Comment by WalterBright a day ago
Washington state, as part of their frenzy of tax increases, decided that gold and silver bullion will be subject to the sales tax. Poof! There goes any point in investing in gold and silver. (Collector coins, too.)
The way you've written it sounds like taxing unmonetized bullion is insane overreach, but is it? They're just treating them the same as any other commodities. I can understand if you're opposed to sales taxes generally, but the only reason to single out bullion for an exception I can see is historic norms.
They're also applying a tax to monetized bullion. That's more more like taxing currency exchanges and it's a bit weird since currency exchanges are normally taxed on appreciation.
We do not charge sales tax when you exchange Dollars for Euros. Bullion advocates argue that exchanging dollars for physical gold is a currency exchange rather than a consumption purchase.
If you were to turn that bullion into an actual product like jewelry, then it would be taxed.
When a firm with tank capacity takes delivery of an oil contract they secured via the CBRE, do they pay sales tax on that? No, because it’s intended for resale.
Unmonetized gold bullion is similarly generally intended for resale. Generally no one is “consuming” gold bullion.
Currency exchanges are exactly why I differentiated between monetized and unmonetized bullion. I don't see why going to Costco and buying a bar of gold is fundamentally different than buying the same weight of gold jewelry. That jewelry may very well be intended for resale the same way.
Whereas to me, it's wild that thousands of years of gold bullion trade as a form of currency exchange is supplanted basically overnight and now only "gold but only on paper" would be considered the only form of real gold currency.
"Monetized" gold has only existed for 50 years since gold futures started being offered in 1972. But the real "retail era" of "gold but only on paper" started just ~20 years ago with gold ETF's in 2003 (Australia) and 2004 (USA). So in just 20 years, we're now arguing that the norm from the past 3,000 years of gold trade is completely invalidated.
That said, you're not completely out of line with the views of the USA federal government. Gold has fascinating history of regulation. There was the 1933 total ban on private ownership when U.S. citizens were given until May 1, 1933, to surrender all gold coins and bullion. That lasted until 1974. Or that gold bullion is not subject to FinCEN Form 105 (currency) but rather CBP Form 6059B (goods).
> That jewelry may very well be intended for resale the same way.
It isn't.
There is a widespread belief that jewelry is a durable investment, that if you fall on hard times you will be able to sell the jewelry for an amount similar to what you paid for it, or more.
It's fair to say that many people have this idea in mind when they buy jewelry, and that it pushes up the price.
But it isn't true; if you resell your jewelry you're going to get basically nothing compared to what you paid, unless you like to wear gold chains. The resale value of new jewelry is more like the resale value of a new car.
If there was any significant demand to resell jewelry, everyone would know this. The fact that they don't is sufficient to demonstrate that they have no intention of actually reselling.
"Generally no one is “consuming” gold bullion."
Huh? Gold bullion is an input to hundreds of industrial processes. If it weren't, why would gold have any value?
That's not consumption as it applies to sales tax rules. In almost every jurisdiction, raw materials and inventory purchased for resale or industrial processing are exempt from sales tax.
> Bullion advocates argue that exchanging dollars for physical gold is a currency exchange rather than a consumption purchase.
One can argue that until they're blue, but it'd still be wrong. Gold is a commodity, and if you're buying it shell-packed at Costco you probably should be paying sales tax on it.
Washington State will do anything to avoid just having an income tax.
They already have a draft income tax proposal, and are eager to pass it.
The law covers "monetized bullion" - bars and coins -https://dor.wa.gov/education/industry-guides/jewelry-stores/...
In English-speaking countries, we have a system that prints money and gives it to asset owners. Gold is still an asset, so buying it will still let people participate in that system. Increasing taxes by whatever (I'll assume 10%) is material but it doesn't remove any point, just makes it a bit less attractive. It could easily be a less risky play than investing in US bonds given that they can't pay them back in real terms.
That's a win for society if the money is instead invested into something productive!
But it's a loss if it's forced into risky investments that aren't productive.
People choose to hold non-yield-bearing assets when they believe the returns offered by current investment opportunities are not sufficient to justify the risks.
It is the miracle of modern capital markets that enables almost anyone to quickly and easily invest their savings in productive assets, but of course capital markets aren’t perfect. The availability of “none of the above” options (like gold) that remove savings from the pool of active investment capital is the essential feedback loop that balances risk and return.
Modern capital markets also have non-yield-bearing assets like gold ETFs. The only practical difference is a tiny expense ratio and more liquidity.
I never invested in gold because it is not productive. I don't have any money, either (other than pocket money), because I've invested all of it.
Gold is usually invested in as a hedge against inflation. It's not really the gold that goes up and down in value, it's the dollar that goes down and up.
This is an oversimplification IMO. There are higher order effects on the price of gold that makes it not directly related to the value of the dollar.
I'm pointing this out because I have seen a lot of sentiment recently about how the dollar is crashing, just look at the price of gold. Yes, the dollar is decreasing in value faster than usual, but it also isn't crashing in the way that gold is spiking.
