Wednesday, 18 October 2017

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Tax Day targets currency

April 15, 2015
in Blog

Today is Tax Day. Across the country, individuals are scrambling to file their tax returns, enjoying discounts from various restaurant chains and (if they’re libertarians) posting lengthy Facebook statuses that outline why taxation is theft.

While it’s easy to argue against our current tax code, claiming that there should be no taxation at any level is certainly a hard sell. For better or for worse, some institutions are essential and taxes serve to fund and maintain them- albeit not always efficiently.

Within any tax system, however, there is one thing that should not be taxed: currency. Unfortunately for us, gold, silver and crypto-currencies (like bitcoin) are treated as commodities, not currencies, and taxed accordingly.

Moving away from legal arguments for why the treatment of gold and silver as commodities is wrong, the fact remains that in our post Bretton Woods world, we need access to an alternative to fiat money that cannot be devalued by irresponsible monetary policies and activists.

If this kind of money exists, or has the potential to exist, then governments should not prevent, or even disincentivize, their citizens from acquiring and using them.

As citizens, we must fight to preserve the ability to choose our media of exchange, with whom to trade and on what terms.

Gold and silver are certainly media that are worth fighting for. Historical evidence shows that metals do a decent job of maintaining their value over time. To further illustrate the importance of gold, within the American context, Lawrence White notes that:

A gold standard does not guarantee perfect steadiness in the growth of the money supply, but historical comparison shows that it has provided more moderate and steadier money growth in practice than the present-day alternative, politi- cally empowering a central banking committee to determine growth in the stock of fiat money.

On the other hand, crypto-currencies, although still volatile, represent the future of money and offer an important alternative to the current systems. Blockchain technology continues to evolve daily and its growth and development should not be disincentivized by bad tax policy.

Unfortunately, that’s exactly what the IRS has done by classifying crypto-currencies as commodities, thus subjecting them to capital gains and retroactive taxation.

In the end, I believe Ben Franklin was right in saying that, “in this world, nothing can be said to be certain except death and taxes.” We must, therefore, ensure that the taxes that we pay are fair and as beneficial to us as they are to the government.