Announcement

Collapse
No announcement yet.

iTulip endorses the Fair Treatment for Precious Metals Investors Act

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • iTulip endorses the Fair Treatment for Precious Metals Investors Act

    iTulip endorses the Fair Treatment for Precious Metals Investors Act


    The Fair Treatment for Precious Metals Investors Act is bill to amend the Internal Revenue Code of 1986 to treat gold, silver, platinum, and palladium, in either coin or bar form, in the same manner as equities and mutual funds for purposes of the maximum capital gains rate for individuals. iTulip endorses the bill and asks readers to contact their elected representatives immediately to solicit their support for the bill.

    When the organizers of the Hard Assets Conference invited me to give the keynote speech to a group of several hundred commodity, energy, and precious metals investors and mining company executives in Las Vegas in the summer of 2007, they asked me to make it controversial, and so I did.

    The audience alternately groaned and gawked for 30 minutes as I clicked from one slide to the next and told them:
    • Hard Assets producers and consumers as a group lacks the will to press elected officials to push through legislation to create the types of tax breaks and subsidies that the real estate industry has managed to engineer over decades that culminated in the housing bubble that started in 2002.
    • As with all subsidies, the market distortion produced in the housing market by these, and neglect of regulations, will end in tears. The housing bubble collapse will crash the financial system and economy.
    • The crisis that will not be good for the interests of the hard asset group, at least temporarily. Commodity and precious metals prices will briefly crash.
    • However, after reflation by the Fed with rate cuts and liquidity and Congress via fiscal stimulus, commodity and precious metals will rise to new highs as the dollar weakens and housing prices continue to fall.

    This collection of far-fetched claims produced a sea of puzzled faces. The presentation is available here.

    Cognitive Dissonance

    At the time, and up until mid-2008, the meme driving commodity and precious metals prices was rising BRIC demand. Since the early 2000s the optimistic vision of China and India buying all the nickel, copper, oil, and other commodities in sight in perpetuity brought new investors to the hard asset class, and the group before me was a collection of true believers. Investment in hard assets was no longer the domain of doom prophesiers who dominated the precious metals markets in particular for decades. In 2007 a pessimistic view that an unsound structure of international central banking and finance was driving currency values down and their natural hedge, hard assets, up, was unwelcome.

    As a further affront to the group, my heretical use of the words “real estate” and “subsidy” in the same sentence elicited blank stares. I knew what they were thinking. I'd seen that stare before. It meant that they felt conflicted as they processed information: “Is he saying that my home price is partly due government tax and loan subsidies?” The news that all homeowners are the beneficiaries of decades of government largess, whether believers in limited government or not, was not greeted enthusiastically in any speech I gave, and I’d estimate that at least 80% of that audience were both home owners and proponents of small government as I am.

    Finally, the audience members bridled at my idea that they need to take a page from the real estate lobbying playbook and get to work pushing precious metals tax legislation to, if nothing else, remove the punitive designation of precious metals as “collectibles” to be taxed at the capital gains rate of 28% no matter how long they are held.

    “I’m not asking for the kind of give-away that the real estate boys have bought in Washington over the past 60 years. If we had a Goldie Mae that backed loans to buy gold, and a gold loan interest rate deduction, and a provision to allow a married couple to pay zero capital taxes on up to $500,000 in realized gains on gold held for at least two years, well, what do you think might happen? Think the price of gold might go up? Sure, but reaching for that level of preferential tax treatment and credit market engagement to inflate precious metals prices like stocks or houses is unrealistic,” I told them. "We need to aim for the more modest goal of fairness, to get precious metals taxed the same as stocks and bonds." At this point the audience is visibly squirming. No one had ever talked to them this way.

    “Is it too much to ask,” I goaded the group, “for our government to levy the same tax on precious metals as on stocks and bonds when that government’s economic policies are guaranteed to depreciate our currency, lower the nominal and real value of stocks and bonds, and force savers out of tax-preferred assets and into punitively taxed precious metals merely to preserve wealth? Taxing stocks and bonds at 15% and precious metals at 28% while pursuing policies that push down the price of the former and raise the price of the latter is just plain sick.”

    Results

    Two years after my Las Vegas keynote, The Fair Treatment for Precious Metals Investors Act was re-introduced in June 2009 by Idaho Republican Sen. Michael Crapo and cosponsored and two Nevada representatives, one Republican, John Ensign, and the other Democrat, Harry Reid, plus Idaho Republican James Risch.

    The bill reverses Internal Revenue Code changes made in 1986 to treat precious metals as “collectibles” to be taxed at the maximum capital gains rate of 35% rather than as rarities to be taxed as other assets are. 1986 was, not coincidentally, the year that the Tax Reform Act was passed that increased incentives favoring investment in owner-occupied housing relative to rental housing by increasing the Home Mortgage Interest Deduction. You could say that higher taxes on precious metals were paid for with lower taxes on residential real estate.

