"Now tell us—is it right to pay taxes to Caesar or not? Should we pay them, or shouldn’t we?"
Jesus saw through their hypocrisy and said, “Why are you trying to trap me? Show me a Roman coin, and I’ll tell you.” When they handed it to him, he asked, “Whose picture and title are stamped on it?”
“Caesar's,” they replied.
“Well, then,” Jesus said, “give to Caesar what belongs to Caesar, and give to God what belongs to God.”
With the advent of easily accessible, anonymous, p2p financial transactions, tax revenues will dwindle; and the drying up of tax remittances will likely put great stress on the taxation State.
The vast majority of US citizens don't even bother to vote any more: if even a fifth of no-voters were included in the tally, 'Nobody' would have been elected as president of the US in 2016. Given the option to not give upwards of 40% of their hard-earned incomes to the IRS, do you think citizens will voluntarily pay their taxes? Honestly, would you? Tax evasion, via murky offshore, shell companies, is already rampant among the rich and the criminal; what will be the likely effect on this trend of easy-to-use, mobile, cryptocurrency apps that bring tax-evasion to the fingertips of the masses?
End of income tax
Owing to its regular, hefty, and ostentatious burden upon the citizenry, income tax could likely be the first taxation-stream to dry up. The difficulty in calculating and reporting capital gains taxes on every single crypto-transaction—the currently de facto (ridiculous) requirement by most taxation-States—certainly does not make compliance easy for the average tax-payer. And consequences for any missteps are high, with the IRS recently threatening $250,000 fines and 5 years in jail for 'mistakes' made on crypto-returns.
For the 2017 tax year, only 200 US tax payers out of 500,000 (0.04%) reported bitcoin gains. Already, this is an estimated loss of $25 billion in tax revenue in the US (20% of estimated US bitcoin holdings in 2017) alone. It seems that vast majority would sooner take their chances hiding amongst the overwhelming majority of non-remitters rather than voluntarily flagging themselves as crypto-holders and hoping their tedious calculations of capital gains is perfect. Some will continue to voluntarily remit, but most will not.
And the question remains whether or not penalties for non-payment are even remotely enforceable: for example, how do tax collectors plan on ascertaining which individuals actually retain ownership of the private keys associated with particular Bitcoin UTXOs, i.e. did an individual really sell their bitcoin to another individual, or simply transfer it to another of their own addresses? As yet, there has been zero precedent set for how exactly crypto-assets are to be legally tied to individuals (please correct me if I'm wrong) — though not for lack of initiatives attempting to link crypto-assets to individuals.
Sales tax hikes
In an attempt to stem the bleeding, the State will likely move to dramatically increase its tariffs on point-of-sale and property taxes. These forms of taxation may be harder to evade, as they are more directly tied to time, person, business, and location than is income tax. But as the weight of sales and property taxes is bloated upwards of the 50% mark—in an attempt to re-coop lost income tax—no doubt, various circumventions will crop up and stay one step ahead of State confiscations. Given the option of saving >50% on the purchase of a product anonymously through an app on your phone rather than using your credit card, which payment method would you prefer?
Demise of the taxation-State
If governments ramp up money printing, to even larger extents than present, in an attempt to make up the deficit, it will only serve to hasten the hyperinflation of their State-sanctioned currencies—which will in turn accelerate the transition of the masses into cryptocurrencies: in turn accelerating the trend of tax evasion.
Currently, for the privilege of using the State currency, citizens are obligated to pay taxes to the State, in the State currency. But what of persons whom do not use the State-sanctioned currency? What of persons dealing only in globally free and open cryptocurrencies? Should the State accept payment in the form of these cryptocurrencies, or must its citizens go through the arbitrary process of converting tax monies into the State currency before remitting? Does the State even have the right to demand taxes be paid on non-State issued and sanctioned currencies?
Privatize all the things
But how would society even function without taxation-State sponsored governments? How would infrastructure get built and be maintained? How would law and order be maintained? Perhaps the most promising alternatives to the taxation-State Democracy, and late-stage capitalism is New Libertarianism. New Libertarianism in short proposes the privatization of everything including law-making, law-enforcement, voting, public works, etc. and the building of a truly free-market society: the Agora.
The police- and military-State are what currently give the taxation-State the 'right' to demand taxes from its citizenry, via threat and act of violence — a Nation State is simply defined as the entity that has a monopoly on violence within a region. The police and military institutions would not be exempt from the sweeping wave of privatization. Likely, national armies and regional police forces would fragment into many independent coalitions that would demand what tribute they might collect within their regions of control.
Hopefully, such regional armies would function as forces for peace keeping, security, and protection from the growth and formation of other rogue armies. The stability of such an equilibrium of global peaceful relations should be greatly aided by the Agora, because majority-vote is usually against war. Armies promoting peace would be readily and voluntarily funded, while those inciting violence and destruction would have a much harder time seizing crypto-assets than they enjoy at present seizing stores of cash and precious metals to fund their war mongering. The secret, secure, and decentralized nature of Bitcoin-like assets should also serve greatly to promote and maintain a peaceful equilibrium amongst regions.
Render unto Caesar
Am I here advising the illegal act of tax evasion? Certainly not: "render unto Caesar what is Caesar's." But cryptocurrency does not belong to any State, government, authority, nor institution. Crypto is by the people, for the people: what right does anyone have to confiscate your Bitcoin? The only right will be that asserted by threat or act of violence; however, key characteristics of cryptocurrency—namely the ease with which it may be held secretly and securely by any individual with access to a mobile phone and Internet connection—harden it against violent confiscation. Correctly implemented, these characteristics of cryptocurrencies should make violent confiscation much harder to practice than with all other conceived stores of value.
Bitcoin, the mother of all crypto, is a child of the cypherpunks, of the open source movement, of the Internet and has no central authority figures to demand tribute be paid them. When Bitcoin was but a babe, it was abandoned by its own father, Satoshi Nakamoto, who alone may have once claimed such entitlement.