you pay more taxes than the guy in the paragraph above.

      This is way within a pure VAT tax system, the Basic Income is also often called “tax-free allowance”.

      1. Georg

        A really good documentary film about pure Cosumption tax and Basic Income can be found here. It’s in German but with English (and other) subtitles:

  3. Klaus Seistrup

    In Denmark the VAT has been 25% for decades, and we still pay 40% or more in income tax. But then again: education and hospitals — to name a few — are free…

  4. David van Deijk (@dvdeijk) (@dvdeijk)

    Piratenpartij medeoprichter Falkvinge over flattax en eerlijkheid

  5. A nony mouse

    Rick, please note that it’s “Bitcoin”, not “BitCoin”.

    1. Rick Falkvinge

      Thanks! Fixed.

  6. Ploum

    I tried to write that bright future myself but, sadly, it’s in French: (doesn’t worth a click if you don’t read French)

    1. Cernael

      Ploum – the google translation (here: ), is, if not a brilliant piece of lucid prose, at least perfectly readable.

  7. @bitcoinmoney this article may interest you, about how bitcoin changes the political game:

  8. ANNM

    A technical point about Bitcoin: As I understand it, every transaction made becomes part of the global blockchain so you can only do transactions “without any single being knowing that you just sent that money or that the receiver got it” in the sense that it is not immediately obvious which individuals the Bitcoin addresses involved in the transactions belong to. However, it should be trivial to build a complete history of all transactions ever made, and then you just need to match an individual to an address at one single point to get a complete history of his or her transactions. Indeed, a transaction is not considered to even have taken place until a certain number of other nodes on the network know about it and send confirmations to the receiver – otherwise there would be no way to prevent double spending. I don’t see any easy way around this without adding centralised authorities, which are obviously not wanted in a system like Bitcoin. It’s much like BitTorrent in that regard – because of the decentralisation, anyone can join a swarm and see many, if not all, of the IP addresses that are in it.

    A more philosophical point about basic income: If I had all the money I needed to pay the rent for a small flat, buy cheap food, clothes etc as well as an internet connection (a basic income would have to be large enough to allow for all these things, otherwise you would have to add social security systems on top of it and much of the advantage would be lost), I can almost guarantee that I would not bring in nearly as much money in taxes to pay for it. I might take the odd job now and then if I wanted some extra money, but mostly I’d just be out hiking, at home playing guitar, or just bumming around in general. Sure, I enjoy hacking and would probably write loads of free software, but it would almost certainly be art or toy projects rather than anything that was actually useful to anyone else.

    If enough people are like me, a basic income system would collapse within a few years. Am I really that unusual?

    1. Rick Falkvinge

      then you just need to match an individual to an address at one single point to get a complete history of his or her transactions

      This problem is addressed within the Bitcoin infrastructure. Every transaction is received at a new and unique address. Only you hold your collection of addresses.

      1. ANNM

        Ah, I didn’t know that. Maybe I should actually read the papers about it.

        Still, I don’t think it’s completely untracable. There’s bound to be ways of detecting patterns that can tie a set of addresses to an individual with some probability, but maybe not with enough certainty to build tax evasion cases.

      2. Scary Devil Monastery

        Given enough resources, anything can be traced – or at least guesstimated with a good enough degree of accuracy.

        But the amount of effort required is vast though. If everyone using Bitcoin or other cryptocurrency has to be approached with the same type of effort which went into finding Osama Bin Laden then you can safely say that spending a million in order to retrieve ten thousand bucks in back taxes never will be a winning model.

      3. Björn Persson

        No Rick, every transaction is not received at a unique address. In many cases it will be convenient to publish a Bitcoin address, like you have published your tip jar address. That address will then receive many transactions, and it will be easy for the authorities to see how much money flows through that address.

        It seems to be possible to make Bitcoin pretty much untraceable, but only if one is willing to do some extra work, and also encrypt any email or other communication that relates to Bitcoin transactions.

    2. Scary Devil Monastery

      Probably not. Since there are no real-world experiments on applying the “citizens salary” we literally can’t say how it would pan out.

      Nevertheless the issues Rick brings to the table are irrefutable. If solid real-world assets and real-world consumtion is all that you actually CAN tax you will end up losing a very large portion of tax revenues anyway. Since you can’t make VAT progressive you will end up with either skyrocketing taxing of real-world assets or a VAT which hits harder against the most needy or a compensation model – i.e. the citizen’s salary.

      And that scenario happens pretty fast. If one person in one hundred starts using an untaxable form of currency you can easily imagine the reaction of the other 99 people who find that just by switching away from established currency that guy is now suddenly getting 30-50% extra income. How many will quietly ask him about how you’d go about doing things that way instead?

      And of course, once you get to the level where there’s a significant amount of consumers preferring cryptocurrency you will always end up with a market evolving around it. The benefits are just too big to ignore.

      1. Denny

        Since there are no real-world experiments on applying the “citizens salary” …

        Not actually true:

    3. Sasha

      You are not unusual but human beings are not designed that way. We have to work, play, hunt. Without being a useful member of a group we cant exist. You would certainly become a great artist, open source software engineer, gardener or anything else you are passionate about. You would enjoy and the society would become better for it, not worse. Check out “Voyage from yesteryear” or Ursula Le Guin book “Dispossessed” for more detailed descriptions and ideas about such.

  9. Josh

    Whereas it might be true that the vast majority spend their income right away, the few exceptions are remarkably critical to the tax system. For instance, the top 5% of income tax payers in the USA, paid about 59% of all income taxes in 2008. Many of those top 5% are not spending all their income on consumption.

    In general, I’m a fan of the simplicity of the system, and the recognition that if you take away income transfer, the welfare state is just a tremendous mess of paternalism. Personally, I think a more elegant solution would be to drop the income transfer as well, and side step all the problems. Why is this not an option?

  10. Per "Wertigon" Ekström

    I see two large fundamental problems with an Unconditional Basic Income (or UBI for short).

    The first one is one of politics; with UBI, populism will become more rampant. Taken to it’s worst case, the party raising UBI the most will win. This I base on human nature and greed.

    The second one, however, is ideological. With UBI, the Government provides everything for me; my rent, my food, my way of living. That means that I and everyone else am essentially owned by the government, to do their bidding. I do not feel comfortable with this. With the system we have today, you are not dependant on the government, atleast not in the same way.