    Second Try


    This is Reid’s and Ensign’s second attempt to see that precious metals receive fair treatment in the tax code. The bill failed after the first attempt in 2001, the year iTulip readers purchased gold.

    This time, let’s not miss our the opportunity to help Reid, Crapo, Ensign, and Risch get this bill passed. With precious metals prices now five times the price they were at when this bill was first introduced, the stakes are high for precious metals owners.

    For every $10,000 worth of gold and silver you purchased split 50/50 between the two metals and sold in 2010, the difference in taxes between a 15% tax rate and a 28% tax rate is $394 if you bought in 2008, $1,030 if you bought in 2006, $3,308 if bought in 2003, and $4,322 if you bought in 2001*.



    Is that worth fighting for?

    As precious metals investors, it's our turn to act. Send the following email to the men and women in congress who represent you.

    You can make a difference. Do it today.
    Dear (Congressman's name),

    I am a voter residing in (your state and city/town name) where I work (state your profession and background).

    I am writing to request that you support the bipartisan Fair Treatment for Precious Metals Investors Act that amends the Internal Revenue Code of 1986 to treat gold, silver, platinum, and palladium, in either coin or bar form, in the same manner as equities and mutual funds for purposes of the maximum capital gains rate for individuals.

    There is no justification for the unequal tax treatment of precious metals and good reason to level the playing field.

    In the present economic environment American investors need to be able to purchase precious metals without being subject to punitive taxes. Precious metals have for more than a decade effectively hedged investors' losses in equities and mutual funds caused by steady currency depreciation. The unequal and unfair tax treatment of this defensive asset class, while asset classes such as housing continue to receive special tax incentives and outright government subsidies, contributes to the growing sense of the American electorate that tax policy is set by special interests and not by elected representatives in the interests of the American people.

    This bi-partisan bill is a litmus test of independence from special interests, especially financial sector and real estate interests. I intend to vote this November for senators and representatives who support it. Please vote "yes" for the Fair Treatment for Precious Metals Investors Act (S. 1367) and restore fairness to investment assets taxation.

    Signed,

    (Your name)
    (Your email address)
    (Your mailing address)
    Contact your Senator

    Contact your Representative


    Read about this legislation and its progress

    * Assumes the Bush take cuts remain in place, else long-term capital gains taxes rise to 20% from 15% and the benefit of this legislation is diminished.
    22
    10 times
    18.18%
    4
    100 times
    4.55%
    1
    1000 times
    22.73%
    5
    Don't know
    54.55%
    12

    The poll is expired.

    Last edited by FRED; 10-29-10, 08:59 AM.

  • #2
    Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

    correct "putative" to "punitive."

    iirc, there was a thread in which someone quoted volcker as saying "gold is the enemy." so it's one thing for folks from mining states to support it, it's another to get the votes from those whose states and districts contain banks.

    Comment


    • #3
      Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

      Can someone tell me the position that might apply if the ownership is by a corporation owned by a foreigner?

      Comment


      • #4
        Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

        My Congressman will be at a small local gathering this evening, he is up for re-election next week. I plan on attending and
        delivering the message to him personally if I am given a chance to speak to him directly.

        A quick search shows that when previously introduced this bill languished in the Senate and House Committees on Finance.
        The persons you really should try and speak directly to are the Finance Chairs. House Finance Chairman Barney Frank who is up for re-election and is bound to be campaigning around his district up till Tuesday. I don't know where he will be but it may be possible to attend
        one of his events in and around Boston over the next few days leading up to the election.

        Senate Finance Chairman Max Baucus is not up re-election, so write him a letter or pay a visit to Helena Montana when he is off. You might
        find him in some watering hole, but for the most part he spends most of his time in and around Washington DC.

        A little personal one on one lobbying can go along way, if you can get face time with your Congressman or Senator.

        Comment


        • #5
          Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

          Originally posted by seanm123 View Post
          My Congressman will be at a small local gathering this evening, he is up for re-election next week. I plan on attending and
          delivering the message to him personally if I am given a chance to speak to him directly.

          A quick search shows that when previously introduced this bill languished in the Senate and House Committees on Finance.
          The persons you really should try and speak directly to are the Finance Chairs. House Finance Chairman Barney Frank who is up for re-election and is bound to be campaigning around his district up till Tuesday. I don't know where he will be but it may be possible to attend
          one of his events in and around Boston over the next few days leading up to the election.

          Senate Finance Chairman Max Baucus is not up re-election, so write him a letter or pay a visit to Helena Montana when he is off. You might
          find him in some watering hole, but for the most part he spends most of his time in and around Washington DC.

