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Aren't dollars just worthless pieces of paper? They are only worth something because people accept them as payment. Some of those people are the IRS, who will

Aren't dollars just worthless pieces of paper? They are only worth something because people accept them as payment. Some of those people are the IRS, who will throw you in prison if you don't turn over a sufficient quantity of said paper. That guarantees a minimum level of demand for dollars.

Tichy 16y ago
I suppose they only charge you taxes if you actually earn dollars, so if you wouldn't earn anything, you wouldn't have to pay taxes? What I mean: you pay taxes with the dollars you earned, you don't have to buy dollars on some market to pay taxes.
- orangecat 16y ago
  IANATL, but my understanding is that you owe taxes whether your earnings are in dollars or euros or bitcoins.
  - tgrass 16y ago
    From the Russ Roberts podcast (goo.gl/mNcQW), they discuss the tax issue. Apparently you're not taxed on bitcoins.
    - nhaehnle 16y ago
      Not right now, but that is simply because the volume isn't large enough to have attracted government attention yet. There was a case some years ago in Germany where something similar happened. A local initiative introduced a local fiat currency, and initially people did not pay taxes on sales etc. in that currency. At some point, this got the government's attention, and soon after that, the tax advantage was gone. People had to pay their taxes in Euros. Something similar will happen to BitCoin if it takes off. It may be somewhat harder to enforce for the government, but then again, paper cash transactions are anonymous, too. You still pay sales tax when you purchase something with paper money. There is no truly fundamental difference here to how BitCoin works.
      - Tichy 16y ago
        I think the same happened to Linden Dollars (Second Life). However, I don't see a problem, as presumably they can only tax you on the corresponding dollar value of the currency. Like if you earn 1000 BTC and they are worth 1000$ at current rates, you are taxed for 1000$, if they are worth 0$, you are taxed for 0$.

Tichy 16y ago

I suppose they only charge you taxes if you actually earn dollars, so if you wouldn't earn anything, you wouldn't have to pay taxes? What I mean: you pay taxes with the dollars you earned, you don't have to buy dollars on some market to pay taxes.

orangecat 16y ago
IANATL, but my understanding is that you owe taxes whether your earnings are in dollars or euros or bitcoins.
- tgrass 16y ago
  From the Russ Roberts podcast (goo.gl/mNcQW), they discuss the tax issue. Apparently you're not taxed on bitcoins.
  - nhaehnle 16y ago
    Not right now, but that is simply because the volume isn't large enough to have attracted government attention yet. There was a case some years ago in Germany where something similar happened. A local initiative introduced a local fiat currency, and initially people did not pay taxes on sales etc. in that currency. At some point, this got the government's attention, and soon after that, the tax advantage was gone. People had to pay their taxes in Euros. Something similar will happen to BitCoin if it takes off. It may be somewhat harder to enforce for the government, but then again, paper cash transactions are anonymous, too. You still pay sales tax when you purchase something with paper money. There is no truly fundamental difference here to how BitCoin works.
    - Tichy 16y ago
      I think the same happened to Linden Dollars (Second Life). However, I don't see a problem, as presumably they can only tax you on the corresponding dollar value of the currency. Like if you earn 1000 BTC and they are worth 1000$ at current rates, you are taxed for 1000$, if they are worth 0$, you are taxed for 0$.