1. How does Bitcoin make taxation more difficult than paper money? How does it make taxation difficult at all? Even if somehow Bitcoin made it hard for a corrupt government to impose taxes, there are a lot of things the government could do to make Bitcoin hard to use (and they only need to ensure that a large number of people have trouble).
2. Welfare is a reality of life, and has been as far back as we have written records. If you have a better system that might actually work, I'm all ears, but until then we need to deal with the reality of this world.
It is also wrong to assume that transaction fees for Bitcoin will remain low forever. As Bitcoin exchanges and other services start complying with financial regulations, the costs of that compliance will be passed on to their customers. Bitcoin is not useful without exchanges in countries that will not accept Bitcoin for tax payments, which at the moment is all countries.
1. Cash can be easily found and seized, not only by corrupt governments but by organized crime (If you think there is a difference). Bitcoin is decentralized and based on cryptography - you only need to have internet access and private keys to make transactions.
2. Free trade and industrialization have a much better track record of lifting people out of poverty than handouts. Even Bono agrees. Bitcoin helps free trade and wealth aggregation, especially in countries with unstable currencies (Argentina, Zimbabwe)
3. As explained in (1), Bitcoin is much harder to control than a centralized system. There is no need for centralized exchanges, everybody with a smartphone and internet access can trade Bitcoin. The fact that government don't accept taxes in Bitcoin does not imply that it will not help poor people, it implies that Bitcoin will not help the government if it chooses to criminalize virtual currencies.
1. Computers can be easily found, seized, searched, backdoored, confiscated, etc. How is that any different than the situation you face with cash?
2. Free trade does not make welfare unnecessary. The point of welfare is not to lift people out of poverty, it is to ensure that people are not starving to death and that they have a place to live. If everyone had to depend on the free market to make enough money to eat, there would always be people who starve to death -- just like there will always be businesses that go bankrupt. In countries with dysfunctional or non-existence welfare systems people do starve to death when they cannot find enough money to pay for their food.
3. Governments do not need to criminalize Bitcoin to stop it from becoming popular. As long as businesses are required to pay taxes those businesses will need to get the money the government accepts tax payments in. Either those businesses will demand the money up front, or they will accept Bitcoin payments and then run to the nearest exchange when the tax collectors come. Either way Bitcoin is only going to be used as long as people have access to Bitcoin exchanges.
Of course, it is possible that the government is so corrupt and so dysfunctional that it is unable to even enforce the tax code. Such governments tend to not last long.
2. Welfare is a reality of life, and has been as far back as we have written records. If you have a better system that might actually work, I'm all ears, but until then we need to deal with the reality of this world.
It is also wrong to assume that transaction fees for Bitcoin will remain low forever. As Bitcoin exchanges and other services start complying with financial regulations, the costs of that compliance will be passed on to their customers. Bitcoin is not useful without exchanges in countries that will not accept Bitcoin for tax payments, which at the moment is all countries.