    Therefore I am not supporting UBI today, especially due to the second part.

    1. Scary Devil Monastery

      There may be a case for UBI if VAT actually does become the only valid taxation. Which cryptocurrency, implemented widely, will certainly accomplish.

  11. Rickard Olsson

    Rick, taxing VAT requires those transactions originating within the old currency system and only passing over into cryptocurrency at the last step from the shop to the consumer (introducing a possibly complex system for exchange rates and re-circulation of Bitcoins). What if all steps take place within the cryptocurrency system, from manufacture to the sale?

    Per, UBI is an added extra, much like our Swedish “grundavdrag”. Just like today, there is nothing stopping you from working and getting paid obscene amounts of money if someone (the job market) wants to pay you for it. There is no more dependence on the government than today, probably less as today all the different subsidies and deductions are reliant on a friendly administrator somewhere, interpreting your case and the tax code. With UBI this is unconditional, removing your need to suck up to the government employees reviewing your case.
    As for your first case, populism today leans AGAINST UBI due to fears of slacker misuse of the system. I fail to see how that will change so radically, especially as we do not see much in the way of populism for lowered taxes today – it would be seen as irresponsible instead.

    1. Ploum

      This is a very good point, indeed. What if the whole chain happens in Bitcoin? You are paid in Bitcoins and you spend bitcoins. What will the government do? I guess one solution would be to tax what you own (house, cars). One step further: you would tax only insurance on what you own: house, car, expensive jewelry.

      It means that only expensive goods would be taxed. You want an expensive car? You are more taxed. You take the bus, you are not.

      You don’t pay any insurance to not pay taxes on some expensive jewelry? Well, the day they are stolen, you are done.

      This is only loud thinking, we should make a think tank about that.

  12. Rogdham (@Rogdham)

    ♺ @ploum: Taxes and welfare in a #bitcoin world: A *must* read, this is excellent.

  13. Kaj Sotala

    Very interesting.

    I’m not entirely sure whether this proposal will solve the problem, however. After all, if payments can be made without notice, then sales can be, as well. Sure, if someone is doing business out in the open, you can try to make sure they pay their VAT. And that would help make sure everyone up in the sales chain pays, as well. But that will still leave e.g. purely virtual businesses untouched.

    Of course, it’s still better than not collecting taxes at all.

  14. Fredrik

    Rick acknowledges that governments can still tax consumption. The Swedish government is doing so with the recent cash register law, which means that every cash register contains spyware so the government can see how much each customer has paid. When they can do so, they also can require that all consumption that involves VAT must be done in non-anonymous currencies. (Just like a recent Swedish law requires that phone/SMS payments can only be done from non-anonymous prepaid cards and subscriptions.) That means that shops will get their profit in non-anonymous currencies which they must spend on something such as salaries, as it’s only possible to trade currencies and not to convert currencies. The employees need to get money in non-anonymous currencies in order to afford things they consume. If you trade between bitcoins and non-anonymous currencies, that looks just the same as money laundry to the banks. As I see it, anonymous currencies can not be used as the main currency of an ordinary family as long as governments require that consumption that involves VAT must be done in non-anonymous currencies. Do me a favour and prove me wrong.

    1. cjp

      I think you’re wrong about “trade between bitcoins and non-anonymous currencies”, as long as people are not forced to give verifiable reasons for non-anonymous transactions. This is because such a trade consists of two parts: bitcoins from A to B, and non-anonymous from B to A. It’s fairly easy to hide the fact that the two are related.

      For the rest, I think you have valid points. “Under the radar” entities can not be forced to pay taxes in any way (including VAT), and “above the radar” entities can be forced to operate with non-anonymous money only.

  15. ANNM

    Looks like someone has already come up with a way of implementing local out-of-band transactions (i.e. cash) on top of Bitcoin, by manufacturing plastic cards that have the private key for a Bitcoin address printed inside it and the address itself, along with the balance of the address, printed on the outside. You can trade the cards themselves as cash, as long as you trust that they are not fakes or duplicates and as long as you trust that the manufacturer has actually transferred the printed amount of bitcoins to the card’s address. You can confirm the balance of the card against the network, and you can cut the card apart to get the private key and transfer the coins to another address.

    There isn’t really any need for Bitcoin “cash” as long as we have regular cash, but it’s nice to see a proof-of-concept. Google for “bitbills” for more information.

  16. Jonas Lagander

    I strongly beleive in the Land Value Tax, the single tax system of Henry George. It would solve many aspects of the problem with global poverty and the uneaqual distribution of land. This is the least damaging tax system on a free market.

  17. Erik Hultgren

    I have a big problem with your “facts” within this article. Not only do you assume that VAT would be a flat tax, while in reality it is extremely regressive (as I’ve written in an earlier posts), you also grossly overestimate the income from VAT.
    The income from VAT in France today is not half of the budget, but merely 16%, as can be seen in the state budget (income from VAT on page 49, total income on page 55). In Sweden, with a higher VAT, the same number is 21%. You would need a massive increase in VAT, making it far more profitable to try to avoid the tax.
    Because, even if you say that there is incentive along the whole chain to report VAT to the government, the truth is that there is a massive loss due to tax fraud. EU estimates that 12% of all VAT is never reported. If VAT was the only tax, do you think that number would increase or decrease?

    1. Rick Falkvinge

      I was using numbers from Wikipedia with regards to France (the article on VAT). The Finnish numbers are more precise.

      They detail that income tax is almost precisely the same amount as VAT. On top of that, there’s corporate tax, fuel tax, etc., which can remain as they are.

      It is not so much VAT compared to the total tax income that’s interesting; it’s VAT compared to personal taxing, or specifically, VAT compared to taxes on wealth and income.

    2. Rick Falkvinge

      As for taxes and terminology, we need to keep our definitions straight here.

      A flat tax rate is, by definition, neither progressive nor regressive.

      However, it can have effects that harm the less fortunate more, in the same way that a regressive tax does (but obviously not as much). I argue that it has such effects, and that those effects need to be offset. But that’s no reason to call it regressive, because it isn’t.

