Despite Warren Buffet’s comments that Cryptocurrecy such as Bitcoin and Ethereum, are headed for a huge crash, these new currencies continue to gain a lot of traction. There’s also a lot of smart money betting on this type of currency and the blockchain technology it utilizes. Fiat currencies have been around in one form or another for a long time. The Yap Culture in Polynesia has had a type of Cryptocurrency for hundreds of years. Are we in a bubble, most certainly, but how much more inflated it will get before popping is the real question. When company’s like Kodak announce they will start using blockchain technology to protect creative works etc. and their stock nearly doubles overnight, you have to be thinking bubble.
So what does this have to do with real tax reform? The government is already on to the fact that the underground economy is shifting to cryptocurrency in a huge way. No government has the ability to trace these transactions which completely skirt bank rules for laundering money, the reporting of business to business transactions, and institutional requirements to report income. If we thought the lowering of tax revenues was going to cause deficits, wait until Cryptocurrency starts to become widely used to conduct business transactions.
The only long term solution is to tax consumption at it’s source, a Value Added Tax (VAT) perhaps which has been around in Europe for a long time, coupled with a much lower income tax based on income levels and wealth. The good part of it all is that it would be a complete overhaul of our system of collecting taxes brought about not by proactive political representatives (a myth), but by a changing global economy driven by the people.
Brave New World.
Stephen Wheeler, CPA 