You do have to admit that their worry about the apparent disability of paying taxes on bitcoin is a somewhat valid one. If suddenly a majority of people would no longer pay any taxes then the entity you owed taxes to earlier, in this case the governing body, will do everything in their power to get that tax money back, one of which ways could be to make it highly illegal, causing its value to plummet.
Yes, because making things illegal usually causes their value to plummet
In general, this is not the case. Making things illegal usually reduces supply. In that case it'd be harder to get bitcoin, since there would be fewer or no established exchanges that you could get fiat to. In the same way that you have to go out to sketchy Joe McDealer to get your marijuana, you'd have to buy bitcoins from your geeky neighbor. Marijuana price hasn't exactly gone down, in fact over the last 50 years it's gone up even adjusted for inflation (yes, I am aware that fundamentals of the two items are vastly differert and must be considered.)
Making things illegal doesn't necessarily reduce demand and can sometimes increase. In fact, bizarre regulations and governmental abuse are something that draws more attention to bitcoin as a way to fight against that. I will admit that there is a strong case to be made that bitcoins' potentially reduced utility as a currency if made illegal (fewer businesses) could result in reduced demand leading to a price drop because of legal status, however, I do not believe this would be the case. I would argue that its function as a store of value that in the long term has out-performed all fiat currencies, its role as a method to bypass the corrupt bankster cartels, and other features, are more important.
But if you want to think that using bitcoin to go down to the Ghandi Mart and get cigarettes and petrol is more important than defeating the corrupt central banksters, fine by me. In that case, bitcoin's value would indeed go down if its legal status were threatened.
Not to mention that no taxes would be quite problematic for things such as [...] the agencies responsible for keeping water clear of any dangers
Yes, because they're doing such a good job of that...
Last I checked, water pollution was an epic problem and our government would rather spend money on bombs and guns than cleaning up the rivers and oceans. Giving them more tax money is certainly not the best way to convince them to change their priorities. "If you give a mouse a cookie..."
and the FDA for keeping out food clean,
Yup, just go look at the list of horrifying carcinogenic chemicals in any grocery store item or its packaging, and tell me the FDA is doing a good job. Heck, they can't even keep rotten meat out of baby food or lead out of vinyl children's lunchboxes.
or even the FCC to keep standards going.
Sure, because there hasn't ever been an industry where standards have successfully been met and adhered to without the assistance of a state regulatory body. Yes, there are plenty of cases where state-enforced monopolies are allowed to roam free and "Ghost" regulatory bodies like the FDA are expected to clean up after them. There are also successful cases of industry standards being kept in check by the interests of competition as well as consumer demand and other natural market forces.
Heck, imagine the horrific situation we would be in if all government grants were to suddenly disappear.
Yeah, heck, that'd be
horrific. 
Stefan wrote some books just for you, buddy. Check them out, they're free, text or audio. Also he accepts bitcoin donations
QFT:
These are not people to be argued with, since they will never, ever be swayed by any argument, however compelling. The only way to change these people's minds is to take away their taxpayer-filled feeding troughs.
And that's what bitcoin allows us to do ... we don't have to explain to them how we are doing it, why we are doing it or grovel for their permission to do it ... or why they are wrong to want to keep feeding from their free troughs.
We just do it, like Satoshi.
You see all of this is a true libertarian view point, which I think anyone is entitled to have. Although IMO, it's just not based in rational reality. Saying the FDA is useless because you can site a handful of incidents is just silly. Hundreds of millions of people survive eating, drinking and taking medicine because of the FDA,
every single day. Including you if you live in the states. That's like saying we shouldn't fly in airplanes or drive cars because sometimes they crash.
Basically what I'm starting to realize is that there are people who want to take this world back to the stone age with no infrastructure, no oversight and no regulations. So, if that's the world we were to have, we would have no need for currency. We'd be back to hunters and gathers so it really just seems self defeating to me. What do we need Bitcoin for?
Dealing with the banking system is another animal all together and that to me is where Bitcoin can thrive. Giving the people an option to bypass the banks but in the end, it still must be converted back to fiat, if there aren't enough business to deal strictly in Bitcoins. Which there aren't.
As long as one can't pay for the basic necessities to survive...Rent, utilities, food, healthcare and education...this "let's get rid of government and world currencies" thinking, is going nowhere and it just makes Bitcoin sound like an irrational cult. Even if the dream is to replace all fiat, Bitcoin itself is fiat and is propped up by the very fiat many seem to despise. It wouldn't currently be sitting at 100+ if it wasn't for the worlds currency being pumped into it. I'm not one of those that believes fiat is evil on it's own. It is amoral to me. It is those in charge, the banks, the Fed, etc. that keep the world prisoner to their systems of control. Bypassing these entities via Bitcoin is a winner but only if integrated into regular, modern society. I'm certainly not going back to stone age living, just to prove a point to bankers. We've simply thrown the baby out with the bath water.
And just food for thought...what do we do when the oil runs out and everything goes dark? No computers, no internet access. What happens to Bitcoin then?
