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Comparing bitcoin or similar to USD misses one big thing: You have to (if you live in USA) pay taxes in USD; if do not you will be met with the force of the st

by chvid 9y ago

Comparing bitcoin or similar to USD misses one big thing: You have to (if you live in USA) pay taxes in USD; if do not you will be met with the force of the state. This creates a default demand for USD and there is nothing comparable to that for bitcoin.

RexetBlell 9y ago
Basically you're saying that what gives the dollar value is that without it the government would imprison you for not paying taxes? In other words, it's a kind of like a freedom (from jail) token according to you.
andrewla 9y ago
I keep hearing this argument and it continues to make no sense to me. With the exception of fixed levies (like property taxes) all other taxes are proportional to income valued in USD. Multiplication is commutative, though -- if I earn 100 BTC, and say my tax rate is 30%, then I own 30 BTC in taxes, at the prevailing exchange rate -- the demand for dollars is an illusion here; regardless of the value of dollars relative to BTC, I owe 30 BTC worth of dollars; if dollars are worth a lot, then I owe few of them, if they are worth little, then I owe a lot of them. There is no function forcing value into USD.
- nhaehnle 9y ago
  There's a question here that affects your story somewhat because governments do require you to calculate value in their currency (USD in your example). Let's say you earn 100 BTC at the start of the tax year, and your tax rate is 30%, but BTC drops from 1000$ to 100$ over the course of the year. How much in taxes do you owe at the end of the year? 30000$ or 3000$? I don't actually know the answer for certain, but my guess is you owe 30000$ -- and if you didn't sell your BTC early, you're screwed. You could perhaps offset some of your taxes by claiming an investment loss, but that usually only works to offset capital gains taxes, not income taxes. On the other hand, what if BTC rises from 1000$ to 10000$? I expect you'd still owe 30000$ in income taxes, plus capital gains taxes if/when you sell your BTC.

by chvid 9y ago

RexetBlell 9y ago

Basically you're saying that what gives the dollar value is that without it the government would imprison you for not paying taxes? In other words, it's a kind of like a freedom (from jail) token according to you.

andrewla 9y ago

I keep hearing this argument and it continues to make no sense to me. With the exception of fixed levies (like property taxes) all other taxes are proportional to income valued in USD. Multiplication is commutative, though -- if I earn 100 BTC, and say my tax rate is 30%, then I own 30 BTC in taxes, at the prevailing exchange rate -- the demand for dollars is an illusion here; regardless of the value of dollars relative to BTC, I owe 30 BTC worth of dollars; if dollars are worth a lot, then I owe few of them, if they are worth little, then I owe a lot of them. There is no function forcing value into USD.

nhaehnle 9y ago
There's a question here that affects your story somewhat because governments do require you to calculate value in their currency (USD in your example). Let's say you earn 100 BTC at the start of the tax year, and your tax rate is 30%, but BTC drops from 1000$ to 100$ over the course of the year. How much in taxes do you owe at the end of the year? 30000$ or 3000$? I don't actually know the answer for certain, but my guess is you owe 30000$ -- and if you didn't sell your BTC early, you're screwed. You could perhaps offset some of your taxes by claiming an investment loss, but that usually only works to offset capital gains taxes, not income taxes. On the other hand, what if BTC rises from 1000$ to 10000$? I expect you'd still owe 30000$ in income taxes, plus capital gains taxes if/when you sell your BTC.