How Bitcoin Challenges the Federal Income Tax System

The tax wonks are looking closely at this Bitcoin thing. Here’s the latest example to cross my screen: How Bitcoin Challenges the Federal Income Tax System. Here’s an excerpt:

Our tax reporting and collection system is built, among others, on the assumptions that (ⅰ) parties to a taxable transaction know each other (or can reasonably obtain information about one another and send information to each other), and (ⅱ) that there are some uniquely situated taxpayers (such as banks) that regularly collect financial information about other taxpayers in a centralized manner. The operation of Bitcoin defeats both assumptions. Parties to Bitcoin transactions do not necessarily know each other, and the operation of Bitcoin is decentralized. Thus, important assumptions that stand in the basis of our traditional collection mechanisms collapse.

Bitcoin is going through some significant growing pains at the present. A major hub in the economy that grew around the currency, Mt. Gox, has shut down amid rumors that it had lost hundreds of thousands of bitcoins that had been stored with or exchanged through its service.

It seems that making the algorithms around the currency itself impregnable was only the first part of the challenge. The next step will be developing tools of exchange and commerce that are up to the challenge of dealing with the new currency in a reliable and trustworthy manner while being accessible to the ordinary person.

The issue of the Monmouthshire Merlin did a backgrounder on the Rebeccaite phenomenon:

History of Rebecca and her Daughters.

About seven years ago a turnpike-road was made between Pembroke and Carmarthen, with the view of securing a great thoroughfare by it between Ireland and London. The Liverpool and metropolitan railway has, however, frustrated the object by leaving but 32 miles of road from Carmarthen to Hobb’s Point, or Milford, as a passage for the mail, which seldom carries more than three passengers a day. Very little thoroughfare exists along it, as a carrier goes but once a week between Carmarthen and Pembroke, by which there is not money sufficient raised to pay the interest for the capital expended, much less to keep the road in repair. The trustees have the power, by Act of Parliament, to put up toll-bars on lanes and by-roads, and also to throw the expense of the main road on the parishes; and that power they have exercised, which appears to have excited the peasantry to the late and continued acts of violence. The tollage upon the road amounts to 12s. 6d. upon each market cart for 12 miles, besides which the people have to keep the roads in repair. Rebecca has already destroyed the St. Clear, Trefechan, Prendergare, and Pime toll-gates. She also boasts of having an auxiliary force of 500 men, true and faithful, at Haverford-west. By order of the Home Secretary, the marines from Pembroke dockyard have been recalled, and the duty of pursuing the malcontents has devolved upon the Castlemarten yeomanry, who in so nobly distinguished themselves under Earl Cawdor against the French troops at Fishguard.