The right way to do it, as far as I can see, is to allow people to report their taxes in whichever form of money they prefer. US Dollars, Euros, gold would all be a valid numeraire to use when reporting your current assets and income to the IRS. And the currency you choose to report your taxes in, is the currency you pay taxes in.
This is just currency competition. Nothing more than that. The ability to freely choose which currency you want to use to measure value.
Whether bitcoin should be considered alongside dollars, yen and silver is an open question. If people are allowed to report their taxes in bitcoins, they can really shoot themselves in the foot. But, personally, I'm generally speaking not in favor of the government preventing people from shooting themselves in the foot.
Say, for example, I choose to report my taxes in bitcoins. I currently hold 10 bitcoins and $1,000. Later, the price of bitcoins in dollars (BTCUSD) falls from 225 to 50. This means that one dollar is now worth 1/50 bitcoin instead of 1/225 bitcoin. I then buy 20 bitcoins using the $1,000, and -- because I report my taxes in bitcoins -- it means I've realized a capital gain of ($1,000×(1/50) - $1,000×(1/225)) = 20 BTC - 4.4444 BTC = 15.5556 BTC, on which I pay capital gains tax. The bitcoin value of my dollars has increased (before 1/225 bitcoin per dollar, now 1/50 bitcoin per dollar), so I have to pay bitcoins to the IRS if I convert dollars into bitcoins, after the bitcoin price falls.
This just shows that bitcoin really isn't ready to be used as proper money. Proper money is a money you would report your taxes in. Bitcoin just isn't stable enough in value yet.
I don't think the complexity would be that great. It's not like different tax rules apply, it's just a different numeraire. Now, remember, people reporting their taxes are not forced to change anything, they are just given the opportunity.
I guess the basic reason I promote currency competition is that I think people have the right no use whichever money they prefer. And in order to not give preference to the national currency, produced by the central bank, it must be possible to report ones taxes in another currency/money.
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The right way to do it, as far as I can see, is to allow people to report their taxes in whichever form of money they prefer. US Dollars, Euros, gold would all be a valid numeraire to use when reporting your current assets and income to the IRS. And the currency you choose to report your taxes in, is the currency you pay taxes in.
This is just currency competition. Nothing more than that. The ability to freely choose which currency you want to use to measure value.
Whether bitcoin should be considered alongside dollars, yen and silver is an open question. If people are allowed to report their taxes in bitcoins, they can really shoot themselves in the foot. But, personally, I'm generally speaking not in favor of the government preventing people from shooting themselves in the foot.
Say, for example, I choose to report my taxes in bitcoins. I currently hold 10 bitcoins and $1,000. Later, the price of bitcoins in dollars (BTCUSD) falls from 225 to 50. This means that one dollar is now worth 1/50 bitcoin instead of 1/225 bitcoin. I then buy 20 bitcoins using the $1,000, and -- because I report my taxes in bitcoins -- it means I've realized a capital gain of ($1,000×(1/50) - $1,000×(1/225)) = 20 BTC - 4.4444 BTC = 15.5556 BTC, on which I pay capital gains tax. The bitcoin value of my dollars has increased (before 1/225 bitcoin per dollar, now 1/50 bitcoin per dollar), so I have to pay bitcoins to the IRS if I convert dollars into bitcoins, after the bitcoin price falls.
This just shows that bitcoin really isn't ready to be used as proper money. Proper money is a money you would report your taxes in. Bitcoin just isn't stable enough in value yet.
Why would the state want to take on the complexity of dealing with the situation you described, just to encourage "currency competition"?
I don't think the complexity would be that great. It's not like different tax rules apply, it's just a different numeraire. Now, remember, people reporting their taxes are not forced to change anything, they are just given the opportunity.
I guess the basic reason I promote currency competition is that I think people have the right no use whichever money they prefer. And in order to not give preference to the national currency, produced by the central bank, it must be possible to report ones taxes in another currency/money.
The purpose is not to create currency competition. The purpose would be to make it easier for citizens to interact with their Government.