          A little personal one on one lobbying can go along way, if you can get face time with your Congressman or Senator.
          can anyone here explain to me why 9347 gold bug sites didn't notice & don't promote this legislation? it's languished in the laps of our congresscritters for over 1 yr & not a peep from the usual suspects.

          too busy chasing gold & silver manipulators.

          what about losing $6600 bucks out of every 10K to anti-gold & silver taxes invested in 2001 vs same gains on stocks & mutual funds?! talk about manipulation.

          how come there's no gold anti-tax action committee? where's mish? jesse? sinclair? on this?

          Comment


          • #6
            Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

            So far the legislation is being tracked by:

            http://coinlegislation.com/fair-trea...investors-act/
            http://www.coinnews.net/coin-legisla...investors-act/
            http://www.numismaticnews.net/articl...old_investors/
            http://goldandsilverblog.com/preciou...ent-tax-rates/
            Ed.

            Comment


            • #7
              Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

              see jesse is running a link to this story...

              Fair Treatment For Metals Investors Act- iTulip

              kudos to jesse! a 66% 43% tax by the irs on my principle investment in gold rams me infinitely harder than intraday manipulations in gold/silver that net out to nuthin.
              Last edited by metalman; 10-29-10, 09:12 AM. Reason: keeping up with fred's edits...

              Comment


              • #8
                Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                In the meantime, surely there is no reason why anyone cannot exchange their Gold as a bulk commodity for Gold coins and then, instead of selling them, simply remove them from storage and use them as currency? What would the tax implications be if, instead of selling the Gold for profit, producing a capital gain, you use them to purchase whatever you need at the time?

                Comment


                • #9
                  Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                  Originally posted by metalman
                  wow. this thread is dead. guess no one but me & sean cares if pm cap gains taxes get cut in half. wtf?

                  ok, i get it.

                  off we go to zerohedge to whine & wring our hands.
                  The problem may be that I'm not seeing it on the iTulip main page. I found it only because Jesse linked to it. Is it posted improperly somehow or is it me?

                  And what's with the ZeroHedge hate speak? ZH is also an awesome source of infomation.
                  "...the western financial system has already failed. The failure has just not yet been realized, while the system remains confident that it is still alive." Jesse

                  Comment


                  • #10
                    Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                    The max long term rate on collectibles, which includes art, jewelry, gold silver and numismatic and bullion coins, is currently 28%, not 35%.

                    I believe the collectibles rate will stay at 28% even when (if) the Bush tax rates expire, and max ordinary income rate goes from 35% to 39.5%. The ordinary income rate applies to all short term capital gains. When Bush rates expire, LT cap gains rate for non-collectibles like shares will go from 15% back up to the clinton rate of 20%. I think the Obama proposal is the same in this regard.

                    So if the bill passes, LT gold sales will be taxed at 20% instead of 28%, so the savings are not as dramatic as in the original post. Nevertheless, I'll definitely be writing my congressmen about this, as I am all for lower taxes.

                    * You can get the LT rate treatment right now if you hold GTU or CEF - worth remembering these are the soundest paper PMs...
                    My educational website is linked below.

                    http://www.paleonu.com/

                    Comment


                    • #11
                      Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                      Originally posted by metalman
                      wow. this thread is dead. guess no one but me & sean cares if pm cap gains taxes get cut in half. wtf?
                      Most people I know who own PMs have no plans to sell any time soon, if ever -- and those who do typically sell for cash, and pay no tax on the gain (if any). I know more than one person who has told me that there is "no way in hell" they will tell the gov that they used to own PMs, as they felt that would make them a mark for possible future confiscation efforts (those who used to own them are more likely to own them again in the future).

                      I don't agree with either view, but this line of thinking may well be a part of why more people aren't excited about a possible improvement in the tax law.

                      Comment


                      • #12
                        Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                        First, I applaud iTulip for supporting this legislation and promoting awareness. Clearly the thing to do, and probably the best avenue given what's politically possible.

                        But I can't help but observe that the title of the legislation is absurd. Surely it would be better named the Slightly less unfair treatment of Precious Metals Investors Act.

                        I mean really, stop and think about it. When you buy PM's you are foregoing ANY income whatsoever. And when you measure things in purchasing power, aside from trend effects, the buyer of PMs is writing off any potential for gains in purchasing power. Over the long haul, PMs are a store of value and nothing else. Yes, I do expect appreciation in real terms in coming years, but that's only because the world is going through a fiat crisis. In other times (like the '80s), holders of gold experienced losses in terms of purchasing power. Over the long haul, it all works out to an asset which, by its very definition, never produces gains in real terms. When it produces gains in nominal terms, it's only because of the reckless actions of the very same governments that seek to tax those gains!

