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It looks to me like it could be both a protest and the first steps, not to a return to a gold standard, but to a system of competing currencies.

Sigh. And while Objectivists here argue about arcane laws that have no actual bearing on our everyday lives, there's an absolute emergency going on that needs our attention going on in another forum.

There is merit in the diversity of weights and fineness mentioned there. Different countries mint their gold coins with differing weights and fineness which require that knowledge to ensure the correct balance is acheived when exchanging amongst them.

 

The Coinage Act of 1792 specified the weight and fineness of gold, silver & copper being used to mint coins at that time.  It also specified a rather harsh penalty for any officer or employee of the mint caught fraudulently debasing the product:

 

"... every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer death."

http://constitution.org/uslaw/coinage1792.txt

 

It seems to me that the reintroduction of precious metals into currency favors saving rather than spending, in that persons holding these coins are hedging against the collapse of fiat money and are therefore more likely to collect than spend them; which makes me question the necessity of coining precious metals, as opposed to simply collecting the same metals in whatever form they are available, e.g. copper wire, gold & silver jewelry, etc.

 

The history of the percentage of actual copper in a penny, for example, has varied from 100% (prior to 1837) to 2.5% (today):

http://www.usmint.gov/about_the_mint/fun_facts/?action=fun_facts2

If validation of the actual value of currency requires assay, aren't precious metal coins combined with less precious alloys, just as suspect as fiat currency to anyone other than a metallurgist?

Edited by Devil's Advocate
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The assay of precious metal coins establishes the specific content of precious metal. Canada and South Africa use a higher purity gold for the Maples and Krugerrands than the US Eagles. This is recognized when transacting with and between them.

Coinflation calls it intrinsic, but it is just stating the value in terms of the common unit used for measuring the various commodities in terms of Federal Reserve Notes. The debasement of the coins is a form of hidden taxation, especially when done by the agency with the power to tax. Paul Voliker's statement along the lines of taxation for the sake of raising government revenue is obsolete comes to mind.

 

Favoring savings rather than spending echos that money, more importantly, is a tool of savings.

 

As to the death penalty attachment, it belies how seriously the issue was taken to be at the time.

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So: I messaged The Mint, and they gave me a pretty detailed answer, which I was surprised about.

 

Are businesses required by federal law to offer goods and services denominated in US dollars? My understanding is that they are but are not forced to accept cash. I.E. Convenient stores need to sell everything in dollars but can refuse $100 bills or pennies as payment. Another example is that buses can refuse to accept anything but dimes/quarters. Am I wrong?

 

Federal law establishes the units for our money.  Specifically, 31 U.S.C. § 5102 states, “United States money is expressed in dollars, dimes or tenths, cents or hundreths [sic], and mills or thousandths.  A dime is a tenth of a dollar, a cent is a hundredth of a dollar, and a mill is a thousandth of a dollar.”  However, I am not aware of any federal law that requires businesses to offer goods and services denominated in U.S. dollars.
 
Federal law does not impose any requirement that a business accept cash.   The designation of U.S. coins and currency as legal tender does not obligate a merchant to accept them as payment.  There are only a few court cases that address this issue.  In 1988, in Nemser v. New York City Transit Auth., 140 Misc.2d 369, 530 N.Y.S.2d 493 (N.Y. Sup. 1988), the Supreme Court for New York County, New York, held that a transit authority could refuse to accept dollar bills tendered on its buses and, instead, could legally demand the use of coins or tokens.  In its decision, this court cited with approval Barker v. Cent. Park, N. and E. River R.R Co., 151 N.Y. 237, 45 N.E. 550 (N.Y. 1896), a New York case in which a passenger tried unsuccessfully to pay a five-cent fare with a five-dollar bill.  The court dismissed the passenger’s case because the payment of such a small fare with the large bill was unreasonable.  Similarly, in Martin v. Rhode Island Co., 32 R.I. 162, 166, 78 A. 548 (R.I. 1911), the Rhode Island Supreme Court upheld a streetcar attendant’s rejection of payment using one-cent coins because the fare-collecting device on the streetcar required the passenger to deposit five-cent coins.  That court concluded, “The absolute language of the legal tender statute is clearly modifiable by the necessary consideration of what is reasonable under the circumstances.”  These cases support policies under which merchants may refuse to accept U.S. coins and currency when they have a reasonable basis for doing so, such as when doing so increases efficiency, prevents incompatibility problems with the equipment employed to accept or count the money, or improves security.  
 
