Gold taxes: The elephant in the living room?

[Kshartle]

The capital gains tax on collectibles (including gold) is not 28%.  It is what your tax bracket is or 28%, whichever is smaller.

If that was meant for me WAH, I know, I was trying to use simple numbers to make a point.

You got hit with income/SS/medicare taxes on your income of maybe 30%, then you take your leftover cash and buy a gold coin. It doubles in price over time due to inflation (unless you're good at timing your selling and buying and catch windfall gains - doubtful). Then you pay another chunk on the "gains". All that's happened is they've stolen another 14% or whatever of the money they already taxed! Supposedly that money was yours....guess not!

People tell themselves that they owe this money and it's the price of citizenship (with all it's benefits  ). They do this to cope with the reality that everywhere they turn the state is reaching into thier pockets to rob them.

That being said, everyone please pay whatever bribes you need to in order to avoid having the jackboots kidnapp you and throw you in a rape cage. Ahhh.....citizenship.

How do you reconcile this thought process with holding cash under your mattress that will slowly lose $ due to inflation? On the one hand, the gov't doesn't give you back 28% of the inflationary loss, but on the other, at least there are no taxes due since there is no gain. 

Holding cash under your mattress doesn't seem very sensible to me but my circumstances are different than others. Some people might want to have a lot of cash right now for various reasons. Since there is basically no after tax gains currently in cash/st bonds you do avoid counterparty risk by holding it yourself. Of course you could get robbed.

I have about 10 bucks in cash at home at any given time but I should have a couple hundred or more in case there is a bank "holiday".

[mortalpawn]

I guess I would say that if inflation cuts the value of your paper money in half in a short period of time, you lose 50% of the value.  In contrast, if you had that value in a gold coin, which doubles in value (theoretically) and is taxed at a 28% collectables rate, you lose 14% of the "value" to taxes.

Still losing 14% is better than losing 50%.  If we look at other investments, bonds would likely not do well in rising inflation (their prices would go down as yields went up), cash would do poorly, and stocks could be up or down, depending on their ability to keep up with rapidly rising inflation.  Real assets like a house would do well.  However even if you had picked good stocks or investment real estate, it would still be subject to taxation upon sale.

If you are an "average guy with a job" you already pay 30% or more in combined taxes (SS/FICA/Medicare, Federal and State), and would probably see your real wages decline significantly in an era of high inflation, while still paying the 30% tax rate.

If you are in the highest income bracket your capital gains rate is now 20% + 3.8% surtax for Obamacare, or 23.8% total.  So even a significant stock sale or home sale could get you a 23.8% tax bill.  Even if you are not "rich" now, you could quickly find yourself in a high tax bracket in an era of 100% inflation if you had any assets like a house or mutual fund that kept pace with inflation. 

That's why inflation is bad, and hyperinflation is really bad.  The only silver lining is that in most economies where hyperinflation has set in, the tax systems quickly break down - and a lot of people turn back to foreign cash transactions, barter or trade (along with widespread tax non-compliance), with little in tax being collected at all.  The Weimar republic saw a precipitous decline in tax revenue as inflation rose, and printed more money to make up for the shortfall.  The same happened in Zimbabwe.

As a final note - your assets (stocks, bonds, even real estate) could be subject to much higher tax rates in the future as our debt-fueled government searches for new sources of revenue, possibly even a "wealth tax" or "national sales tax".  They raised capital gains rates last in 2013, and one party is looking to raise them again soon if they get their way.

[portart]

About four years ago I sold a large amount of gold coins to pay down part of my mortgage. I bought it at $300 an oz and sold it at $1100.00. I reported the sale and paid the capital gain taxes. Did I want to pay the tax? Most definitely not. Did I think I could get away with it? I was told by the company where I bought and sold the gold told me that they don't report Eagle sales to the government. My take on it is that at any time the the government, needing money, could walk into the gold sales retailer and ask for their records. The last thing I want on my mind following me into the future is tax evasion on a large amount of profit on unreported gold. You can't put a price on peace of mind.

[Kshartle]

About four years ago I sold a large amount of gold coins to pay down part of my mortgage. I bought it at $300 an oz and sold it at $1100.00. I reported the sale and paid the capital gain taxes. Did I want to pay the tax? Most definitely not. Did I think I could get away with it? I was told by the company where I bought and sold the gold told me that they don't report Eagle sales to the government. My take on it is that at any time the the government, needing money, could walk into the gold sales retailer and ask for their records. The last thing I want on my mind following me into the future is tax evasion on a large amount of profit on unreported gold. You can't put a price on peace of mind.

Portart I don't disagree with that decision one bit. I just personally don't think it makes sense that you paid as your civic duty and that anyone deserved the profits other than you. It was your property not theirs. You paid it to avoid punishment from a bunch of brigands, and I completely understand that.