  18. Jonas Lagander

    Falkvinge… by the way. If you´d like to learn more about alternative currency systems you are hereby invited to become VIP-member in my barter exchange It will be up and running within a week or two. We will be using Mutual Credit to facilitate trade amongst the members. We have an online based trading plattform, connected with other exchanges on an international level. =)

    If you are interested, please send me an e-mail. =)

  19. David van Deijk (@dvdeijk) (@dvdeijk) (@dvdeijk)

    @victorsterren zou je een stuk willen schrijven over deze?

  20. Jonas Lagander
  21. Robert Wensman

    Okej, vi inser att du dissar landvärdesskatten, och hissar mervärdesskatten (momsen). Men i så fall vill jag bara säga följande:

    Vore det inte bättre för handeln om man även kunde ta bort mervärdesskatten. I Kina, det land som vi kommer att konkurrera med om jobben, har man närapå 0% i inkomstskatt och ingen moms alls!

    Läs min artikel om det Kinesiska undret:

    Om vi ska konkurrera med detta så behöver vi ÄVEN ta bort mervärdesskatten.

    0% skatt på inkomster och transaktioner! Det borde vara målet! Detta är endast möjligt med en land- och naturresursskatt som istället fördelar välståndet och ger staten en inkomst.

    Dessutom förstår jag inte hur man ska kunna beskatta konsumtion utan ännu mer av ett övervakningssamhälle. Om person A går hem till person B och renoverar ett rum, och överför pengarna genom en digital-ospårbar transaktion. Så menar du att staten ska veta att tjänsten utfördes på vilket sätt? Genom att spåra våra mobiltelefoner och se hur människor rör sig?

    I så fall kräver landvärdesskatt betydligt mindre inskränkningar av den personliga integriteten. Allt staten behöver veta är vilken person som besitter vilken mark vid en viss tidpunkt. Till detta tillkommer skatt för övriga naturresurser, utsläpp, nyttjande av fiskbestånd, etc.

    Notera också att en landvärdesskatt är väsensskiljd ifrån den så nedsvärtade fastighetsskatten. Fastighetsskatten blir högre när man får finare kakel i badrummet. Landvärdesskatten tar endast hänsyn till markvärdet, och låter bostadsägaren underhålla sin bostad på vilket sätt han eller hon vill.

    Sedan att man inte ska ha landskatt för att man gjorde det på 1800 talet? Jag kan tänka mig många saker som man gjorde på 1800 talet som vi fortfarande gör idag, och som vi kommer att vilja göra i framtiden…

    Men det är annars mycket glädjande dessa senaste utspel angående cryptocurrency. Mycket skarpsynt analys av framtiden vad gäller detta!

    Nya intressanta tider är här!

    1. Fredrik

      Intressant artikel! Den fick mig att tänka på att den svenska trångsyntheten kanske inte är så mycket bättre än den kinesiska censuren. Här är vi så vana med att tala gott om “vårt” så vi inte ens behöver censur för att tvinga oss till det. Svenska politiker är sannerligen mästare på att åstadkomma ingenting av nytta.

  22. Vladimir

    Finally, someone with a brain writes about implications of bitcoin adoption. Thank You.

  23. btc

    taxes are setting up to be the DRM of the teens…

  24. Jan Hopmans (@elonoir)

    Problems to about taxes in a cryptocurrency world. Something to think about, Rick Falkvinge shows his solution.

  25. pelpet

    A higher VAT level on non-essential consumption would add more progression to a VAT-only system. Say 20% VAT on food, basic cars, medicine and 40% VAT on shellfish and lobsters, tobacco, alcohol, luxury cars and plastic surgery.

    Land and building taxes are also very good taxes from most perspectives. Rich people tend to have more of it, it’s easy to tax and the people using it will always end up paying the taxes.

    In sweden, income taxes goes the municipality (local stuff, schools, healthcare) while VAT goes to the government. I believe that land and building taxes should be handeled by the municipality, and VAT by the government. VAT should then pay for all schools and healthcare.

  26. Christer Jansson (@kondensatorn) (@kondensatorn) (@kondensatorn)

    Bra av @falkvinge: The Information Policy Case For Flat Tax And Basic Income –

  27. anonymous

    Insightful, +1

    I was about to flattr you, but can’t be bothered to dig up my flattr password. Do you accept bitcoin tips? 🙂

    1. Rick Falkvinge

      Thanks, and of course! 🙂

      My BitCoin tip jar is 13NbngX74AGVxGqAUTdEqZ9jPBmNhg4G6X.

  28. Gustav

    Mycket intressant och spännande! Däremot håller jag med Robert i frågan om varför det går att beskatta konsumtion, men inte inkomst? Utveckla!

    1. Rick Falkvinge

      Because the taxing authorities can see consumption (through the bookkeeping of the companies), but nobody can see income any longer.

      If you can’t see citizen’s income, you can’t tax it. You’re dependent on people reporting their income honestly, which means the morale of the tax system would break down quite rapidly. Essentially, the gov’t would be asking for voluntary donations.

      1. Fredrik

        You are not making sense, if the government can make companies keep books on sales for VAT tax, it can make them keep books on the salaries they pay, how much and to whom.

        Besides, just as it’s companies who make sure the VAT is collected, it’s companies who make sure the majority of the income tax is collected, by paying part of my salary directly to the government. So I can’t cheat on my income taxes, no matter if it’s payed in some anonymous currency or not.

        The only thing I can see that my anonymous crypto-currency stash can do is letting me avoid paying “förmögenhetsskatt”, but that form of taxation is disappearing anyway, since he who has the money makes the rules.

        In short, I don’t buy your argument that the government can’t see my income. Please explain why I’m wrong.


      2. Scary Devil Monastery


        Actually you are looking at this from the wrong angle. Given that an employer for whom you spend man-hours may very well be a wholly internet-based enterprise trading exclusively in Bitcoin or similar cryptocurrency it is in fact quite possible that the “company” itself is located in a tax haven. And cryptocurrency doesn’t respect national boundaries. In short there’s absolutely nothing which even today prevents a situation where neither employee nor employer can become able to see any books at all.

        Thus leading to Rick’s assertion that local government will have to ask for voluntary donations in the form of what the average citizen allows it’s government to see.

        At the end of the day, most things can be represented by man-hours of labour of a certain degree of skill (something which has prompted online games to become functional real-world economies already). As soon as there is a viable and relatively trusted currency to use for such transactions, government monopoly on currency turns into a smoke and mirrors operation.

