What would make it more difficult? The fact that banks can report on your spending if the government asks? That problem exists with cash too and maybe we'd see more under-the-table stuff with bitcoin, but I'd guess most people/businesses would still pay taxes. If taxes are still levied with the threat of imprisonment, most people will comply.

If there's a lot more under-the-table bitcoin stuff than there is with cash despite the threat of prison, governments will be forced to make their taxes more fair and appealing to pay or harder to evade. IMO we likely end up with a simpler tax system that's harder to evade like a sales-tax-only tax system or a property-tax-only tax system rather than our current tax-everything-everywhere system.

It gets a lot more complicated though when you consider that inflation is a hidden tax that will no longer exist. It's what allows us to have nearly 40 trillion dollars of federal debt and keep heaping on more. It's what allows us to finance forever wars and bail out banks that made bad bets. The world will have to change a lot. I think it'll be a change for the better - no hidden taxes, governments that have to operate without stealing from us all by printing money, governments that have to justify how they're spending their money.

In general, I think governments would stay the same for the most part - they'd just be way more accountable. IMO governments exist as the result of the network effects of violence; that is, the capacity for violence tends to concentrate and people want to pay to belong to the group with the largest capacity for violence, the group that it's safest to belong to.

I think a lot more government services will be more pay-as-you-go and pay-for-what-you-get in such a future. I suspect federal governments will mostly exist as a minarchy - nation defense and as a constitutional backstop, then a plurality of state and municipal government types, competing for citizens and sats.

Personally, I'm so infatuated with bitcoin in this way, bitcoin and related technologies as machines of change, that I have little interest in political hypotheticals anymore. You don't have debate change. You can just build something that incentivizes it.

Yep, technology is about making machines for change. Sometimes the change is relatively frivolous, but sometimes they change just about everything.

Electricity, computers, the internet, cryptography, bitcoin.