Taxes are a bad user experience. They are mandatory payments to governments for the funding of public services such as education, health and infrastructure. All calculations for tax - including valuations, allowances, payments and deductions - are made using the government’s tax token; US dollars, British pounds and so on. These taxes are often presented as fair or necessary to protect us; that the benefits somehow outweigh the downsides.

It is essential we recognize this is a system under continuous human review, something we will expand on later when we talk about cryptocurrencies.

The impact of taxes may not be immediate or obvious but it exists in all tax systems. The concept of taking from Peter to pay Paul is not new, it works the same way as:

• taking a loan to pay a different loan
• cutting funds from one division to cover another
• reallocating capital to cover funding gaps

If Paul is struggling, Peter must make a sacrifice. Likewise, if Peter has a surplus, Paul will see an opportunity to “borrow”. We can say, when Peter pays Paul, there may be short term benefits. However, when the underlying rationale for borrowing goes unresolved, then these events become frequent and normalized. The act of re-balancing requires coherent reasoning and strong discipline.

It is important to consider that Peter and Paul can be the same person! Peter is a young healthy man paying his taxes, and later in life needing to cash-in on his contributions. In his lifetime, Peter has experienced an ever changing landscape of governments and policies to arrive, for better or worse, at a complete unknown.

Let us consider, for example, a tax to fund a health service. At first glance this may seem harmless and perhaps even charitable. The benefits seem obvious but now the government must attract talent from the private sector and, in doing so, ends up paying more for the same doctors and nurses. The government becomes anti-competitive by demanding their health service be funded before the free market. Now, there are situations where a government funded service is cheaper to run than the free market and this is usually due to over-regulation, insurance mandates and price controls which in turn create highly centralized monopolies. Strict pricing controls invariably leads to distortions elsewhere such as long waiting lists.

Of course, if we cannot afford essential healthcare then the incentives are strong to take whatever is “free”; our principles become compromised. This is true for all government subsidies, whether it’s unemployment, housing, disability payments and so on.

A government subsidy model creates dependencies and expectations. You now need to check for corruption and fraudulent behavior. If benefits are targeting poverty, for example, then a person’s savings and spending will be scrutinized and limits imposed. Perversely, a claimants incentives must align to meet the definitions of being poor. A reckless lifestyle, blowing income benefits on drugs and prostitutes may fit those rules, keeping you poor and funded. It becomes a glass ceiling that can be broken with a side hustle. Fines or incarceration are no doubt a part of this incentives model, but they do not address the underlying imbalance.

In essence, taxation is a form of insurance and a healthy free market embraces an entire spectrum of scenarios; from the popular to the ultra-niche. If a baseline of insurance is not covered then we must explore all non-coercive voluntary solutions, many of which are modern and tech-driven. When a strict social contract is forced upon individuals, there are always unintended consequences.

Perhaps through the lens of an emergency we may see the limits of a tax machine. During a pandemic, for example, extreme parameters put immense pressure on supply chains and resources, threatening an entire collapse without immediate action. Lockdowns and travel bans are not just practical safety measures, they are trip wires to save the system itself.

When governments panic and suck all the air out of the supply side, the true price of demand cannot be measured. In a free market, even in the midst of panic, the true price is always discovered.

Generally speaking, public services are tethered to total economic output (GDP) whereas the private sector can extend beyond borders and poor incentives. It is sometimes argued, however, that governments provide the tools for increased economic activity while also upholding social values. What may not be immediately obvious though is that the private sector is also optimized to preserve and promote freedom and the sovereign self.

We must also consider, as a public service becomes a dependency, the private sector decays. A new problem emerges; how do you transition back to private services when it was squeezed out and now barely exists? Such problems are exacerbated by organizations like the International Monetary Fund when they place harsh demands on countries seeking loans.

When taxes are approaching zero, when regulations are flexible and we take full control of our money, incentives change. Things like healthcare don’t just become cheaper; personal long-term health takes a higher priority.

Some may argue that poverty leads to increased crime, and this is invariably true to some extent. However, context here is essential as a strong social contract extends into the homes and communities of people, Local communities have parents, elders and active youth leaders that are respected. This is not simply summoned by legal obligations.

Once again, incentives matter. In a bureaucratic system without personal accountability, statistics become the battleground. When targets are not met compared to previous time frames, instead of defunding for poor results, the taxpayer will be told it can be solved with more money. With no real alternatives routes, the taxpayer has just one reluctant path. Goodhart’s Law says “When a measure becomes a target, it ceases to be a good measure.”

One might also argue that fixing extreme poverty has an opportunity cost; to find hidden talent we must search for diamonds in the rough. This is essentially a trade-off; that there is an acceptable or equal amount of wasted resources in search of a brilliant mind. With infinite resources, this is invariably true, you will find diamonds. The main problem here is the extreme difficultly to objectively show the sum of all negatives is less than the positives.

Universal Basic Income (UBI) is a token distributed to everyone to help meet the cost of basic necessities. It functions as baseline inflation and is therefore a form of tax. UBI can only work where a chain of economic activity is tightly controlled. In a free market, people invariably sell their UBI payments into a stronger currency.

Similarly, minimum wages attempt to raise the baseline quality of living but in doing so, limit the number of employees that might have otherwise been hired. It is effectively payroll tax, forcing companies to pay more per unit of labor than the open market. In a truly free market without artificial constraints, low salaries cannot be slavery when individuals have full autonomy and the right to self-determination. To be poor and do nothing is your birthright as much as being free to explore new opportunities.