        Will this gain a foothold though? Given the ease of use and potential gains for all parties concerned, it’s actually hard to see how it wouldn’t.
        How governments will react is, unfortunately, predictable. That reaction won’t stop a migration to cryptocurrency, but we certainly have our work cut out for us if we want to keep government-sanctioned trojans out of our harddrives once they realize income tax is about to go bye-bye.

    2. Grozkov

      “Because the taxing authorities can see consumption (through the bookkeeping of the companies), but nobody can see income any longer.”

      One must ask oneself how this is supposed to work? Is everybody supposed to cheat the government?`Is that Ricks answer? Stepping back in time hundreds of years?

  29. Jonas Lagander

    Att skippa momsen på mat, kläder och andra livsnödvändigheter och höja på tobak, alkohol, juveler osv. kanske kan vara en tanke. Men annars är jag helt för jordskatt. Det är en klockren lösning helt enkelt. Rätt anpassad borde den vara ypperlig får både planeten, marknaden och människan. Gärna i kombination med medborgarlön och fria decentraliserade valutasystem, helst både on- och offline. I Afrika betalar de varandra med mobiltelefonminuter till exempel. Finns massa varianter och visioner måste man ha! =)

    Man kan även ha en splittad fastighets/landskatt som i Harrisburg: Skall sägas att de kontinuerligt ända sedan skatten infördes 1984 (av samma guvernör som sitter idag, så poppis blev han) har flyttat över skattebördan mer och mer till landdelen och minskat på fastighetsdelen. Med ökade positiva resultat för varje gång. I Hong Kong får de 45% av inkomsterna från uthyrning av mark och det stället räknas som en av världens friaste marknader och de har, exempelvis, högteknologisk välutbyggd kollektivtrafik som i stort betalat för sig själv genom att höja markvärdena och därmed inbringat mer pengar till det allmänna. Inkomstskatten tror jag ligger runt 17%. Här klagar vi över att inga pengar finns till järnväg etcetera. Inför LVT och bygg, sen höjs markvärdena runt rälsen och staten kan få igen sina utlägg. Funkar i Hong Kong iaf. som har haft stora budgetöverskott år efter år och det byggs som “f-n” hela tiden. Men i Sverige står det still.;content

    I USA hade de innan 1913 Land Value Tax som betalades av den allra rikaste 1%:en. Inkomstskatt existerade inte. Land of the free -eran. 😉

    Henry George står sig nog än idag. =)

    1. Fredrik

      Det är nog inte många procent av omsättningen av kläder som kan räknas som livsnödvändighet snarare än nöje för shoppingslavar som köper mer kläder än de hinner använda. Momsfri mat gynnar lika så de som vill att man ska köpa fem storpack glutamatröra i fall man hinner använda tre av dem innan bäst före-datum, samt de som bara köper dyra saker. Jag skulle hellre se något som vänder storpackstrenden och får folk att köpa billiga och nyttiga saker efter säsong.

  30. Robert Wensman

    Rick; I agree that your solution is probably easier to implement as it is closer to our current understanding of what is a company, and our current bookkeeping regulations. However, in the “swarm economy” will it be so easy to determine what is a company transaction, or what is a private transaction?

    I still think the Chinese model deserves consideration. Chinese companies, except the really big ones, or the ones who do it for their own benefit, are not required to do ANY BOOKKEEPING AT ALL. There simply are no bookeeping for chinese companies, and this is probably a huge benefit for their development and the starting of new companies. Just get paid, take the money and put it in your pocket. Spend it for your pleasure. Totally compatible with a swarm economy!

    Like I said (for those who do not understand Swedish). The Chinese government get their money to fund enormous projects and a welfare system not as bad as one might think through:

    1. Tax on properties. Like I said, Hong-Kong gets 40% of its revenue from land value tax. Other provinces are not quite as forward in this sense, but also tax property (essentially land as their taxation generally do not consider the market value of properties).

    2. State owned companies, typically large energy companies with monopolies on natural resources. Here in Sweden billions of profit from our energy companies go directly into the pockets of wealthy private owners. At the same time, the common people struggle with huge energy bills.

    3. By having politicians controlling their central bank and not the other way around, so China does not have to pay off ANY of its national debt, and the interest rate can be as low as the Chinese government wants it to be, at the same time as they control inflation somewhat by having the government control the bank’s lending. For example, a person can only lend money to buy a house, TWICE (or was it once?) in their life. It is a crude method, but it might work. Essentially China has a kind of Greenback system, even though it is disguised as a fiat money system. Check out Ellen Hodgson Browns book for more info about this.

    So no wonder China is turning into the worlds economic superpower. The myth a lot of people want us to believe is that it is all because Chinese are so much more hard working than us westerners. Even though this could be true to some degree, it is far from the whole truth. The truth is that even China is ruled by a firm regime, they somehow managed to get it all right (or at least not as catastrophic as here in the west) when it comes to the arrangement of taxes and the banking system.

    (By chance the whole Chinese population are also natural pirates. The Chinese mentality is simply to regard copyrights as “something silly” or “childish”. Copy protection is something that someone would do if they are cheap cowards who do not want competition. In general, rules are always something that can be bent, sometimes broken, in China.)

    So, essentially I am in favor of the “Chinese model” as opposed to high VAT. It has been proven to work, excellently. In LARGE SCALE too!!! If not for anything else, simply because the Chinese economy will outgrow ours in every way if we do not follow their lead of truly 0% income tax, including VAT.

    You are entitled to your opinion, but my hope is that you could eventually turn in favor of land-value taxation oriented system. At least keep the debate open until people of the pirate community have gotten a chance to make up their mind about this issue.

    But anyway, It is the hackers that can make anything happen in this issue. If they manage to provide decentralized banking and currencies to the public. That would really be a catalyst for change, as opposed to just a few idealist talking to the deaf ears of politicians, and a slumbering public.

    1. Scary Devil Monastery

      What in essence everyone keeps missing about China is that it was the chinese who invented capitalism. Adam smith in comparison was a Johhny-come-lately who thought up brilliant and creative scenarios without the firmn grounding of a culture steeped in some 4000 years worth of tooth-and-nail market economy.

      China is, and has always been, centered about mercantilism and entrepreneurship. Every now and then there’s an invasion or uprising which is within a century solidly assimilated after which the equilibrium of status quo reestablishes itself.
      Communism, in that regard, leaves no more permanent mark on the Chinese than Djingis Khan did.

