I lost it in a boating accident.
Rugpull Token is a fictional token designed specifically for legalized tax evasion. As I have stated many times, crypto is programmable smart money not under the control of the government. This implies that smart money will know how to fully evade government control, even if the citizens using crypto are bent to their own government's will (for now). Just like Jurassic Park, crypto finds a way.
A post I wrote the other day detailed how crypto (and more specifically yield/airdrops) might soon be classified as "new property created by taxpayers". Should this happen it will make my White-Elephant Airdrop Attack null and void. Airdrops won't be taxed until they are sold so the infinite liquidity assumption can't be exploited.
However, in programming, life, and especially complex economies, when one variable is changed to fix one area, it ends up usually having massive unintended consequences in another area. For example, we might think it's a good idea to increase minimum wage so that the poor become less poor. However, by manipulating free-market capitalism with this kind of socialism we create another problem: now it costs more the run and operate a small business. Now more small businesses are going bankrupt or can simply no longer maintain profitability, so this created another serious problem. In addition, raising the minimum wage artificially creates incentive to automate systems and eliminate jobs entirely, which could also have extremely negative ramifications.
So while classifying airdrops and yield as "newly created property" is a very smart thing to do and makes a ton of sense, it also makes it even easier to evade taxes altogether (legally) with a token like Rugpull.
Easy, everyone figures out how much profit/income they generated in a certain tax year (let's use 2022), then at the end of the year we throw exactly that much money into Rugpull and Rugpull rugs us. We just lost all that money. Too bad, so sad. How could we have known? Whelp, I guess I don't owe any taxes this year because I lost it all.
Unfortunately this strategy doesn't work very well for income. Technically you have to pay income taxes on income and it wouldn't matter if you got Rugpulled. Income is income. You can't deduct capital gains losses from it.
However, is yield income? Is an airdrop income? Once again we see that if this legal precedence classifies these things as "newly created property" we could argue that it's not income at all. It is unrealized value on property that we created. We don't know the value because the value has not be realized, and thus it can't be income.
The point is that if the government want's to classify crypto as property, we should hold them to it. Not let them have their cake and eat it too, calling it property or income randomly when it suits them in the given moment. This would make Rugpull Token exponentially stronger.
Selling your "newly created property" for Rugpull tokens wouldn't be income related. It would be a capital gains tax, which means once the rugpull happens we could deduct everything from our taxes and claim we made zero dollars that year no matter how much we actually made. It's all right there on chain. Rugpull rugpulled. I lost my money.
But then on January 1st the Rugpull dev has a change of heart. He creates Rugpull2 token and airdrops everyone he stole from their coins back and reboots the liquidity pool (lets say it's on BSC and paired to BNB). So now anyone can dump their Rugpull tokens back out to BNB and exit if they want.
Once again, this 'airdrop' is arguably property and not income. Which is a huge distinction for the reasons mentioned. So imagine just keeping that value in the Rugpull/BNB LP for the entire year. If this new law should set precedence, that means this airdrop is untaxable because you never sold it. It also might be possible to hold it an entire year, cash it out, and then claim it as a long-term capital gain, whose taxes are multiples lower (and sometimes 0%).
This is old data from 2020.
New numbers are a little higher every year.
It would also obviously be possible to simply dump all the Rugpull tokens for BNB on Jan 1st and claim short-term capital gains on the 'airdrop'. Then at the end of the year you just Rugpull2 again and cancel out all the gains you make for the entire year all over again. On Jan 1st you'd receive Rugpull3 tokens.
What on earth would the IRS do if this was a thing? They are very much trapped in a corner. They can't fix this problem so easily, because fixing it would inevitably lead to another attack vector or even worse problems than the original.
They can't tell people they aren't allowed to declare losses on crypto. That would obviously be insane. They can't write a loophole law either that says Rugpull itself is not allowed to do what it does, because it doesn't have to be called Rugpull, and it can be a secret Rugpull that isn't even advertised as such.
Essentially once the IRS caught wind of this exploit and actually tried to fix it (5 years down the line) it would already be way too late. The code is open source, everyone can fork it, so the protocol goes underground and fractures into a hundred different pieces. Now instead of there being one Rugpull token that everyone knowns about, there are a hundred private Rugpull tokens that the IRS will not be able to distinguish if they are real rugpulls or fake ones designed to evade taxes. In turn, it might take them another 5 years to pivot around this new decentralized version of RugPull. That being said, I will describe the obvious solution in my next post. Spoiler alert: it's a 5%-10% unavoidable flat tax.
This is the insanity crypto is about to unleash on the legacy economy. The protocol I've just described was something that I just came up with off the top of my head. Imagine how many financial gymnastics are actually going to happen in the next ten years. It's going to be absolute insanity. Rugpull token will seem like child's play compared to the things that actually happen during the Great Disruption.
At the end of the day it is simply offensive that the government would even attempt to tax crypto. They do not control these networks. They can not control these networks. They have no right to the value stored on these networks. Eventually they will come to realize this and have to pivot accordingly, but until then they will unleash the hounds.
It becomes obvious that people themselves are indentured servants to the government. We know this to be true because we are building value on systems they do not control, yet they expect their cut anyway and they threaten to throw us in a cage if we don't pay the protection money. This is no different than the mafia. If they expect us to pay taxes for communal infrastructure then they have to provide the communal infrastructure. However, we know they can't because the system is broken and the money flows into crony capitalism instead. There's a war coming, a digital war, and it's not going to be pretty because it will bleed into the real world something fierce.
Taxes used to make sense, and now they don't. They used to make sense because we were making that money using resources that the government did control. It makes sense to pay taxes when we're earning money within a system that needs the money to pay for communal infrastructure. However, that is no longer happening. We are building our own game and the government wants to flip the board. Good luck with that, gubment.
I hate to say this, but what we really need are for people to suffer for the greater good. We need people to be brought to court and lose. We need the government to demand the defendants to hand over their crypto and have them say "No", or "I lost it in a boating accident. Sorry." We need these people to go to jail for 5-10 years and then come out as billionaires. Gee, I wonder what they are going to do with all that money once they get out.
I wonder how much incentive they will have to dismantle the very government that threw them in a cage and tortured them and took away all their rights as a person. Revolutionaries will be born, yet again from a taxation dispute (funny how that works out).
Again, the future of the Great Disruption is going to be an insanely ugly event, but I guarantee it will be necessary. These dinosaurs aren't going to just lay down and die. Count on it. They will lash out violently even when they know they've already lost. Simply out of spite. Know your enemy. Know yourself.
