How you can resist funding the government →
a survey of tactics of historical tax resistance campaigns →
switch to alternative currencies →
Ripple / LETS
I’ve blogged before about “alternative currencies” — things like Calgary Dollars or Ithaca Hours.
I pretty much let it drop after a little investigation because it seemed to me that there wasn’t much of a tax resistance angle to be had.
I may be wrong, though, or it may be that I’ve overlooked some of the other advantages of alternative currencies — for instance, that local currencies encourage people to rely on their neighbors for products and services and help frugality and reuse by greasing the wheels of the barter economy.
But something new caught my eye:
The Ripple Project bills itself as a “decentralized peer-to-peer currency and payment system.”
Each person in this peer-to-peer network…
…indicates which other participants he or she trusts, by offering to accept their IOUs up to a certain amount, like a line of credit.
To make a payment to someone who trusts you, you simply adjust your IOU balance with them to indicate that that you owe them the amount of the payment.
To pay someone who doesn’t trust you, the Ripple system finds a chain of credit connections between you and the payment recipient.
Then you pay the first person in the chain, who pays the second person, and so on until the recipient gets paid.
This is exactly what happens when someone writes a normal cheque.
Their bank deducts from his account (which is his IOU balance with the bank), and pays the central bank, who credits the recipient’s bank, who further credits the recipient’s account.
In other words, the payer gives some of his bank’s IOUs back to his bank, his bank gives some of the central bank’s IOUs (national currency) back to the central bank, who passes them along to the recipient’s bank, who issues its own IOUs (bank account digits) to the recipient.
Note that all three intermediaries are banks.
Ripple lets everyone act like a bank.
This is the sort of application that gives cyberpunks the wide-eyed jizzies.
I’m going to keep this one in my bookmarks and on my radar screen.
A frequently-expressed dream of the libertarian, anarchist, and tax resister far-out fringe is the idea of a replacement for government money.
This, for many reasons, including:
The “inflation tax”:
“Governments are almost always net debtors (that is, most of the time a government owes more money than others owe to it).
Inflation reduces the relative value of previous borrowing, and at the same time it increases the amount of revenue from taxes.”
If the government has a monopoly on issuing money, it can use this monopoly to manipulate the currency supply and generate a stealth tax that tax resisters can’t easily avoid.
Basic anarchist principles.
American anarchists like Josiah Warren, William B. Greene, and Benjamin Tucker challenged the government monopoly on currency, and Warren’s labor notes are an ancestor of the Time Dollars variety of local alternative currencies currently found in some areas of the United States (for instance Ithica Hours).
Privacy / secrecy.
If you can remove yourself from the government’s money system, perhaps you can keep it from finding out about your earnings and spendings altogether.
So much of the early cyberpunk sci-fi took for granted that in the future, anonymous, encrypted micro-payments were going to be flying invisibly through the wires faster than any government could track them.
(The founders of PayPal were in fact hoping to turn this sci-fi dream into reality and fully intended their service to empower people and disempower governments.) John T. Kennedy, writing of what he called economic secession, put it this way: “Think of how much less profitable taxation would be if government didn’t know how much money you earned or how much money you had.
The Leviathan cannot extract the revenue necessary to sustain itself at anything like current levels without knowing where the money is.… if the means of economic privacy are available they must choose between keeping their own money in their own pockets or voluntarily turning it over to government.
Then you’ll see economic secession on a grand scale.”
But actual alternative currencies have not yet taken off in any revolutionary way, although they are frequently prophesied.
None have proven to be anywhere near as widely-accepted, flexible, dependable, and safe as the good old Euro, greenback, Yen, and their other government-issued companions.
I’ve been keeping my eye on things like LETS and the Ripple system, which automates LETS and expands its boundaries.
Sounds interesting, but I’ve never purchased anything with LETS, or with Time Dollars, or with any of the other occasionally-proposed emerging alternative currencies like pre-paid phone cards, frequent flyer miles, and so forth.
Nor has anyone ever offered me any of this stuff for any goods and services I might have to offer.
It’s still dollars in my neighborhood.
But zipping through the wires around me is an alternative currency I’m only really aware of through rumor and journalism — the currencies used inside the worlds of massively multiplayer online games to buy things within the context of the game.
These things are huge, and with players beginning to sell their hard-won (or virtually-purchased) game-world belongings on eBay, it became possible to exchange virtual money for real goods, real money for virtual goods, or virtual money with real money.
In , an economist took the time to figure out what the exchange rate was between EverQuest Norraths and U.S. Dollars, and he concluded:
The nominal hourly wage is about $3.42 per hour, and the labors of the people produce a GNP per capita somewhere between that of Russia and Bulgaria.
A unit of Norrath’s currency is traded on exchange markets at $0.0107, higher than the yen and the lira.
The economy is characterized by extreme inequality, yet life there is quite attractive to many.