                        Can you imagine if holders of cash in non-interest bearing accounts were charged a tax on their cash that experienced zero change in balance, under the rationale that because of deflation, the cash was somehow now worth more? Of course not! But when you stop and think about it, that would actually make sense. Someone who held cash through deflation ends up with more purchasing power, and one could frame an argument for why they should be taxed on that gain in real terms.

                        But when you buy PMs, you are basically making a bet that the government will breach its duty under the law to preserve the purchasing power of the dollar. When your gold is suddenly worth twice as many dollars, you probably didn't "make anything" in the sense of additional purchasing power. All you did was to preserve your previous purchasing power against devaluation as a result of the government breaking its own laws. And you should be taxed for that???

                        I don't have any fantasy about exempting PMs from capital gains tax entirely ever being politically viable. But I do challenge anyone here to make a persuasive argument for why capital gains on PMs should be taxed at all! All you are doing when you buy PMs is to exchange your USDs for real money, and you have to accept the bad news that instead of being paid interest on your balance, you'll have to pay storage fees instead. The value of your real money (PMs) never goes up or down - it only maintains its value as reckless government policy devalues the fiat currency of the land.

                        This brings to mind a really important discussion topic I haven't seen covered here on iTulip. Consider EJ's predictions of 20 - 40% annual inflation, and thus enormous devaluation of the USD in coming years, resulting in a price of $2500 - $5000 per oz for gold. In the ignorant reaches of the gold bug universe, people who hear such predictions believe they are going to make a killing. Here at iTulip where investors are more informed, they understand that they're not going to make a 5x profit in terms of purchasing power. Rather, they're going to keep their purchasing power pretty much as it was, as the USD loses 80% of its purchasing power. But guess what? You still get taxed on that 500% "gain", even when there really was no gain. And after paying the tax, the real return on (unleveraged) buying of gold is probably actually negative. If you look forward to the challenges the nation will face and factor in a doubling of all capital gains tax rates (gotta "tax the rich", don'cha know), you're looking at a significantly negative after-tax real return.

                        Yes, I am well aware of the fact that gold investors who get in early will benefit from the mania effect that is sure to eventually take hold, and that those who also time their exit correctly will see a genuine gain in terms of purchasing power from their bullion investment. But for every investor who has that experience, another will get in too late and have the opposite experience of missing the big momentum move and seeing a negative real return in terms of purchasing power. Averaged over the long term for all investors, gold never produces a real return. All it does is store value at zero real return in exchange for insulation from the effect of depreciating fiat currency. As soon as you tax the gains in nominal terms, you're effectively taxing the average investor for a gain he never really realized.

                        xPat
                        Last edited by xPat; 10-29-10, 07:18 AM.

                        Comment


                        • #13
                          Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                          I did my part and contacted my congress critters (I wrote my own letter, no offense to the gifted author above)

                          A question about this tax: How do we establish the basis for calculating the gain?
                          My physical is all coins, bought with cash, with no records in place of the purchase price.
                          Who gets to say what I paid for it when I sell?

                          Comment


                          • #14
                            Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                            Originally posted by thriftyandboringinohio View Post
                            I did my part and contacted my congress critters (I wrote my own letter, no offense to the gifted author above)

                            A question about this tax: How do we establish the basis for calculating the gain?
                            My physical is all coins, bought with cash, with no records in place of the purchase price.
                            Who gets to say what I paid for it when I sell?
                            The basis is whatever you paid for the coins. For now, it works on the honor system. The IRS trusts you to report your basis accurately, just as you have to report your basis on stock and other asset sales on schedule D when you file your 1040. The IRS has no record of stock basis either, but that will change starting in 2011 or 2012, IIRC. At that point, your broker will start reporting to the IRS the basis on securities you have sold.....

                            Whether the infamous "1099 for every transaction" law sticks (part of the health care abomination), and what effect that will have remains to be seen.
                            My educational website is linked below.

                            http://www.paleonu.com/

                            Comment


                            • #15
                              Re: iTulip endorses the Fair Treatment for Precious Metals Investors Act

                              Originally posted by rogermexico View Post
                              The basis is whatever you paid for the coins. For now, it works on the honor system. The IRS trusts you to report your basis accurately, just as you have to report your basis on stock and other asset sales on schedule D when you file your 1040. The IRS has no record of stock basis either, but that will change starting in 2011 or 2012, IIRC. At that point, your broker will start reporting to the IRS the basis on securities you have sold.....

                              Whether the infamous "1099 for every transaction" law sticks (part of the health care abomination), and what effect that will have remains to be seen.
                              Thanks, that's what I'd hoped the answer was.
                              A form 1099 won't establish a purchase price for any physical we hold today.

                              Comment

                              Working...
                              X