Gov't HORROR: IRS to begin tracking gold and silver coin purchases
Friday, July 09, 2010
By David Galland in Casey's Daily Dispatch:In past editions of this service, I’ve advocated tuning your personal radar to pick up early indications that the government is taking an active interest in gold. Especially when that interest revolves around terrorists or tax evaders, two popular bogeymen these days.It was, therefore, with more than a little concern that I read an article in our Ed Steer’s Gold & Silver Daily service yesterday on an item slid into the legislation authorizing the government takeover of health care. Here’s a snip from Ed’s letter…The good folks over at numismaster.com report that, starting on January 1st in 2012, U.S. federal law will require coin and bullion dealers to report to the Internal Revenue Service all gold and silver coin purchases and sales greater than $600. The report is written by David L. Ganz and is headlined "$600 Sale? Get Ready for Tax Form." Apparently this little jewel was an add-on to the national health care legislation. But there’s a new bill being introduced by Rep. Dan Lungren (H.R. 5141), which has gathered over 80 members of Congress as co-sponsors to repeal this section... so we'll see how that turns out. The link to the story is here.According to the author of the article Ed references, the rationale for the new regulations is that the taxocrats believe that people conducting off-book trading in precious metals are chiseling them out of $17 billion in lost revenue annually. The net result, however, will be that the government will soon know who’s got the gold. Can’t a person just keep their gold purchases under $600? With the price of gold heading higher, that will increasingly require buying smaller-denomination bullion coins – which typically carry a higher premium. More importantly, a large body of case law gives the government license to charge people for “structuring” – i.e., taking active measures to get around a particular law. Thus, two $500 gold purchases could be construed as active evasion and carry additional penalties. Looking to get a better handle on this matter, our own Jeff Clark of Casey’s Gold & Resource Repor contacted Andy Schectman of the coin dealer Miles Franklin to get his quick take.
Here it is… It would be a logistical nightmare. But it’s not just gold – it’s any and all companies that would be required to file a 1099 for anything over $600. A lot of people feel it won’t pass, and I have a hard time believing it will, too. It would really kill the small businessman; they’d spend their entire time filling out paperwork for the government. Hopefully it won’t pass. Think about this: it might be a precursor to a VAT tax, so they can figure out where the money is coming from. Everyone should contact their congressman and encourage them to not let this pass.Continuing our mini-investigation, we reached out to another well-informed source who confirmed that the new regs would apply to all businesses. For example, under the new regime a plumber who does work for you in excess of the $600 threshold would be required to file a 1099 report. That being the case, I have to think that Andy’s got it right – the implications of this move transcend just the precious metals. Rather, this is a deliberate step in the direction of implementing a VAT – once the government has everyone reporting essentially every transaction, taking the next step is a snap. So what are the odds that the movement to have this clause repealed will succeed? In my opinion, given the sheer quantity of new regulations embedded in the new health care legislation, most of which is equally wrong-headed, the administration and its allies are certain to take a hard line about making changes. Simply, once the hard shell of the legislation is cracked open, great swaths of the thing will be subject to being picked apart.I ran that opinion by Don Grove, our man in Washington, and he responded by sending across the following…David,This from Tom Coburn this morning:Jun 08 2010Drs. Coburn and Barrasso: Congress Should Repeal and Replace Health Law That Will Harm Seniors and Our Future (WASHINGTON, D.C.) - Physicians and U.S. Senators Tom Coburn (R-OK) and John Barrasso (R-WY) released the following statement today regarding how the new health law will affect Americans. “The American people have rejected this plan because they see it not as a series of milestones, but millstones that will trap seniors and future generations in failing programs before drowning them in debt. No amount of rebate checks will plug Medicare's $38 trillion funding gap. In fact, this new law will undermine Medicare even further by cutting benefits rather than waste, increasing premiums, reducing access and rationing care," Dr. Coburn said. "If the President really wants to cut waste, fraud and abuse in America's healthcare system, he'll cancel his misleading multi-million-dollar PR campaign about the new