However, the most conclusive and recent cases on this issue are Genesee Scrap & Tin Baling Co. v. City of Rochester, Civ. No. 3:08-CV-00431 (D. Miss., Aug. 13, 2008), and Metal Management Miss., Inc., v. Governor Haley Barbour, 558 F. Supp. 2d 432 (W.D.N.Y 2008).  The courts in both these cases recognized that, even though Congress has the “exclusive right to declare what constitutes legal tender,” the Legal Tender Statute does not prohibit states from specifying the “manner of payment of legal tender [that] is permissible or required for particular types of transactions.”  Metal Management Miss., Civ. No. 3:08-CV-00431, at 10 (emphasis added).  Although these two recent cases examined state laws—as opposed to merchant policies—that prohibited the use of U.S. coins and currency in certain transactions, they clearly held that such restrictions are not “at odds with” the Legal Tender Statute.
 
 
 
So, looks like I was wrong. Hopefully this clears it up if anyone had the same misunderstanding as I did.
Edited by thenelli01
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So: I messaged The Mint, and they gave me a pretty detailed answer, which I was surprised about.

As an aside, government bureaucrats will often respond positively to queries from the public, when those queries come across as genuinely seeking information. There have been a couple of times I've wondered about some government published data, and have emailed the department, receiving an informative reply. Sometimes, these departments have metrics where such emails -- and response-times -- are tracked. Also, people who work in government -- particularly at the junior levels -- are "regular folk". We had a forum member here who used to work in the department that produces the BLS unemployment figures.
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Thanks dream_weaver, thenellie01 & softwareNerd for your latest posts - very informative :thumbsup:

 

I'm currently of the impression that precious metals in the form of competitive currency is a good thing.  The following link to Utah Sound Money makes several good points:

--

"Think of the system as a way to "inflation-proof" your dollars. Even though the value of gold money, silver money and dollars would float against each other on a daily basis, historically, money backed by precious metals has retained its purchasing power. By contrast, unbacked fiat currencies always lose value to inflation caused by money creation. For example, over the last century the U.S. dollar has lost over 95% of its purchasing power, while gold and silver haven't lost any."

 

"Day to day exchange rate fluctuations would also present opportunities for savvy depositors to benefit from arbitrage opportunities. In other words, Utah depositors could aim to swap out of a given currency at the height of its strength to buy into a relatively weaker currency before that one starts an upwards climb in relative value. Innovative depositories could even offer currency exchange programs managed by experts in the field."

 

"When businesses compete for your patronage, you win. The fact that there is both a Burger King and a McDonald's on the corner in my town means that lines are shorter, I get a diversity of options and I have somewhere else to go when McDonald's raises the price of their hamburger. Similarly, when currencies are competitive, you reap the benefit of a more stable currency. ... The offer of competition in currency can benefit the Utah consumer. It might also make businesses more confident in investing locally."

 

http://utahsoundmoney.org/home/index/78/0

--

Intrastate currency (in the form of precious metals exempt from capital gains taxation) in competition with national fiat currency, allows an oppertunity to choose the medium of exchange that responds to financial and political concerns.  Over time, Intrastate transactions made with precious metal currency may prove more effective in addressing the problems associated with fiat currency.  In the wake of the Arizona Govenor's veto of the legislature's effort to join Utah as the second state to enact precious metal currency, it will be interesting to see whether other states press forward or withdraw from this issue.

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Excellent. This should all put to bed the myth that gold coinage and trading is mysteriously controlled by the US government. People don't trade in Gold coins because they don't want to or need to, not because they are forced to.

 

Now, given this, why do you suppose so much of the "right" in the USA--including a good deal of spill-over into Objectivists--are obsessed with an "oppression" that doesn't actually exist? Is this a bit of nonsense that Ayn Rand accepted inadvertently 40 years ago, which just wouldn't die for some reason? I'm at a loss to explain it, personally.

