Steem has a big stumbling block potentially standing in the way of scaling up to millions of users (at least in the West where the people pay income taxes), because users of social networks aren’t going to want to hassle with taxation just to use a social network. If the tax authorities begin publicizing example cases of where they have jailed (c.f. also) or fined people for not reporting their crypto income, that could potentially have a chilling effect on adoption of Steem. Most of us are not yet paying our taxes.

Prior analysis concluded (c.f. also) that Steem’s rewards are taxable as income, at least in the USA and probably in most nations. Every time we receive some tokens in our wallet, we have taxable income! This creates a tax reporting nightmare as explained by Coindesk in A Hobbyist Crypto Trader's Life in Tax Hell. The Steem FAQ states that taxation is each user’s problem.

_{Note Steem also has an insoluble problem with it’s rewards design and distribution being corrupted. I suggest all readers inform themselves about this issue. But that is not the focus of this blog.}

Taxation destroys both rich and poor

My prior blog included a video which explains how the politics of ignorant egalitarianism causes people to think incorrectly about the benefits and problems with taxation.

What the poor don’t realize is that when they vote for more taxation of others such as the “rich”, what they actually do is steal from the productive upper middle class thus destroying what makes society prosperous, and those taxes ends up in the pockets of the most ruthless powerful tycoons who control the power vacuum of democracy. The people get debt and debilitating (i.e. moral hazard inducing) social welfare which collapses the economy eventually. With this control the tycoons (who will never pay taxes because they will always control the government from behind the curtain) fools us into war and divide-and-conquer us and incite us to fight against each other whilst they surreptitiously walk away with all the profits from our works. Really folks, you need to read my linked blogs and educate yourself about what really is causing the problems for humanity and stop falling into their trap of the two-headed beast consisting of a false left-versus-right political divide.

The Deceiver

_{How ironic that the analogous surreptitious theft is happening now with Steem’s corrupt reward system, but most of you do not even realize it.}

Taxation is a winner-take-all paradigm

Every time we spend our money or tokens (or vote to reward tokens to others) someone receives an income. Thus every time some money moves then the government taxes it as income, unless it is being invested or loaned. That is very regressive because if for example we start with a money supply of 100 tokens, then if the tax rate is 25% then after the money has changed hands 5 times then the government will have received 76 tokens or 76% of the money supply in form of taxation!

(a=0.25) + (b=(0.25 × (1 - a))) + (c=(0.25 × (1 - a - b))) + (d=(0.25 × (1 - a - b - c))) + (e=(0.25 × (1 - a- b - c - d))) = 0.763

b = 0.1875, c = 0.140625, d = 0.10546875, e = 0.079101562

WTF!!?? So the bastards who control democracy from behind the curtain end up with eventually 99% of the money supply while fooling all of us getting us to fight and bicker with each other whilst they’re robbing us blind from behind the curtain that we’re too ignorant to see. Eliminating the centralized control over inflation of the money supply won’t solve our problem if we don’t also eliminate taxation.

Can you understand why they think we are just sheep or cows for harvesting because not all of you are aware.

Taxes are entirely unnecessary

The EU and Federal Reserve central banks have been creating money out-of-thin-air to buy the debt of the governments thus funding the spending of governments. But instead of only creating money out-of-thin-air, they loan this money to our governments creating a huge interest payment that has to be paid back to the central banks. Instead the treasury departments of the governments could create the money out-of-thin-air the they need for spending, instead of issuing bonds and indebting the government.

The indebtedness of governments is sham that is foisted on the people by the tycoons behind the curtain who surreptitiously control the central banks and the government. It is game they created to fool us.

The government does not need to collect taxes. The government does not need to issue debt and go into debt. The government has the authority to create the money it needs for spending. We the people give the government all the authority it needs.

Taxing tokens as property is blasphemy

Those nations who tax tokens as property rather than classifying tokens a currencies should be warned that they’re going to lose this war they’re waging against the people of the world.

It’s ridiculous that they tax the money received as income whilst also forcing us to track every expenditure and pay capital gains tax on the appreciation (i.e. increase) in the exchange value of the tokens. Imagine if we also had to track the changing foreign exchange value of the dollar, peso, or euro every time we spent those currencies. Crypto tokens are global and have their own independent value (i.e. unit-of-account) relative to the global economy, as dollars have relative to the U.S.A. economy. Crypto tokens subsume and supersede the jurisdiction and economy of nations!

So the warning is very simple. Those nations who tax tokens as property will find that the global economy leaves their jurisdiction and moves to jurisdictions that do not take tokens as property. Somebody should send a copy of this blog to the IRS and tell them to wake the fuck up before they destroy the U.S.A.. even more than they already have.

Improving the tax problem of Steem

There is a solution to this problem achievable with a different design for the reward system, so that nations will not be able to tax our token rewards as income. I will detail this in a future blog.