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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:
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.
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.
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 SenatorI 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 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.
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