 

Nevertheless, if Objectivism is ever to be taken seriously, it needs to rid itself of this garbage...

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Excellent. This should all put to bed the myth that gold coinage and trading is mysteriously controlled by the US government. People don't trade in Gold coins because they don't want to or need to, not because they are forced to.

Now, given this, why do you suppose so much of the "right" in the USA--including a good deal of spill-over into Objectivists--are obsessed with an "oppression" that doesn't actually exist? Is this a bit of nonsense that Ayn Rand accepted inadvertently 40 years ago, which just wouldn't die for some reason? I'm at a loss to explain it, personally.

Nevertheless, if Objectivism is ever to be taken seriously, it needs to rid itself of this garbage...

Actually, I was the only one who said it (in this topic at least) and I certainly don't speak for objectivists or 'Objectivism'.

Objectivism does not say anything about this - it is a matter of fact; either it is law or it isn't. It is not a matter of philosophy. I was wrong on what the law said, that has nothing to do with Objectivism.

I also think you are mischaracterizing me and unfairly equating my views to those of the right because of one error - I thought businesses were forced by law to accept dollars. That is the premise I was basing my analysis on, not some conspiracy theory of the right.

Edited by thenelli01
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Actually, I was the only one who said it (in this topic at least) and I certainly don't speak for objectivists or 'Objectivism'.

Objectivism does not say anything about this - it is a matter of fact; either it is law or it isn't. It is not a matter of philosophy. I was wrong on what the law said, that has nothing to do with Objectivism.

I also think you are mischaracterizing me and unfairly equating my views to those of the right because of one error - I thought businesses were forced by law to accept dollars. That is the premise I was basing my analysis on, not some conspiracy theory of the right.

 

I wasn't responding to your post specifically--I should have clarified that. Your post thread looked quite clean and honest to me.

 

The entire premise of the OP's referent is that we need new laws to enable the common trading in gold. Many people here have appeared to be very supportive of this, with the assumption being that these laws will actually solve real-world problems, or that they are something that rational people should be for. My point is that the advocacy of this is retarded.

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The entire premise of the OP's referent is that we need new laws to enable the common trading in gold. Many people here have appeared to be very supportive of this, with the assumption being that these laws will actually solve real-world problems, or that they are something that rational people should be for. My point is that the advocacy of this is retarded.

 

Retarded because current law already enables the common trading in gold?  Even under a system of barter, value fluctuations in gold and silver assets make them subject to capital gains taxation any time they are traded:

 

"Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

  1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
  2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
  3. You must report all capital gains.
  4. ..."

http://www.irs.gov/uac/Ten-Important-Facts-About-Capital-Gains-and-Losses

 

It seems to me that legislation to remove the taxation of gold and silver used as currency is a step in the right direction.

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It seems to me that legislation to remove the taxation of gold and silver used as currency is a step in the right direction.

The real problem is that this complicates the tax code. Imagine that I'm buying merchandise using silver, gold and US$ as payment to my suppliers. I turn around and sell my inventory for silver, gold and US$ too. Assuming I'm using all three as possible forms of money, when a customer orders merchandise, and wants to pay in gold, I would send him merchandise regardless of whether I bought that merchandise in gold, silver or US$.

I would not end up with a "gold profit" and "silver profit" and a "US$ profit", but with some profits that do not fit in any of these categories. After all, one of the functions of money is to act as a standard, and that means one cannot have three standards unless the dollar is a certain amount of gold/silver.

 

From what I read, the bill did not seek to resolve this by going into the next level of detail. Given the absence of such detail, I think it was more of a symbolic/protest bill than something real. 

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The real problem is that this complicates the tax code. Imagine that I'm buying merchandise using silver, gold and US$ as payment to my suppliers. I turn around and sell my inventory for silver, gold and US$ too. Assuming I'm using all three as possible forms of money, when a customer orders merchandise, and wants to pay in gold, I would send him merchandise regardless of whether I bought that merchandise in gold, silver or US$.

I would not end up with a "gold profit" and "silver profit" and a "US$ profit", but with some profits that do not fit in any of these categories. After all, one of the functions of money is to act as a standard, and that means one cannot have three standards unless the dollar is a certain amount of gold/silver.

