Rely on taxes that can't be evaded: taxes on usage of natural resources, the largest category of which is land value taxes. Perhaps industrial scale emission of CO2 could also be taxed.
Land value taxes not only are evasion-proof - which means they are extremely fair in applying to all equally - but they require very little administration, and no invasions of privacy, to enforce (a consequence of a person needing to include their land in the government maintained land title registry in order to enforce their ownership over it).
They are also considered by many economists as the "perfect tax" due to their economic efficiency:
Ultimately though the public sector will need to shrink as a share of GDP, as the LVT alone cannot support current spending levels. In other words, the trend seen in this graph will have to reverse:
Two interest groups stand to lose from the change I describe:
Those who own real estate, and those whose income derives from government spending.
I would suggest the constructive path forward is to propose a multi-trillion dollar settlement package for both groups, to compensate them for the losses they would incur from transitioning to the new system I describe, which has much less government spending, and much higher taxes on land ownership.
The settlement can be paid for over subsequent decades, similar to the bonds the UK issued to pay former owners of slaves as part of its Slavery Abolition Act of 1833.
As costly as all of this sounds, it would probably actually be much less costly than perpetuating an increasingly inefficient system, which leads to escalating culture wars, and growing repression.
Anonymity is good and all, but the moment a known intermediary comes into the picture, it becomes a target for government enforcement.
If you need a service like Tornado Cash to preserve anonymity, as long as there is a physical name attached to that service, government regulation becomes enforceable.
In other words, there's still a long way to go before salary payments or other forms of taxable money transfers become evasive enough that they're unenforceable. The small number of exceptions (e.g., tech-savvy remote workers taking payments through blockchain) are not large enough to set the rule.
Thank you! Interesting. Why would it necessarily reduce culture wars or repression? Because the public sector gets smaller? Or because taxes are "fairer"? Edit: middleman free finance? How?
1. the taxes are more just, and thus cause much less collateral damage (like enforcement actions related to prohibiting Americans from using financial privacy software on their computer) that elicits hostility/acrimony from a broad cross-section of the population toward governing institutions, and
2. by offering a settlement to those negatively affected by reduced government spending and the introduction of a LVT, we are not threatening to deprive major interest groups of their livelihoods, which would create avowed opponents of the reform plan in whose interest it is to vilify the reformers and their plan.
The goal is to align interests so that all major groups support reform toward a more just and efficient economic system.
Thanks. Just so that I can close the mental loop here: because "the state" is smaller, things like sanction control also matter less/will be handled differently, hence privacy can be stronger?
I'd say the decision by a state to enact sanctions is orthogonal to the size of the state.
With respect to sanctions, I think targeting financial transactions would be less appealing to policy makers if it didn't align with broader income tax enforcement goals and couldn't utilize the controls set up for that purpose.
So how do you envision a public sector to be funded, if at all?