This sentiment I think drives speculative gold demand, from standard speculative investing FOMO as well as from emotionally driven inflation fear well beyond what is realistic. The same thing happens to the stock market.
You can call it emotionally driven, but if it’s taken as a fact that the dollar is and will continue to lose value ( and the president is incentivized to pump the price of Bitcoin, whatever level of hell/episode of Mr Robot that is) - then you should expect gold to go up infinitely, relative to a worthless dollar. People aren’t necessarily trading out of fear, just trying to predict the future.
Given that the gold and the dollar are not productive I think one is betting that society is less productive than inflation when one invests in gold and that one will need to pay a ransom over a long weekend when one holds dollars.
Taxing bullion is absurd - it’s not a product but more like currency or a placeholder of money you already have. What other taxes are they passing when you say “frenzy”?
Why is it more like a currency than any other object? It's not negotiable currency or legal tender.
People buy it and sell it. I don't see any difference between bullion, iron ore, frozen concentrated orange juice, and Pokemon cards. You buy a thing, you pay the sales tax.
Well it's more like a currency than any other object because it has been used historically to either a) be the currency, or b) back the currency. Sure that's not true today in the United States, but like, it's obviously different than frozen concentrated orange juice... can we not at least agree on that pretty tame assumption? Or is this just some semantics race to non-meaning?
Iron ore is similar physically, but it's really just a raw input material/ingredient used for heavy industrial manufacturing and production, it's never been intended to be an appreciating asset/hedge against inflation.
I'm unfamiliar with whatever tax is being referred to in this specific comment thread, but I'd be curious how something like $SIVR is handled, considering it's backed by actual silver in vaults. That could lead to some unintended consequences if the investment plans of a lot of money suddenly changes how it's being allocated.
> Iron ore is similar physically, but it's really just a raw input material/ingredient used for heavy industrial manufacturing and production, it's never been intended to be an appreciating asset/hedge against inflation, not any intrinsic property of gold itself.
Gold is not intended to be an asset/hedge against inflation either. Market participants believe that gold has value and that it can hedge against inflation. The belief is what gives life to gold being as a hedge against inflation.
Gold is not an asset, it’s a commodity, an industrial input, and material for jewelry, and for some reason I fail to understand, people buy and hold it because they believe it is an asset that will appreciate in value, but it’s just an elementary metal that is useful for being easy to work with (jewelry) and because it doesn’t oxidize. It does not generate income, you can’t eat it, and in a post-apocalyptic scenario, it’s useless. I suppose the density of gold would allow some very small, very high mass slingshot balls you could defend yourself against people with?
A system is what it does, and gold is popular for jewelry because it’s a useful way to wear money.
Off topic and this might be apocryphal, but I heard on the internet a good reason to keep “money” in the form of gold chains and other jewelry, is that it counts as personal property, so if you’re arrested during a drug bust or trafficking women, your cash and bank accounts may be seized, but whatever you wear to prison gets put in a ziplock bag and returned to you when you leave :)
> What other taxes are they passing when you say “frenzy”?
https://www.ballardspahr.com/insights/alerts-and-articles/20...
It's incomplete, it doesn't list the gold tax.
Not my downvote, but the least devastating tax is only on commerce, and it has to be at insignificant levels to keep from resuting in undue damage.
Taxing wealth, property, wage income, or just plain existence has always sapped productivity like few other things.
It's foolish to try and tax "wealth" when you should instead be taxing the creation of wealth as it's in progress and nothing else. When actual ongoing business operations are going forward is the only time anybody can truly afford to pay any significant tax at all. Even if they are billionaires, and I say this as someone at the complete opposite end of the spectrum.
Ordinary wage income doesn't even make sense to tax whatsoever when you want max productivity, unless income is excessive enough to reach so far above average that greater capitalist profits can be earned on the surplus. Then maybe more than just those gains should be taxed.
This investment is now taxed more than other types of investment. Is sales tax charged when you buy stock? Should it be?
Gold is not an investment. It takes otherwise productive capital out of the economy and produces nothing. It's functionally no different than stuffing your money in a mattress.
In physical metals that don’t generate income or induce further economic activity, I don’t believe so. What good does a hunk of gold sitting in a safe do for the economy?
>What good does a hunk of gold sitting in a safe do for the economy?
Not a whole lot once legal tender certificates can no longer be redeemed for the same amount of metal year after year.
Can you please make your substantive points without snark, flamebait, swipes, or personal attack? Regardless of how wrong someone is or you feel they are, you can make your substantive points without these things. We're trying for something else here.
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
I can certainly do that, and I can see how my comment came across as unnecessarily harsh. I just want to be clear that my issue was with the reasoning, not the position, and not the individual.
Thanks! and yes, it's often the case that those different levels get tangled up in the reader's mind, even if the commenter was clear in their own mind. Basically, intent doesn't communicate itself - it has to be disambiguated.
Following the guidelines is the best solution of course :)
What about GLD (SPDR)? I've been investing in a gold derivative for nearly a year and haven't touched a physical object yet.