Thursday, 22 July a.d. 2010

I have now lost count of all the emails, hysterical & otherwise, I have received about the “new tax on silver & gold” that was slipped into the Obamacare bill.

WHOA. Stop. It is nothing of the kind, and in truth is MUCH worse than a mere tax on silver & gold.

Here’s what actually is happening. Section 9006 of the hilariously mis-named Patient Protection & Affordable Care Act amends the Internal Revenue Code to expand the applicability of Form 1099, but does not impose any new tax.

Currently 1099 forms are used to report miscellaneous “income” (another hilarious misnomer, which is misapplied to “revenue” to confuse the public) in the form of payments to independent contractors or the self-employed. Right, it is a method of government spying to determine how much revenue you have, which they call “income”, so they can be sure they bleed as much as possible out of you, Turnip. Chances are you might sneak around and mow a yard for $20 without giving the government its fair share.

Currently the law supposedly requires businesses to issue a 1099 to any individual or unincorporated business paid more than $600 cumulative in any calendar year. Right, 30 payments of $20 qualifies. 1099s are not required to be issued to corporations, except incorporated law firms. (Maybe lawyers cheat on their taxes more than other people?)

So what’s the change? Beginning 1 January 2012, not immediately, all payments over $600 allegedly must be reported on a 1099, including payments to corporations.

This is not a tax on silver & gold. Let me make this perfectly clear, as a person who has fought with IRS for 15 years, been indicted for conspiracy to defeat IRS operations, and wilful failure to file income tax returns and having been acquitted on the defense that the law contains no statute that makes anyone but foreign withholding agents
liable to pay income tax: people who cheat on their income taxes are stupidly committing perjury. I will go to jail arguing with the government about whether I owe the tax or not, but I will not go to jail for lying about how much I owe.

If coin dealers & their customers are upset because the government is eliminating a way for them to cheat on income taxes they voluntarily pay, I have no sympathy for them. They sign returns under penalty of perjury.

This new reporting provision imposes NO new tax on silver & gold, none. If you are a person who is liable to pay income tax and you realize “income” when you sell silver or gold, you are ALREADY required to report the gain. This law changes nothing.

But this is the lighter and shallower question raised by this new 1099 requirement. The weightier consideration arises from the enormous accounting burden and cost it loads on small businesses. Every payment must be tracked by customer to make certain the total payments do not exceed $600. You probably pay your garbage man more than that every year. Will you send in a 1099 on him? Do you have his address and tax ID? Worse than that, payments to corporations were exempt from reporting, but must now be reported, a colossal increase in accounting labour.

As usual, the government piles stupidity upon stupidity. Apparently they haven’t caught on that a depression is raging, and small businesses create more jobs than anyone else in the economy. Wouldn’t it be a great idea right now to increase their costs by quintupling their accounting load? Well, I reckon it will create new accounting jobs - for a couple of months until the new costs shut businesses down all over the country.

But before everyone concedes the end of the world, ponder this. California Rep. Dan Lungren on 26 April last introduced legislation that would repeal this requirement. Look up HR 5141, Small Business Paperwork Mandate Elimination Act.

Finally, there are deeper questions still lurking here. Do all the folks upset by this latest tyranny not recognize already that we live under a financial police state? That a government that claims to be god must know & gather every fact about every person & transaction? After all, a god can’t be a god unless he knows everything. What about
the income tax itself? Why does the law contain no statute making anyone except foreign withholding agents liable for the tax? Why does everybody pay it then? Could the federal government actually have been collecting a tax for 97 years that doesn’t exist in the law? Where are the emperor’s clothes?

Listen: a little more 1099 reporting is the least of your worries, except that it will put hundreds of thousands of businesses, including coin dealers, out of business.

This new law changes nothing. It does NOT evidence an Obama plan to confiscate gold. It does NOT imply you shouldn’t buy physical gold and silver — just the opposite. It makes clearer than ever that the US government will drive the economy & the dollar into the ground. You will need the silver & gold in your own hands, and not another’s.

Related reading:

A Solari Report - The Coming Avalanche of 1099 Forms