Taxing Gold

Pension founds are heavily regulated and easy to tax. They are also the place where most people have their life savings. They are therefore the prime target of the state. When the next crisis strikes, pension founds will be stripped for wealth. There will be very little left for the savers.

By comparison, the gold market is tiny. Gold is also very difficult to regulate or tax. The taxman is reluctant to go into people's houses looking for gold. History tells him that such actions have a tendency to end with little loot and a lot of dead functionaries, the French revolution being a particularly grim example with casualties running in the thousands.

It is much better to tax through proxy. Inflation is in this respect an excellent choice. Most people do not understand inflation. Rising prices can easily be blamed on speculators and gold hoarders. A general atmosphere of hostility targeting capitalists splits the population and makes it easier for the state to come in with draconian measures. We can therefore expect pension founds to be looted primarily through inflation. It is by far the safest and easiest option.

With rampant price inflation, and a furious population venting their anger at speculators and gold hoarders, the state will be free to implement price regulations on most goods and services, as well as confiscatory sales taxes on gold and silver.

It appears then that gold hoarders like myself are no better off than the pensioners. I will be stuck with gold that I cannot sell without taxation. I too will be robbed. However, this assumes that people stay within the system even when it is falling apart. That is not how the world works.

When my father bought his first flat in Norway back in the 1950's, he paid a regulated sum to the seller. He also paid a substantial amount in cash, completely unregulated. The true price for the apartment was the regulated sum plus the cash in hand. The seller happened to be a policeman, which proves that everyone was doing this, even functionaries of the state.

To avoid this, the state can ban cash. That way, all transactions will happen electronically. It will be easy to discover the sort of transactions my father and the policeman engaged in. However, if there is rampant price inflation, the seller may in fact prefer something other than cash. A gold bar would fit that bill. I can therefore do exactly what my father did 65 years ago. I make an official, highly regulated, bank transfer to the seller. Then I slip a bar of gold into his hand before we sign the contract.

The only taxation possible on this transaction would be on the official sales price, which the state has regulated downwards. The net result is that the state collects less taxes than what had been possible had prices been unregulated. But even if prices remain unregulated, allowing for higher taxes, both seller and buyer may prefer gold. Rampant price inflation, combined with heavy taxation on transactions will in themselves make gold the preferred medium of exchange.

  

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link