 

From what I read, the bill did not seek to resolve this by going into the next level of detail. Given the absence of such detail, I think it was more of a symbolic/protest bill than something real. 

 

Intrastate currency would have no immediate effect on the federal tax code and would only effect a state's tax code by treating gold and silver coins as currency (non-taxable) instead of commodies (taxable).  I don't see this as a complication, but perhaps I'm missing something?

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ntrastate currency would have no immediate effect on the federal tax code and would only effect a state's tax code by treating gold and silver coins as currency (non-taxable) instead of commodies (taxable).  I don't see this as a complication, but perhaps I'm missing something?

Yes, everything is at the state level only.

If the law had passed, trading from gold to US$ and vice-versa (also silver) would not create taxable income. It also would not create tax-deductible losses. This aspect would be a simplification for the tax-payer. However, this is really not an example of gold or silver being used as currency, merely an example (in the context of that law) of currency-exchange. 

 

To be used as currency, and to be something other than a niche, we need to look at gold etc. being used to buy and sell other products. Suppose I buy a widget for US$1000 and sell it for 1 oz of gold, do I have any state-taxable income? Today, the calculation would be as follows: every transaction is converted to US$. The US$ is the standard unit of account. Under the proposed law, it is unclear how one would account for it. Would the tax-payer have the discretion to decide whether to convert every transaction to any one currency? Unless both legs (buy-widget and sell-widget) use the same currency, one has to convert to a common unit in order to compute the profit. 

 

Even with "matching legs", there are questions. If one has 3 oz of gold profit and $150,000 US$ profit, and 300 oz silver loss, how much tax does one pay and in what units? How does one allocate costs (e.g. rent for the shop) across the various sales. Since the rent is paid in US$, does it mean that it is a cost against only the US$ sales, and not against the gold-denominated revenues? 

 

Other than small personal transactions or niche businesses, I don't see how one can get away from these complications. The law could have offered a resolution. For instance, the law could have said that a business-owner may decide that he is going to use gold as his standard for a particular tax year. I'm not recommending this; I'm just saying this could have answered some of the complications that arise. Even with that, the person would have to maintain two sets of accounts -- using a gold-standard for the state and using a US$ standard for the Feds.

Edited by softwareNerd
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Retarded because current law already enables the common trading in gold?  Even under a system of barter, value fluctuations in gold and silver assets make them subject to capital gains taxation any time they are traded:

 

"Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

  1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
  2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
  3. You must report all capital gains.
  4. ..."

http://www.irs.gov/uac/Ten-Important-Facts-About-Capital-Gains-and-Losses

 

It seems to me that legislation to remove the taxation of gold and silver used as currency is a step in the right direction.

 

Why should gold and silver get a tax break, but not copper, houses, stocks, bond, soybeans, ammo, etc. etc. etc.?

 

Lower taxes across the board are great. Lower taxes for some specific industry is worse because not only is the government taxing you, it's attempting to pick winners in the marketplace, which often causes a lot more harm than taxes themselves (see: the mortgage interest deduction and its distortionary effects on the housing industry for example).

 

If you want lower taxes, then advocate lower taxes across the board. That said, simply advocating lower taxes would be a start, and not some Rube Goldberg scheme like this which will amount to a tax break in some narrow way on some particular business decision under the guise of doing something that seems cool but is in fact pointless.

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@ softwareNerd,

 

The introduction of intrastate currency ought not be any more complex than swapping dollars for euros, yen, pesos, etc., which is to say that doing business in a state with precious metal currency would be roughly the same as doing business internationally.  Banks regularly swap currency as a matter of doing business, so I don't see how adding additional types of currency is particularily complex or challenging for accountants who regularly deal with this type of thing.  All transactions are calculated at the time of sale and recorded according to the currency used along with the rate of exchange at that time, and then taxed according to federal of state guidelines.  Easypeasy for CPAs used to counting beans, peas or whatever their employers need them to count.

