When one side breaks a contract, the other side is no longer held by it.

Precisely

Pragmatically though, we have to be careful how we act because the contract breakers have more and bigger weapons and control the media and therefore how the majority will interpret everyone's actions.

There are necessary components of government, ones where they need to defend us from people they pissed off, and we have made ourselves defenseless by not requiring the states to maintain an orderly militia. As a result we are all residents of Stockholm.

How do you think we can be careful against an almighty government? One option is to simply obey.

another is run away

To where?

to somewhere a less almighty government that is less dangerous is in charge of the extortion and looting, usually means more corruption but also less energy going into things like monitoring your off the record income

But your quality of life can't be good in such a place.

And when there's money to be made, even a less almighly government will come around tracking your wealth.

if you have enough wealth for a corrupt second/third world government to care about you have other ways to deal with this problem the scenario i'm hypothesizing about is that of the lower-to-middle wealth range also, another aspect of "run away" is "from the city" where the government forces are concentrated and more likely to find you out in the country, people don't tend to be so fond of the tax man, and the police tend to be more focused on securing their fellow citizens from crime or at least, looking like they are

I live in such a place and my quality of life is fantastic.