    2. Grozkov

      “There simply are no bookeeping for chinese companies, and this is probably a huge benefit for their development and the starting of new companies. Just get paid, take the money and put it in your pocket.”

      Wonder where you got that idea from? As it is not true.

  31. Charbax

    VAT is the most unfair tax. Poor people pay most of the VAT. While rich people just don’t spend their money, at least don’t have to spend it on VAT products. Totally unfair.

    The only solution is for the United Nations to introduce a global digital crypto currency and enforce it to all Governments, requiring all Government workers to be paid in that and requiring all legitimate businesses to get paid and to pay in that currency.

    Taxation on income and on wealth needs to be same in all countries of the world. Part of the new global digital crypto currency, there must be fair global taxing schemes, that needs to be set exactly at the same level for all humans.

    1. Charbax

      Meaning welfare would be paid in that new global digital crypto currency, all legitimate businesses would be compelled to use it and heavily fined if discovered to be using alternative crypto currencies like bitcoin.

      Bitcoin can still exist but it would only be used for illegal things, and as I think more and more of the illegal things need to be legalized, such as piracy, drugs, etc, there will be very little incitement to want to do illegal things.

      Of course for a UN controlled transparent crypto currency to have popular support, Governments and the UN need to become fair, we need to get much better and fairer democracy. That of course is a requirement. Meaning we also need systems for online direct democracy that really works and full on transparency about the wealth and transactions of everyone in society and everyone involved with Governments. Meaning, that will be the end of wars, oil and everything else that is bad.

      Of course, if you cannot believe that we could make a much better online democratic system you cannot believe in a fair transparent open online crypto currency.

  32. Robert Wensman

    I am not a big fan of everything Milton Friedman said, but here is one thing he said that seems relevant to this topic:

    “In my opinion, the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.” – Milton Friedman

  33. Robert Wensman

    As of the intaxable cryptocurrency, I endorse it completley! I do not believe government should force their way in-between people and monitor their interactions in any way. The Chinese model proves that this is not necessary for a state to get tax revenue.

    If all this Rick speaks about will come true, it is quite remarkable! Better than anything I have imagined… It just never occurred to me that currencies could be made so that they are untaxable.

    When it comes to digital currency/bank of choice? Personally I am currently in favor of the Digital Coin model by Paul Grignon. At least if it can be made to work as intended.

    If the government want to tax land and natural resources, they simply issue a special natural-resource-currency that is used exclusively for paying land-taxes, and that is then circulated back into the economy as basic income. This is the currency that the government controls for the purpose of tax and welfare, but when people interact economically with each other, they can use any digital money system they like. The exchange rate between private currencies and the natural-resource-currency is just determined by the markets.

  34. Joakim

    Rick, you mention Valenti but don’t include a link to The Best of Jack Valenti? 🙂

  35. Magnus

    In the mid seventies we all sat in front of the TV and watched Space 1999 – Moonbase Alpha..

    Now why did i write that? Yes of course, we have always, in _any_ given time said that the development of the world are going faster and faster, and humans have always thought that the development is much faster than it actually is. I am fully convinced that you are too. Make it 50 years, not ten.

  36. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    @ryonck new from @Falkvinge on #infopolicy: The Information Policy Case For Flat Tax And Basic Income

  37. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    @OpPinkPower new article by @falkvinge #BitCoin changes the game. Taxes and welfare need to be rewired, fast #infopolicy

  38. Thom (@thomkaufmann) (@thomkaufmann)

    The Information Policy Case For Flat Tax And Basic Income #Bitcoin #PirateParty

  39. Andrew Craucamp (@andrewcraucamp)

    The monetary system, as it is today will collapse within a decade according to Rick Falkvinge #Money #Anonymous

  40. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    @reihansalam yes — @falkvinge: #BitCoin changes the game. Taxes and welfare need to be rewired, fast: #infopolicy

  41. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    #basicincome #livable RT @falkvinge #BitCoin changes the game. Taxes and welfare need to be rewired, fast: #infopolicy

  42. Josef O. Collentine (@collentine)

    Bitcoin or other cryptocurrency will lead to reforming tax systems and a base income for everyone #change

  43. Jonas Lagander

    Robert: Germany issued a similar currency to the land value backed currency you propose – the rentenmark. It was backed by bonds in land and industrial plants, And it saved the country from the hyperinflation of the Weimar republic.
    “The introduction of the Rentenmark was highly significant, it allowed the currency to stabilise and supported by the Dawes Plan it stood a good chance of not succumbing to inflationary pressures as had previously happened. The new Rentenmark was valued at 1 Rentenmark to One Trillion old marks (no typographical error there). The Rentenmark was exchangeable for bonds in land and industrial plant – in other words they were worth something. Inflation ceased to be a problem, the German people accepted the value of the new currency and businesses accepted it as being of worth.

    The stability of the new currency couldn’t be taken for granted however and a range of new fiscal measures were implemented that would keep inflation and the exchange rate at acceptable levels. For example, the government opted to stop offering credit to industry as this had led to widespread speculation and consequently inflation. Borrowing therefore slowed and the circulation of money returned to ‘normal’ levels. Similarly the government altered the policy with regards the printing of money. Previously the government had increased the amount of money being printed as inflation had risen, this had simply led to prices rising even more rapidly. Now the government decided that the amount of money in circulation would be strictly limited to the real worth of economy. ”

    /do a google search =)

  44. Jonas Lagander

    Everybody interested in virtual currencies should check out They are working on a common “language” for virtual currencies similiar to HTML och SMTP. Give it ten years or so and this thing could explode!

  45. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    #FF RT @falkvinge #BitCoin changes the game. Taxes and welfare need to be rewired, fast #infopolicy

  46. Troy Bennett (@007roy)

    How do you tax what you cant see? Distributed cryptocurrency is here to stay. #bitcoin

  47. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    .@falkvinge ‘a basic unconditional income for every citizen that amounts to some level of minimum sustenance.’

  48. Sepp Hasslberger (@healthsupreme)

    How cryptocurrency will bring about flat taxation and citizens basic income thanks @Falkvinge

  49. Ludwig

    Great article. I’m a staunch defender of a citizen’s salary as the main means of redistribution (less bureaucracy and more transparency, which I guess are the main reasons why it has never been adopted), although I think VAT is fundamentally unfair.