Note that when he says that EverQuest had the 77th largest economy in the world, he means the real world, not just the virtual world.
The IRS does not tax this thriving economy, though most of its transactions are (in theory at least) easily-traceable.
Julian Dibbell at Legal Affairs wonders why:
If you haven’t misspent hours battling an Arctic Ogre Lord near an Ice Dungeon or been equally profligate spending time reading the published works of the Internal Revenue Service, you probably haven’t wondered whether the United States government will someday tax your virtual winnings from games played over the Internet.
The real question is, Why hasn’t it happened already?
…if you look on online marketplaces like eBay today, you will find a thriving, multimillion-dollar market in Golden Runic Hammers, Ethereal Mounts, and similarly exotic items — all of them won (and anything found or wrested from another player is “won” in the context of a game) or bartered for in this or that MMO quest, and many of them fetching prices in the hundreds, even thousands of dollars.
Dibbell tries to figure out how he would declare income earned in the course of the game if he did decide to.
After all, the IRS’s instructions include sections on how to declare barter, graft, and…
…every conceivable form of income known to accounting.
To read it once is to realize that you know nothing about income.
Here you’ll find a description of gains, ill-gotten and otherwise, so irregular that they can be taxed only according to that form of guesswork known as fair market value.
Here are stocks, options, retirement watches, and stolen goods (“If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner”).
He determines that “items acquired either through barter or as prizes in a game” is the closest category.
But now it gets sticky:
Goods taken in trade or won at play are taxable the moment they fall into somebody’s hands, even if they are not sold for money.
The more I read, the more I wondered whether reporting the amount I had brought home from selling virtual items on eBay was enough to satisfy the IRS.
What about the assets I bartered for or won in the game but never sold in the real world, the suits of armor stashed here and there with their easily established fair market value?
What if I traded those assets for their value in Ultima Online’s official currency, the Britannian gold piece, rather than for dollars?
Wouldn’t it be easy to establish their value in dollars nonetheless and, if I owed American taxes on the exchange, put a number on the deal that the IRS could grasp and love?
And what about all the other MMO players out there — how long could the IRS be expected in good conscience to leave the resulting millions of dollars in wealth untouched?
Hilarious.
Imagine opening the treasure chest behind the recently-defeated balrog to find that it was one-third empty thanks to withholding.
Is the armor your character bought a business expense, and if so, how should you handle depreciation?
Can you imagine?
But it’s either an army of IRS accountants and lawyers coming up with just this sort of absurd regulation, or the government allowing a huge virtual economy at which many of its citizens fruitfully labor for hours and hours, to go untaxed.
For more on alternative currencies, time dollars and the like, see also: The Picket Line and .
, I mentioned the “Ripple Project,” which was attempting to create a “decentralized peer-to-peer currency and payment system” based on electronically-mediated trusted chains of IOUs.
It basically allows people to make their own currency, based on the full faith and credit of themselves, that is as fungible as their reputations allow.
It not only destroys the government currency-creation monopoly, but fully democratizes currency-creation.
The idea has a beautiful cleverness to it, but honestly I haven’t given it the kind of research and thought it deserves and so I can’t yet give it a wholehearted thumbs-up.
Still, I want to make note that the project is live (and in Beta) if you’d like to give it a go.
If you’re wondering why I’m plugging a project like this on a blog dedicated to tax resistance… see, for instance, The Picket Line .
Some bits and pieces from around the great big web:
One way to avoid paying taxes to whatever jurisdiction is lording it over you would be to move to another jurisdiction.
The problem is figuring out how to take your assets with you before the folks in the revenue office figure out what you’re up to.
Kathleen Macaulay has written up her advice for people considering what she calls the “ultimate estate plan” — taxpatriatism — in the wake of new laws that changed the rules for U.S. taxpatriates .
Matthew Yglesias notes that the news media allowed themselves to be used as a propaganda arm of the military-industrial complex, shamelessly and without remorse.
To which IOZ responds — allowed themselves? hell — they’re an essential part of the military-industrial complex.
Who do you think owns NBC?
Trying to convince folks that their tax dollars might be better spent by anyone but the Pentagon?
You could do worse than pointing to them to a new report from the Center for Defense Information about Pentagon waste and budgetary shenanigans.
Bureaucrash, the Competitive Enterprise Institute’s attempt to make capitalist ideology hip and exciting to the Internet generation, is sponsoring a “crasher challenge” — “a monthly drive to inspire activism on a specific issue.
We’ll help provide the initial resources to help you and other crashers get your creative juices flowing and we encourage you to share those resources that you create.
At the end of the month, the best submission (i.e. video, documented crash, writing, etc.) will be rewarded with Contraband t-shirts and props on Bureaucrash Social.”
This month’s challenge is called Stop Wars and it would be ideal for a project that ties taxation to warfare.
