Alternative Currencies Encourage Tax Resistance

Some people have tried to use alternative currencies (alternatives to official government-created legal tender, that is) to facilitate tax resistance. Here are some examples:

  • Missouri started issuing what it called “Time Dollars” to people who volunteered to spend their time helping the elderly. These volunteers could in turn use these Time Dollars to hire help if they needed it later on. And the state vowed that it would honor these Time Dollars if no home care workers were available who would themselves accept such currency. Though Missouri did not have a tax resistance motive in establishing this program, they did seek and obtain an IRS ruling that these Time Dollars did not represent taxable income. (Here is some background, and some additional commentary.)
  • Many alternative currency projects in the United States are trying to follow the Time Dollar model, in some cases with the explicit goal of being a way of helping tax resisters.
  • The currencies in massively-multiplayer online games are taking on the appearance of a plausible challenger to legal tender. A silly on-line currency called the “QQ coin” became a craze in China, which exposed a latent demand for an alternative to the tightly-controlled legal tender there.
  • For a time in the United States, you could go to a bank and buy an “honor bond” (or “bearer bond”) for the face value of your purchase. Such bonds were anonymous, and earned interest, and so for a certain class of savvy people, tax resisters in particular, were better than money for conducting high-denomination transactions. The government has since cracked down on the practice.
  • The U.S. government also cracked down, hard, on a fellow who started coining a parallel currency called the “Liberty Dollar” that he hoped would be more reliable and valuable than the stuff they print out at the Mint.
  • In present-day Greece, people are turning with creativity born of desperation to a variety of alternative economic tactics, including the use of an alternative currency called “tems” which the government there has not yet figured out how to tax.
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