    So here’s a thought about an alternative form of taxation. Most of the money supply is not in cash but in loan contracts. Savings, investments, borrowing for companies and nations, etc. And those contracts cannot be done in a distributed anonymous way like cryptographic money works. They will always have to rely on trusted mediators such as the law or banks. That means most of the money supply and transfers can still be easily taxed by governments.

    It will require a major shift in policy, since rich people have much better lobbies, but my guess is that if governments have no other source of taxes than loan contracts, that’s what they will tax. And it seems fairer to tax lending and borrowing than to tax labor or to have an indiscriminate tax on purchases.

  50. Deep Blue

    Interesting! I will have to think about this more. First I’m glad you also support welfare, I don’t see how we could do without it in a good society.

  51. Putte

    Of course you should have a tax on land and buildings. It is easy to handle and you can’t cheat.

  52. Mats Henricson

    There is at least one bad thing with taxes based on land or property, and that is that you may inherit something that is way too expensive for you to keep.

    Lets assume you inherit your parents big house, while you’re still a child, or student with no or very low income. The result would be that you’d have to sell it, since you wouldn’t have the money to pay its taxes.

    1. Grozkov

      ” The result would be that you’d have to sell it, since you wouldn’t have the money to pay its taxes.”
      If one inherits a house which is fully paid. There is no problem to get a substantial loan on its value to pay taxes and running costs. If the house is not fully paid for, the one inheriting it, probably has to sell it but not because of the taxes but because of the loan-payments.

  53. Joonas Mäkinen (@JoonasD6) (@JoonasD6) (@JoonasD6)

    @toukkala Onhan niitä monia asiantuntevia, vaikkei pankki olisikaan. try @Falkvinge #bitcoin

  54. Grozkov

    This article once again shows Ricks true political face. And it aint pretty. It’s the face of a rightwing ULTRACAPITALIST.
    I am a little puzzled that Rick now goes all out and chooses to aleniate himself from a large part of his somewhat naive supporters who always thought that his political ambitions was directed at helping the many not the superrich.

    1. Deep Blue

      But it seems he still wants us to keep things like healthcare and welfare?

    2. Scary Devil Monastery

      You are missing the point. Rick is talking about a form of currency which will invalidate any and all old models of fiscal calculation in one go if it is ever adopted. Since the payoff of adopting it are going to be a 30-50% effective revenue increase for both companies and employers it’s just a matter of time before cryptocurrency becomes an established standard.

      Rick is simply putting up an analysis of the ramifications, and it’s a fairly solid one. Once cryptocurrency becomes a norm, income taxation will, to all effects, become voluntary. You can bemoan that fact as you will, but the fact is you are simply shooting the messenger and clapping your hands over your ears.

      1. Grozkov

        Scary you and Rick really ought to enroll in a economics for beginners class as soon as possible?
        I mean before you make even bigger fools of yourselves.

      2. Scary Devil Monastery

        And in that class they would tell us much the same as what Rick and I outlined above. If you have a currency which is, in all effects, untaxable, then you ARE going to need another source of revenue.

        Whether this will be consumption-based or a form of land tax remains to be seen, but if cryptocurrency becomes popular – and it’s hard to see why it wouldn’t – then large parts of the world’s actual currency will have to be guesstimated.

        I think you have an urgent need to clarify yourself. Or shall we just take it for granted that you resort on calling opposing opinions foolish simply because you have no better criticism to offer?

      3. Grozkov

        Scarry in 20 years from now you will ask yourself Oh Why Did I not listen to this kind man Grozkov giving me and Rick advice we were badly in need of, but did not listen to.

  55. Grozkov

    “But it seems he still wants us to keep things like healthcare and welfare?”

    Does he?

    Falkvinge: “This also has the nice side effect of killing the need for all other welfare systems, from unemployment benefits to student loans, and the bureaucracy that comes with them.”

    Rick’s knowledge of economics in any scale could as best be described as rudimentary.

    1. Scary Devil Monastery

      Better than yours, looks like.

      Would you care to ponder, from an economists perspective, what happens once any transaction of a monetary unit becomes, for all intents and purposes, completely voluntary to display to the state?

      And here’s the clincher. Cryptocurrency works,

      1. Grozkov

        Sorry Scarry it obviously does not work and needs somewhat of a miracle to reach anything resembling scale but you and Rick can keep dreaming about it while holding hands.

      2. Scary Devil Monastery

        Actually it works rather smashingly well for a prototype. Saying it doesn’t is refuting the evidence so far.

        What it does need is a bigger consumer base. Other than that it satisfies all criteria for a useable currency. We are already living in an age where digital currency is norm and standard.

      3. Grozkov

        You are as I, and I am sure many others already have pointed out living in a digital dreamworld with almost no contact with the real world.

  56. jorges (@jorges)

    @Falkvinge pro pure #Konsumsteuer + #BGE, weil Kryptogeld keine Wahl lässt: / Was denken Wirtschafts- #Piraten darüber?

  57. Robert O'Brien (@robertobrien)

    A link would help. With crypto currencies "All income taxes go out the window"

  58. Ploum (@ploum)

    @zim_del : les geeks disent déjà non à leur manière : et #bitcoin

  59. Olivier Auber (@OlivierAuber)

    #eg8 Stop wasting your time… The right topic is #crytocurrency #basicincome #citizenship #rentabasica #revenudevie

  60. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    @Shedletsky on Bitcoin by @falkvinge Flat Tax and #basicincome #infopolicy #swarmeconomy

  61. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    .@falkvinge on Bitcoin and #basicincome | and Bitcoin explained RT @Shedletsky heard of Bitcoins?

  62. Livable4All (@Livable4All) (@Livable4All) (@Livable4All)

    .@falkvinge on Bitcoin and #basicincome | and Bitcoin explained RT @Shedletsky heard of Bitcoins?

  63. Gérard Foucher (@gerardfoucher)

    Cryptocurrency=Freedom at last?…

  64. Gérard Foucher (@gerardfoucher) (@gerardfoucher) (@gerardfoucher)

    Cryptocurrency=Freedom at last?…

  65. Sven Sladek (@Derfizz)

    Ach wisst ihr wer eig. auch BGEler ist? Kommt ihr NIE drauf!

  66. Sven Sladek (@Derfizz) (@Derfizz)

    Ach wisst ihr wer eig. auch BGEler ist? Kommt ihr NIE drauf!

