It would be natural to assume that gold would be treated like an investment by the government. However, US tax regulations put gold in an entirely different category than almost any other serious investment. While many thoughtful people choose to view gold as an investment, the IRS chooses to view it as a collectible. This gives them the ability to harshly tax gains on gold. Gold is taxed at this higher rate because it makes the IRS uncomfortable, as they are unable to control it like they can other assets. They favor other gold related assets, which shows that they don’t fundamentally distrust the investment value of gold, but only gold in its physical form. Gold also threatens many people in the government because it too clearly demonstrates the weakness of the US dollar. Gold poses many problems for the IRS, so they choose to penalize anyone who wishes to own it.
Capital gains on gold can be taxed at a rate of 28%, which far outpaces regular capital gains. This feels like a disincentive to own gold because it is intentionally designed to be so. The IRS has a harder time keeping track of physical gold than electronic investment assets. The inability to track and control it means that they do not want anyone to own it. Gold is most definitely not primarily used as a collectible, and to suggest so is insulting to the intelligence of US citizens. It was the very basis of our currency for many years and if anything that shows how far the US’s leadership has fallen. Rather than regulating based upon standards of morality or good business practices, the IRS has made this choice to shift reality to be more easily regulatable for them. Dropping the capital gains tax on gold by 8% would mean that millions more Americans would hold gold and millions of Americans would be protected against shocks like the stock market drop of 2008.
Seeing that they claim that gold is a collectible rather than an investment, it is humorous that they more strongly incentivize the ownership of an ETF of that collectible. While gold itself is taxed at 28%, many gold ETFs are only taxed at 20% or lower. The logic doesn’t have to hold up because the IRS knows they can do whatever they want. Gold mining stocks are taxed at the same regular capital gains rate as all other stocks. The relatively better treatment of all non-physical derivatives of gold strengthens the hypothesis that the IRS is only taxing gold so highly because it is hard for them to regulate. It seems like the IRS would rather have people speculate in pursuit of higher returns than be responsible and safely store their money in gold. Once again, it seems as though they are doing this based on their own incentives rather than what is best for American citizens.
The price of gold relative to the dollar lays bare the rapid inflation caused by the US government. The relative increase in desirability of gold plays second fiddle to the story of the dollar’s decline. The IRS has a strong incentive to diminish demand for gold, as higher demand for gold would only paint a starker picture of governmental abuse of currency. Regardless of regulations and IRS tax policies, gold value will remain. The US has less demand for gold as a result of these regulations and other countries will step in. Just as in so many areas, this high tax rate shows another example of the US government’s desire to alter reality and re-create the world in its own image. Sound money will always win out, and even exorbitant tax policies cannot end the reign of gold.
Gold makes the IRS uncomfortable, so they try to penalize people for owning it. The difficulty of tracking physical gold makes it a target for the control-obsessed IRS. Gold derivatives are taxed at lower rates than gold itself, showing even more clearly that the IRS is distrustful of citizens rather than the value of gold. As a part of the government, the IRS is haunted by gold’s constant reminder of the self-imposed devaluation of US currency. Gold is taxed at a higher rate because of a fundamental distrust the IRS holds for Americans, particularly of the variety that desire independence. Gold stands for a robust type of independence that cannot be tolerated by regulatory control freaks, and they will penalize against it until we elect representatives who are willing to reform the IRS.
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