 

As an aside, I recognize your name in camelBack notation even though the english standard notation for Software Nerd, has been avoided...  iMightAddressYouInThisFormatAsAWretchedWayOfMakingThePointThatSwappingStandardsDoesn'tNecessarilyAddComplexityForProfessionalsWhoKnowTheStandardsBeingUsed ;)

Edited by Devil's Advocate
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@ CrowEpsitemologist,

 

I agree that lower (or no) taxation is a valid goal for fiscal conservatives, but differ with you on how to get there.  Taxation, as a politically entrenched method of generating government income, is less difficult to transform than to dismantle.  I believe that introducing specific exemptions has greater long term effects than simply advocating and waiting for less taxes across the board.  California's Proposition 13 comes to mind, the effects of which remain in place today.  I'll take a state exemption to capital gains for transactions made with precious metal currency any day of the week and twice on Sunday.  It establishes a fiscal precident that can be measured against the statis quo, and if it really has the kind of impact supports are hoping for, then it will ultimately lead to further exemptions.  If not, then move on...

 

As to why gold & silver now, and not to copper houses made from soy beans, I believe the supporters are leaning on the language used in the Constitution, specifically Article 1, Section 10... "make any Thing but gold and silver Coin a Tender in Payment of Debts"

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@ CrowEpsitemologist,

 

I agree that lower (or no) taxation is a valid goal for fiscal conservatives, but differ with you on how to get there.  Taxation, as a politically entrenched method of generating government income, is less difficult to transform than to dismantle.  I believe that introducing specific exemptions has greater long term effects than simply advocating and waiting for less taxes across the board.  California's Proposition 13 comes to mind, the effects of which remain in place today.  I'll take a state exemption to capital gains for transactions made with precious metal currency any day of the week and twice on Sunday.  It establishes a fiscal precident that can be measured against the statis quo, and if it really has the kind of impact supports are hoping for, then it will ultimately lead to further exemptions.  If not, then move on...

 

As to why gold & silver now, and not to copper houses made from soy beans, I believe the supporters are leaning on the language used in the Constitution, specifically Article 1, Section 10... "make any Thing but gold and silver Coin a Tender in Payment of Debts"

 

Prop 13 is an example of a specifically-targeted tax break which has distorted a market and given certain special interests a break while punishing others. It makes people never want to sell their houses in California, which makes the entire market for homes in California very different than it would otherwise be. (The same is true for the mortgage interest deduction).

 

To me, the lesser of two evils is taxes that simply slow everybody down a bit rather than taxes that distort the normal flow of business. We have entire industries in the USA which wouldn't exist at all if it weren't for targeted tax breaks. These "targets" create an entire culture of crony capitalism and corruption.

 

Give me a flat tax (and sales tax at that): you'll still have taxes, but at least you'll cut down on the corruption. Having Gold and Silver join the ranks of solar panels, muni bonds and other government boondoggles sounds unprincipled to me...

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Prop 13 is an example of a specifically-targeted tax break which has distorted a market and given certain special interests a break while punishing others. It makes people never want to sell their houses in California, which makes the entire market for homes in California very different than it would otherwise be. (The same is true for the mortgage interest deduction).

 

To me, the lesser of two evils is taxes that simply slow everybody down a bit rather than taxes that distort the normal flow of business. We have entire industries in the USA which wouldn't exist at all if it weren't for targeted tax breaks. These "targets" create an entire culture of crony capitalism and corruption.

 

Give me a flat tax (and sales tax at that): you'll still have taxes, but at least you'll cut down on the corruption. Having Gold and Silver join the ranks of solar panels, muni bonds and other government boondoggles sounds unprincipled to me...

 

I'm with you on a flat tax :thumbsup: , but that reform is as difficult to attain as an across the board tax reduction.  The public perception that millionairs ought to pay higher taxes than low income families prevents any real movement on this issue.  That's not to say that I don't regularly argue for flat taxes, I just appreciate whatever reduction comes along prior to achiving that lofty goal. 

 

You seem to argue for fairness in tax reform, whereas I presume taxation to be inherently unfair to begin with.  Prop 13 responded to the "unfairness" of elderly home owners on fixed incomes having their retirement funds stripped away by ever increasing property taxes.  That their children wound up with these homes and continue to reap the benefit their parents got is more an issue of the inequities of inheritance than market distortion in my view.

