Oddbean new post about login | logout Lifetime tax pressure. I wrote a short program that roughly calculates the tax pressure over a lifetime, with the impact of inflation on past wages. Output examples: --- 45 years of work Inflation: 2% Tax: 30% Lifetime tax pressure: 54.486 % --- --- 45 years of work Inflation: 2% Tax: 0% Lifetime tax pressure: 34.98 % --- I think this output is interesting because it shows that without any regular taxes, the *minimum* inflation over 45 years of work is equal a ~35% tax pressure. --- 45 years of work Inflation: 2.3% Tax: 54% Lifetime tax pressure: 71.817 % --- This output is based on the average tax pressure in Sweden, with an average historical inflation of 2.3% since the Riksbank (central bank) was established in 1668. --- 45 years of work Inflation: 7% Tax: 0% Lifetime tax pressure: 71.603 % --- This output is based on a yearly inflation rate of 7%, without any taxes. This is the likely inflation rate we have in the West when we account for asset inflation from government + central bank moneyprinting. --- 45 years of work Inflation: 7% Tax: 30% Lifetime tax pressure: 80.122 % --- This is the output of an inflation rate of 7% over 45 years of work, combined with a 30% tax rate. Conclusion: Inflation is a significant tax levied by governments and central banks as they expand the monetary supply. These figures account for cumulative inflation: the savings of year 1 is inflated for 45 years, while the savings of year 40 is inflated for 5 years, etc. This is not only a theft of income but a grand theft of life and time on this planet. Bitcoin fixes this by allowing individuals to opt out of the hidden tax of inflation. Every individual owns themselves and the fruits of their labor. (Paraphrasing John Locke, 1690) A final consideration is to add living expenses to the calculation. As inflation drives up the cost of living, this also represents a loss of purchasing power. I have left this out so far due to it being difficult to calculate, especially since wages must increase *somewhat* to account for increased costs. #Inflation #Moneyprinting #Tax #Taxation #TaxRate #InflationIsTheft #Bitcoin
Great insight. Does it include indirect taxes?
Bitcoin only partially fixes this. And I see two problems that get often dismissed. Bitcoin is a hedge against inflation only if it's completely or mostly out of the hands of custodians (which already is not the case). As custodians (government licensed companies) can increase supply through fractional reserving the underlying asset. This comes in many different flavours and it's already a thing. The other thing is that KYC in combination with Bitcoin transparency is a perfect tool to increase tax coercion. So we will see likely less effects through inflation tax, but more taxation through direct taxation including potential wealth tax/unrealised capital gains. Monero is much more powerful when it comes to direct taxation. Bitcoiners who think Bitcoin alone will fix most of our problems are ignoring the details and often outright dismiss the adversarial environment all of this takes place. Bitcoin is a great store of value if no KYC. Monero could arguably have less effective inflation than BTC because it's not listed at custodians. And supply stays < BTC until 2040 anyways. Which leaves Monero with a small risk of an undetected inflation bug that everybody should hedge with a Bitcoin position. #Monero #Bitcoin
If I understand you correctly, you are saying that exchanges and potentially ETF providers can increase the supply of paper bitcoin and sell such printed tokens to customers. I see a couple of problems with this. First, this would become apparent when the company is audited. If they don't own as much bitcoin in reserve as they claim then they would be engaging in fraud. For this to go unnoticed we would need governments collaborating deeply with exchanges. Secondly, fake paper bitcoin would only be a problem for those that use government-aligned custodians. It seems like it would be self-defeating for governments to undermine the government-aligned custodians where they can easily tax the paper bitcoin. Since sovereign owners can verify their bitcoin they are not impacted by frauds. You could argue that the exchange rate could be impacted temporarily. This is possible, yet would allow bitcoiners to stack more bitcoin at a cheaper price for a longer period. 2. Yes, bitcoin on exchanges will be impacted by all kinds of taxes. Yet, if governments overplay the taxes then nobody will want to use government custodians, so there's that consideration as well. Bitcoin in self custody is hard to tax, in spite of KYC regulations. Bitcoin is global and not jurisdictional. If a government seek to tax your bitcoin in a manner you disagree with, you can cross the border and spend your capital (bitcoin) in a better jurisdiction. This is how game theory plays out: jurisdictions have to compete for capital and skill by offering good conditions of living, low taxes, et cetera. I wrote a longer piece on game theory and why tainted coins will not work over time: nostr:nevent1qqsyp39g9ykyclhvg2xxq3m5e6speyjdumzwk2llp2q3r630jkxrj5spz3mhxue69uhhyetvv9ujumn0wd68ytnzvupzqg75jw2xzfv9wpk89yy2tcusf723wl4qs7cr9hdle55xyvzv0kvrqvzqqqqqqy22xsdy
No, not as a separate calculation. The function just applies the tax rate that you input at the beginning, so this tax rate is used as the total tax pressure and is applied uniformly over 45 years, so it is a hypithetical average. If you have figures for the impact of indirect taxes then you can add that to the total tax pressure. For example, a tax on nuclear, gas or coal energy will drive up the costs of all production, products, services and transports that uses the energy grid. Such a tax should be added to the total tax pressure. However, it would be complicated to simulate how that tax impacts every day life with cost increases throughout the whole infrastructure. If you can only save 20% of your income (or less) after tax then this is clearly a situation impacted by inflation, but since living expenses differ from region to region and quality of life is subjective (options differ in cost), it might be impossible to calculate the full impact of inflation. If we earn income in jurisdiction A and then settle in jurisdiction B, this will also matter.
So total tax rate is basically in the ball park of 80%+ I refuse to call something that is based on coercion and extortion cilivl society. They control the meaning of words. War is peace. Ignorance is strength. It's lainly obvious that we haven't been anywhere near a free or civil society for a very long time if ever. And most people are not even able to see this as the huge toll this is on humanity and development.