health care law. Instead of selling a bad law, the White House should focus on actually fixing America's health care system. The fact is that the President's new law cuts Medicare, raises costs, kills jobs and burdens seniors' grandchildren with more debt. We need to repeal this new law and replace it with health care reform that helps all Americans," Dr. Barrasso said. I will admit that I did not search the massive tome that is Obamacare for “gold,” “silver,” or “coins,” and even if I had, I would have missed this provision that impacts such transactions. When the government is this desperate to squeeze money out of citizens, it is already well into diminishing returns. This level of busy work does not come without a crippling price. People will rebel and simply not comply. They can’t. It’s impractical. Many will probably not even know they are not complying. Congressman Steve King (R-IA) introduced legislation, a discharge petition, that will completely repeal Obamacare. The brief text of his bill H.R. 4972 “To repeal the Patient Protection and Affordable Care Act” follows:Effective as of the enactment of the Patient Protection and Affordable Care Act, such Act is repealed, and the provisions of law amended or repealed by such Act are restored or revived as if such Act had not been enacted.King said:“Today the work begins to repeal Obamacare and restore the principles of liberty that made America a great nation. The American people must take their country back by methodically eliminating every vestige of creeping socialism, including socialized medicine. The Pelosi Democrats will pay a price for their overreach. This fight is far from over.”H.R.4972 has 95 cosponsors. Rep. Tom Price (R-GA) is circulating a request that members support King’s discharge petition. 74 representatives have signed Price’s request. If a majority sign, Pelosi will have to bring King’s bill to the floor for an up-or-down vote. 218 signatures are needed to force a vote on the House floor.20 senators have cosponsored Senator Jim DeMint’s S. 3152, the Obamacare repeal bill in the Senate. DeMint’s bill is even shorter: “The Patient Protection and Affordable Care Act, and the amendments made by that Act, are repealed.” DeMint said: “I will continue to work to gain support for full repeal in the Senate, so that together with the efforts in the House, we can save health care freedom for all Americans. ObamaCare is built on a flawed foundation of government-run healthcare and it must be overturned in its entirety.”These efforts for complete repeal would of course encompass Section 9006 of Obamacare imposing the $600 1099s. Meanwhile, Dan Lungren’s (R-CA) HR 5141, the Small Business Paperwork Mandate Elimination Act, has 91 cosponsors and attacks the problem with surgical precision. His bill reads: “Section 9006 of the Patient Protection and Affordable Care Act, and the amendments made thereby, are hereby repealed; and the Internal Revenue Code of 1986 shall be applied as if such section, and amendments, had never been enacted.”I would not write off repeal. As Nancy Pelosi said, “We have to pass the [health care] bill so that you can find out what is in it.” Now it’s passed, and we’re finding out more by the day and don’t like what we find. Regards, DonClearly, the battle is joined – but, unlike Don, I hold out little hope that any of these attempts at repeal will succeed. The Democrats know this is their Maginot Line. If Obamacare unwinds, then their already dismal chances of holding power after the November elections become dark, indeed. Further, the latest polls show that the health care legislation is gaining popularity and is now approaching a majority. As time passes and November approaches, I think the legislation’s popularity will grow as more and more people decide they want something approaching “free” medical, a want that becomes ever more acute as the economy struggles and unemployment continues to rise. In other words, deep political trenches are being dug on the battlefield of nationalized health care – and the Democrats hold the political high ground, making a retreat unlikely. Back on the specific issue of setting the stage for a VAT, even politicians on the Republicrat side of the aisle are talking about the need for a national sales tax. Get ready for it, it’s coming. Meanwhile, if you are a physical-gold investor in these United States and would like to prepare… a few thoughts:
1. Use dips in the gold price to top off your portfolio before the 2012 implementation date.
2. Document your purchases so that, should you ever be dragged in to explain the source of funds you used to buy your gold in a subsequent sale, once the regulation is in place, you have a ready answer.
3. Consider opening a safe deposit box at a reputable Canadian bank, then make occasional gold buying/storage trips up north. I suspect that the availability of Canadian safe deposit boxes will become scarce well before 2012 rolls around.