  67. ulle69 (@ulle69)

    @Falkvinge’s thoughts on cryptocurrency. Seriously disruptive stuff.!

  68. ulle69 (@ulle69) (@ulle69)

    @Falkvinge’s thoughts on cryptocurrency. Seriously disruptive stuff.!

  69. Amin

    Helping the poor should be voluntary, not mandatory.

  70. Aaron D

    “I would argue that you only have two options: you can give welfare to nobody or to everybody. Since giving it to nobody isn’t really an option, all that remains is to give it to everybody, completely without condition. ”

    This is hogwash. Why? Short version: GNU/Linux and Wikipedia. People can and do voluntarily donate their time and/or money to helping others though causes they deem worthy. Thus, the notion that a welfare state is necessary is bunk.

  71. dpc

    You can’t have VAT. What’s makes you think that if people will be evading income tax, then companies will not evade VAT?

    VAT is a stupid tax because it taxes not only consumption, but services. Services help use time and resources better. You want to tax pure consumption, tax the resources: trees, oil, water, coal, chemicals, etc. and do tax them HIGH because that will make people use them in smarter way, limiting our ecologic footprint. Stop taxing the fact that one person is doing something better and using less resources than other!

  72. Gérard Foucher (@gerardfoucher) (@gerardfoucher)

    Rick Falkvinge : Rethinking taxes in a world with cryptocurrency

  73. Don

    Dearest Rick,

    Bitcoin is an elegant exercise, and it provides very elegant solutions to many key issues:, as you’ve discussed: total currency float is asymptotically fixed, preventing debasement of the currency; anonymity & untraebility are enabled (note: *enabled,* not guaranteed, you still have to take steps to protect your identity and address) and so on.

    This all sounds great, but it’s a bit premature to take the leap of faith about the effects you think this will cause to social, economic and governmental systems.

    That’s because the key issue, the one that dwarfs all others, has not been solved yet: the exchange issue.

    Currencies can be used to procure virtual goods & services, and Bitcoin can be great for that, but in the main, we need to use currencies for real-world goods & services. That means either exchanging Bitcoins for physical stuff, or exchanging it for national currencies so we can take the dollars or euros, or whatever, to pay the real-world schmoes who aren’t capable of operating in the digital world.

    And this is where the tax people will come for you. They’re not going to change their tax regime just because you’ve got a way to use your computer to hide assets from them. They’ll just get to work doing the same old revenooer gumshoe work they always do. Their techniques are as old as the hills, and they’ll work on digital cash just as handily as they have against physical cash users, offshore account holders, people with double sets of books, you name it.

    You need stuff (stereos, computer parts, a loft, a car, groceries.) Well, they’ll spy on you to see if your ‘lifestyle’ can be possible on the kind of income you’ve reported to them. So go ahead, send Bc80.000 to a guy for his Audi R8 that he’s selling to you at a great price! But you better be sending enough dollarcoin the IRS’s way if they get interested in you and see that sleek ride pulling out of your driveway . . . you also better have a mechanic who’s close enough to you, and a self-employed individual, so that he can alert you if the IRS walks in and demands the v.i..n. and service records of your luxury ride!

    The other key chokepoint will be Bitcoin-national currency exchanges. The very first thing that will happen with Bitcoin once it appears on the radar of the money cops is that the gov’t will require any exchanges who don’t want their door kicked in to register as financial institutions, and agree to the usual “know-your-customer” “anti-money laundering” requirements.

    So you’ll have your choice after you’ve done your online crypto-dealing & investing, but now need to convert it to national currency: either go to the gov’t regulated guys & loose all anonymity; or go to guys who are willing to work underground. Both have their advantages, risks-and costs.

    I think you can see where this is going . . . the biggest problem in crypto currency has most emphatically *not* been solved, and until the exchange issue is at hand, don’t expect the government crowd to change much of anything they do w.r.t. tax and/or welfare, apart from hiring more gumshoes.

    1. Rick Falkvinge

      Dear Don,

      a very well thought-out response, and I agree with you wholeheartedly. The most important issue of all with regards to a currency, the networking effect for everyday people, is not anywhere near reaching critical mass.

      Nor do I see it reaching that critical mass in the short term.

      However, I see other key drivers that I will elaborate on in a blog post that I hope will be finished tomorrow.

      Short version: there are quite a few people who don’t want to, or cannot, use the legacy banking systems. These are the ones that will drive adoption. Speculators from Wall Street will follow as money pours into the currency (and therefore value appreciates).

    2. Rick Falkvinge

      Btw, with regards to taxes:

      Different countries have different tax laws, but gifts and inheritances are expressly tax free in Sweden. Is it reasonable that people give you money where the government can’t see it, if they ask you how you got your expensive stuff?

      Maybe, maybe not. I guess it depends on your overall image. In my case, I lived off of donations for a year and a half, so I have the records to prove people do donate when I ask nicely (and I also informed the tax authorities about this, as well as about every single transaction, just to be totally in the clear).

      In any case, we are in agreement that it is not as simple and clear-cut as it may seem.

      1. Paul Lockett

        In a cryptocurrency world, VAT is no more sustainable than income tax. It might continue to work for large tangible goods, if there is stringent monitoring at the border, but for many services, it is just not feasible. Not to mention the fact that VAT, when it is enforceable, is incredibly economically damaging.

        The logical solution, which was mentioned but dismissed out of hand in the article, is taxing land. It is the one thing which is a fixed quantity and cannot be hidden or moved off-shore. As a result it is the one thing which can be taxed in a cryptocurrency world without require extensive bureaucracy or punitive and invasive enforcement.

      2. Don

        Thanks for your nice replies. I read your followup article, and I think it’s great. Some serious value is going to be added within the Bitcoin realm for people who are astute investors, and who also know how to stay out of the clutches of the anal-retentive government types.

        BTW- you Pirate Party adventures are showing the way to us all when it comes to getting out from under the thumb of governments influenced by commercial interests, which is where I think the most serious suppression problems for Bitcoin will originate.

        May the Force be with you!

