Crypto and blockchain could replace paying income tax with earning yield, minimize bureaucracy, fund social spending and tame inflation permanently. Here is a thought experiment on how.
Just a quick and rough thought experiment (so forgive the crudeness)
Let’s say a country, call it Souvlakia, adopts an open source crypto currency (not a CBDC) as legal tender. Let’s call that currency MoneyCoin. Because the economy runs on the MoneyCoin blockchain the government cam express its tax code not through documents with byzantine layers of value destroying priesthoods, but through self-executing smart contracts.
This means everyone is taxed fairly, and automatically. This automation eliminates the need for for a tax collection bureaucracies, accountants, bookkeeping software, annual tax filings, receipt management, audits, loophole chasing, tax attorneys, fraud investigators, etc… This also means that income tax can be streamed rather than collected annually
The result is income tax is no longer directly experienced by tax payers. It has receded into the background, like an automatic transmission.
Now, here is where things get interesting…
This means that monetary policy is no longer about printing and taxing, but about minting and burning. Budgets no longer require taxation. Instead the government mints whatever its budgets require, and then burns to control the resulting inflation. Inflation then become an organic constraint on spending.
And citizen’s earn a yield on their MoneyCoin for holding and stabilizing the entire system.
In this way crypto replaces paying income tax with earning yield, minimizes bureaucracy, funds social spending and tames inflation permanently.