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I'm with you on a flat tax :thumbsup: , but that reform is as difficult to attain as an across the board tax reduction.  The public perception that millionairs ought to pay higher taxes than low income families prevents any real movement on this issue.  That's not to say that I don't regularly argue for flat taxes, I just appreciate whatever reduction comes along prior to achiving that lofty goal. 

 

You seem to argue for fairness in tax reform, whereas I presume taxation to be inherently unfair to begin with.  Prop 13 responded to the "unfairness" of elderly home owners on fixed incomes having their retirement funds stripped away by ever increasing property taxes.  That their children wound up with these homes and continue to reap the benefit their parents got is more an issue of the inequities of inheritance than market distortion in my view.

 

So... until we move to a flat tax, we should move away from it?

 

I don't see how I am arguing for "fairness" (whatever that means). I am arguing in favor of an Evil to have the least amount of negative effect as possible. Taxes do two Bad things: one, in which they take money from you; and another, in which they change the otherwise natural flow of business (which can have far-reaching effects which can be a lot worse than the tax itself).

 

In order to argue for poor old ladies in their homes, you need to argue against new families with children. Those poor old ladies are busy voting for lots of government while they vote for exempting themselves from the negative consequences.

 

The flatter the tax system, the less drive there is for corruption.

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We can chew gum and walk at the same time...

 

Until a truly flat tax arrives via a uniform sales tax, or percent of income (I favor the former), any steps taken will maintain some corruption.  Flattening one area of the code will most likely give rise to another in the same manner that providing some exemptions usually shifts the burden to others.  No one is arguing against new families with children; there were plenty of them who reaped the same benefit as the elderly at the time Prop 13 passed.  The argument should be carried forward as an example against taxation forcing people on marginal incomes out of their homes, i.e. expand the exemption rather than withdraw because it didn't cover everyone.

 

Precious metal currency eliminates capital gains* (on those items) at the state level, and if that causes Utah to have a better economy than their neighbors, then more states will be inclined to follow their lead.  If no state had a capital gains tax, how long would it take for the federal government to follow suit?  There are currently 7 states without an income tax, and I personally know several families who have moved from states that do to states that don't for that reason.

--

* "States without capital gains taxes on the sale of capital assets include Alaska, Florida, Nevada, New Hampshire, New Mexico, South Dakota, Tennessee, Texas, Washington, and Wyoming."

http://www.teamthayer.com/Nav.aspx/Page=%2FPageManager%2FDefault.aspx%2FPageID%3D1829163

Edited by Devil's Advocate
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We can chew gum and walk at the same time...

 

Until a truly flat tax arrives via a uniform sales tax, or percent of income (I favor the former), any steps taken will maintain some corruption.  Flattening one area of the code will most likely give rise to another in the same manner that providing some exemptions usually shifts the burden to others.  No one is arguing against new families with children; there were plenty of them who reaped the same benefit as the elderly at the time Prop 13 passed.  The argument should be carried forward as an example against taxation forcing people on marginal incomes out of their homes, i.e. expand the exemption rather than withdraw because it didn't cover everyone.

 

Precious metal currency eliminates capital gains* (on those items) at the state level, and if that causes Utah to have a better economy than their neighbors, then more states will be inclined to follow their lead.  If no state had a capital gains tax, how long would it take for the federal government to follow suit?  There are currently 7 states without an income tax, and I personally know several families who have moved from states that do to states that don't for that reason.

--

* "States without capital gains taxes on the sale of capital assets include Alaska, Florida, Nevada, New Hampshire, New Mexico, South Dakota, Tennessee, Texas, Washington, and Wyoming."

http://www.teamthayer.com/Nav.aspx/Page=%2FPageManager%2FDefault.aspx%2FPageID%3D1829163

 

So your argument against fixing the tax code in some areas is that they we shouldn't do that since it will cause the government to unflatten it in other areas? Then how do you square that with a new tax exception to a the specific investment instrument known as "gold"? You can "imagine" they will do bad things all day, and kill any idea. That's not much of an argument.