The free-rider problem essentially says that those not contributing will still end up using what others are paying for. For example, a road is built and someone else is using it without paying. Once again, the costs are socialized. Large heavy trucks creating large potholes with increased maintenance costs are carried by motorbikes and family cars alike. If we argue such damages can be minimized by enforcing limits, then why should we exclude tolls? Tolls impose limits and are self-sustaining. For if we do introduce tolls then we are essentially reproducing the private sector. If the government is running the show then this is called a monopoly. One side might claim they are not seeking profit, only cost recovery, but this choice of words does not change what is actually happening.

These ideas extend to parking meters and congestion charges. No matter the mechanism or intention, we can say monopolies and anti-competitive behavior have negative consequences. But more importantly, we have now learned that whether you are a private business or a government body, all policy intentions carry consequences even if those consequences are not immediately obvious.

To understand the differences between private and public toll roads, we must first focus on intentions, as these are at the heart of all government policies. For example, the taxman will not simply look at a transaction objectively; he will take a subjective view while talking about the intentions of a transaction. By examining intentions, incentives, disincentives, and constraints, we can establish consistency in our arguments.

A private toll road is sometimes framed as greedy or “profit extracting.” Likewise, a public toll road is sometimes framed as a “public good,” such as meeting environmental targets. Let us consider the incentives and intentions for both sides of this argument.

In a truly free market, a private toll road must compete for attention. If charges are too high, traffic routes around it. The incentives here are both profit and customer retention.

In contrast, a public toll road has almost no competition, usually enforced via contractual agreements where potential competitors are barred or the incumbent is financially compensated in lieu if alternatives are introduced. The intention for public tolls is typically environmental targets, where roads are treated as a scarce resource and the price is used to manage human behavior. When you have no competition and a steady income stream subsidizing other public services, the incentives to build alternative routes or to disband the current tolls melt away. Charging less on tolls therefore means less funding for other public services.

The real consequence of pursuing these environmental targets is a lack of true price discovery. This, in turn, impacts small businesses, frontline workers, and low-income consumers alike.

Regardless, whether it’s private or public toll roads, every user must consider their commute as the cost of doing business or staying employed.

Consider the implementation of urban charging schemes, such as London’s congestion and emissions zones. Initially framed as a targeted measure to clear traffic, the underlying Automatic Number Plate Recognition (ANPR) infrastructure rapidly transformed into a permanent surveillance and revenue apparatus. Protected by public authority and free from market discipline, the system expands its scope year after year; extending hours, raising fees and widening its boundaries. Instead of displacing traffic to neighboring streets, the grid steadily creeps outward until there are no edges left to escape to. What began as a benign policy to manage traffic evolved into an insulated and extractive digital checkpoint.

The only question left is, how can the private sector help to improve the environment? Perhaps the same way we regulate the safety of children’s toys at the manufacturing level. Environmental standards belong on the vehicle, not the asphalt.

The first pillar of soft power is layers. Tax systems are typically multi-layered. For example, an end user pays VAT, a business owner pays employee and property taxes, and a supplier pays import / export duties. It doesn’t matter if you’re spending, investing or inheriting, there is an extraction multiplier from your time and effort. Each layer feeding other layers; a complex web of transactions, where the sum of all the layers is greater than 100%. Each layer with compliance costs, fraud fighting, bureaucratic processes and each one of these cause and effect incentives. Tax is like rust; hidden away, eroding over time until there’s nothing left.

The second pillar of soft power is the edges. A tax may seem innocuous or fringe, only affecting a small group of people. This is real soft-power as it is easy to dismiss as “not applicable to me”. But when we apply “fringe” to our multi-layer tax system, things become more latent than benign. Over time, limits are squeezed and the scope is gradually extended, slowly becoming more inclusive.

The third pillar of soft power is erosion. Inflation is a tax on all of us. To prosper, income must surpass the costs of living, which if achieved also pushes people into higher tax brackets. This weight of inflation is carried by the tax payers, not the government. In contrast, inflation makes government debts cheaper.

The fourth pillar of soft power is leverage of dependency. Family and social ties can produce significant friction when it comes to moving to more favorable tax jurisdictions. A more nomadic lifestyle can perhaps work in our favor but governments are increasingly responding with exit taxes, unrealized gains, global minimum tax initiatives and other globally coordinated actions.

The constant tweaking of tax rules combined with significant increases in global data capture and sharing creates hostility and distrust that works against the core principles of capitalism.

Tax itself is not a product. It is simply a coerced proxy for someone’s labor and time measured in the government tax token. Those who work for the government do so voluntary, but those whom pay the government do not.

The classic justification for tax is, “who funds the safety nets that no one can do alone?” This question is classically loaded. It implies fear, that without vital services there would be a vacuum and it implies the free market alone is inefficient to fill that space. Thus, we must simply ask, what are vital services that private individuals are not willing to pay for? For every person unable to pay, the government must subsidize the inefficiency gap.

in the modern age, the Internet, blockchain technology and AI have all flattened, democratized, automated and redefined the availability of information and money. Cooperatives, crowdfunding, DAOs (Decentralized Autonomous Organizations) and smart contracts, This tectonic shift to highly efficient global markets is a blueprint to a future without taxes and coercion.

When a government is a middleman and dependent on others for production, and when they demand to be paid first before the private sector, the outcome is always going to be poor decisions and reckless spending. Incentives are everything; it’s easy to spend other people’s money! And finally, to increase spending, governments must widen their net.