  74. zakazaka (@zakazaka)

    @liam_davies this is crazy of the day:

  75. Carl

    Hi Rick, I enjoy your articles as well as your previous work.
    However, it seems you are somewhat stuck in time when it comes to your social organizational views. Just as technology moves forward and lays earlier works in the grayscale shades (of course still as important relics which we can value in memory), the “technology” of social engineering also moves forward. Taxation may have been useful in some situations and a good thing initially, and perhaps “right for its time”. The problem is that it’s based solely on the initiation of force against non-consenting innocent, peaceful people, and left to be administered by a very small group of powerful and corrupt people we call the state. This is not compatible with the human future if we want less violence and solve social problems. Considering all you have achieved and that you are an intelligent and admired thinker I find it very strange, with all due respect, that you haven’t looked into the true philosophy of freedom. I respectfully encourage you to read some of the stuff that e.g. Stefan Molyneux has written/recorded to get a feel of what I’m talking about. Freedom will work!

    Best regards,

  76. Bankparasiternas eroderande pyramidbygge | Ett nytt penningsystem

    […] Rick Falkvige om bitcoin  1  2  3 […]

  77. Alaric Snell-Pym

    There’s an alternative to a citizen’s wage: Just hand out the essentials of living (food, shelter, clothing, medical care) for free.

    I explore this in

    The upside is that the infirm can’t be swindled out of their benefit handout before converting it into the essentials (and if they’re drug addicts or mentally ill, can’t spend it on the wrong things). They can’t be extorted out of it by loan sharks, etc.

    The downside is that they then have no income to spend on other things; but if they’re healthy and secure, then they should be able to do even basic work to earn a few bitcoin here and there. Which might require ditching minimum wage laws and making it easier to hire people (not having to deal with income tax and the like will help with that), but that’s perhaps no bad thing either…

    1. cjp

      Another downside is that giving physical goods instead of money reduces the freedom of choice of those who depend on the basic income. But I understand where it comes from: for drug addicts, you might argue that freedom of choice is not good for them.

  78. Jon Matonis

    Rick, I am thrilled that you get the macro-economic impact that is forthcoming due to the bitcoin ecosystem. However, it is a shame that you intertwine that with support for a welfare nanny State. Welfare is just as immoral as taxation and fortunately free individuals that only spend within the bitcoin ecosystem will be immune from proposed consumption taxes as well.

  79. Morten

    I just want to say that I do not consider flat tax better or worse in any way than a progressive one. The real effect of taxes are less production especially for the things that the poor would need the most. This manifests as prices being higher than they otherwise would have been. Perhaps some people consider taxes a good thing, but this effect must be taken into consideration. Personally I think people in society would find ways to cooperate a lot better were it impossible to tax.

    Citizens salary sure sounds like a more efficient way of redistributing from producers to consumers, but I think it would fail precisely because of this. There is already a problem in many western countries of large amounts of people becoming dependent on the system, and I just think this would make it worse. Sure, many people would still do something fun like program or make music, but I think a citizens salary would just do a lot of damage to the price system and therefore on a whole, we would just begin wasting more resources, and get even more consumerism(the bad, wasteful kind) than today until it all collapsed.

    So I would just suggest that it is possible to build a peaceful future without taxes at all. If the majority of people really do want to help the few who need help to survive in society, I cannot see what would get in their way.

  80. […] deux billets déjà, je me suis penché sur les effets de bitcoin sur la société. J’ai beaucoup […]

  81. » Piraten vor der FDP

    […] Ersteres stellt ein einen unzulässigen Eingriff in die Vertragsfreiheit dar und würde viele Arbeitsplätze vernichten. Letzteres würde nur dann einen Sinn ergeben, wenn man gleichzeitig die Lohn- und Einkommensteuer abschaffte und das “Grundeinkommen” lediglich eine Art Steuerfreibetrag auf indirekte Steuern wie die Mehrwertsteuer wäre. Ein solches Modell schlagen die Fair-Tax-Bewegung in den USA und der Gründer der schwedischen Piratenpartei Rick Falkvinge vor. […]

  82. FSCONS och kryptovalutor «

    […] på detta problemet är inte självklart. Falkvinge tar upp i en bloggpost problemet och föreslår en lösning som innebär att man helt avskaffar inkomstskatten och […]

  83. Bitcoin és adózás | Magyar Bitcoin Portál

    […] Forrás: […]

  84. […] folgende Artikel ist einer Übersetzung dieses Artikels von Rick Falkvinge, dem Gründer der schwedischen Piratenpartei. Ich fand ihn so interessant, dass […]

  85. Why the pirates should back the basic income | Boiling Frogs

    […] some regional sections of the French one, and Rick Falkvinge, founder of the Swedish pirate party, mentioned it several times on his blog. Guess […]

  86. […] his kills two birds with one stone, as it also solves the progressive taxation case: a basic unconditional income for every citizen is basically the same thing as a basic tax deduction before taxes start to apply plus a guarantee that you have minimum sustenance. We already have those two anyway.   This also has the nice side effect of killing the need for all other welfare systems, from unemployment benefits to student loans, and the bureaucracy that comes with them.  […]

  87. Daytona

    Good article, I’ve long agreed with flat tax and what I now see is called basic income.

    I don’t know if you’ve already covered the issue in the comments but the problem I see with a basic income is it’s flat payment nature when life aint like that. The pensioner with dementia and no relatives/support network might require care costing $50,000pa, whilst someone who’s unemployed might require $20,000pa.

  88. […] Dans cet article de son blog personnel, Falky cimente ensemble les notions de crypto-monnaie et d’Allocation Universelle. Je vous propose ici une résumance à la serpe de son propos, sous forme d’une liste d’événements, car les gens aiment les listes. ( […]

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  91. Ewout

    Are you familliar with Ex’tax? Seems like a match made in heaven…

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  93. Jan Karlsson

    Please don’t be fooled by the Emperers new clothes. From my point of view, the collective level of integrity, physical emotional, mental and spiritual, is still not very high. This low level of integrity (heavely EGO based), coupled with centralized digital distribution , is virually guaranteed to create the same type of inequality and greed as any other fear and scarcity based system. Furthermore, digitalized currency, irrespective of name, is more than likely another Rothchild,Rockefellar scam so they at a later point can step in and run the show, but now under a different name.

  94. Justin
  95. […] two posts now, I have considered the effects of Bitcoin on society. A lot of more thinking has been done than […]

  96. […] Rick Falkvinge, de oprichter van de eerste Piratenpartij, bepleit naar aanleiding van de cryptografische valuta dat we arbeid en kapitaal maar eens helemaal […]

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