 

Utah adjusting their tax code to make gold a more advantageous investment will make more people in that state invest there, no doubt. It might even make a lot of people move to Utah (and some move out who will be necessarily taxed more to make up for the shortfall).

 

Utah could exempt gains on stocks and get 10x more residents though, if that's what they are after.

 

Doing this sort of centrally-planned, "economic engineering" which you are advocating is dangerous though. If the laws in Utah caused residents there to invest heavily in gold, a fall in gold could take a disproportionate toll on the economy there, which for a single state (or a small group of states) could be very devastating. All of the old people who lost their life savings would hit the social safety net there very hard, thus forcing them to increase taxes, for instance.

 

Arguing in favor of greater government intervention over the economy in order to "make a statement" is something that has been tried many times before. It never ends well.

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Actually, my argument is for a greater diversity of intrastate tax policies on the premise that interstate migration by population and business ultimately reduces taxation globally in order to compete for tax payers.  Centrally planned, economic engineering (via tax policy) is what states do, and those states that perform better at luring tax payers away from their neighbors drive interstate taxation lower in order to lure tax payers back.  This is, in my mind, a very effective way to flatten taxation globally, as there will be some level of taxation beyond which a state can no longer function financially, and that is likely to be equivalent to the level all states need to function financially.

 

Your concern about investors being persuaded to invest heavily in gold and potentially taking a loss if the value of gold falls isn't a relavent in terms of securing individual freedom, which is what states are tasked to do (and require tax generated revenue to pay the cost of).  Utah's enactment of a precious metal intrastate currency only represents the expansion of choice in a marketplace, which is a good thing.  States aren't tasked to guarentee individual happiness via personal investments; only to allow individuals to pursue happiness, i.e. invest as they choose to and accept the consequences of their own actions.  Social safety nets aren't a legitimate state concern, any more than the regulation of charity is.

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Actually, my argument is for a greater diversity of intrastate tax policies on the premise that interstate migration by population and business ultimately reduces taxation globally in order to compete for tax payers.  Centrally planned, economic engineering (via tax policy) is what states do, and those states that perform better at luring tax payers away from their neighbors drive interstate taxation lower in order to lure tax payers back.  This is, in my mind, a very effective way to flatten taxation globally, as there will be some level of taxation beyond which a state can no longer function financially, and that is likely to be equivalent to the level all states need to function financially.

 

Your concern about investors being persuaded to invest heavily in gold and potentially taking a loss if the value of gold falls isn't a relavent in terms of securing individual freedom, which is what states are tasked to do (and require tax generated revenue to pay the cost of).  Utah's enactment of a precious metal intrastate currency only represents the expansion of choice in a marketplace, which is a good thing.  States aren't tasked to guarentee individual happiness via personal investments; only to allow individuals to pursue happiness, i.e. invest as they choose to and accept the consequences of their own actions.  Social safety nets aren't a legitimate state concern, any more than the regulation of charity is.

 

 

"greater diversity of intrastate tax policies" -- I'll take euphemisms for $100 Alex! :-)

 

Again, for every alleged gain you might imagine your bits of social engineering might cause, you will never be able to account for all of the unintended consequences. This is why people advocate free markets rather than regulated markets. (I like to add that free markets don't magically guarantee blissful outcomes for everybody--as Conservatives say they do--but they are the only moral form of government regardless).

 

Now, one thing to reel this conversation in back to here/now reality: lots of states have very low taxes already. Many don't have capital gains tax since they don't have income tax at all. In the world of sorting out our concerns from the most pressing to the least pressing (using our "lightning calculators" as Ayn Rand called them), fixing State level taxes won't do you much good unless you fix the Federal problem. Moreover, in the current system when States fail to hold up the social safety net, the Feds take up the slack--lower state taxes often just means higher Federal taxes since nobody questions the underlying spending level.

 

This last is where the focus needs to be. Rearranging who gets stuck with the bill and when is folly.

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OK, well out of that last bit, the only thing I'd care to respond to is your assertion that, "... fixing State level taxes won't do you much good unless you fix the Federal problem ..."  Here you've got this exactly backwards.  The senators and representitives for Congress come from where??

Edited by Devil's Advocate
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