ANOTHER UNNECESSARY FIGHT—TAXING CRYPTOCURRENCY
Another unnecessary “war” caused by the federal income tax is starting to heat up in the United States. This war is over taxing cryptocurrency. We read about people whose initial investment of $10,000 in Bitcoin a few years ago is now worth $250,000 or more.
The interest in cryptocurrency has grown in direct proportion to people’s fear of government and the way that they are printing money. Cryptocurrency was designed to make it difficult, if not impossible, for governments to keep track of who owns it and to whom it may be transferred. It is becoming increasingly popular with people who want to keep government out of their finances.
Obviously, this frightens many governments because it severely impairs their ability to monitor their citizens and tax them on these transactions. The 2020 1040 form will have this question on the front page right under the name and address blocks: At any time during 2020, did you receive, send, sell, exchange or otherwise acquire any financial interest in any virtual currency? The taxpayer must check the box “Yes” or “No.”
If you don’t answer truthfully, you are in violation of Title 26, United States Code, Section 7206(1) False or Fraudulent Returns. It reads:
Any person who —
Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.
Violating this section is a felony, and as you can see, the penalties are severe.
HOW TO TAX CRYPTOCURRENCY?
The IRS has determined that cryptocurrency is not really currency but property. Therefore, when cryptocurrency is sold, you are taxed on any gain you have earned. For example, if you purchased a Bitcoin for $1,000 and sold it two months later for $2,000, you would have a short-term capital gain of $1,000 which would be taxed at ordinary income rates. If you held it for over 12 months, long term capital gains rates would apply.
Under the income tax, any gains on the sale of investment property, like stocks, are taxable. When you report these gains to the IRS, you must, of course, show proof that the amounts you reported are correct. That’s easy for things like stocks. Your broker provides this information both to you and to the IRS.
However, it’s an entirely different story with cryptocurrencies. Unless you grant them access to your cryptocurrency wallet, there is no way that the IRS can verify from other sources that the gains you report on cryptocurrency transactions are correct.
HOW DOES CRYPTOCURRENCY PRESERVE PRIVACY?
Bitcoin and several other cryptocurrencies operate by using what is called a blockchain—a type of database. However, unlike many other databases, blockchain places each cryptocurrency transaction into a “block” and that “block” is linked (chained) to the next transaction. All of these transactions are handled through a group of privately owned computers. In fact, every crypto transaction ever done can be seen on these computers.
In most cases, obtaining cryptocurrency is as easy as going to an exchange and purchasing the currency of your choice. You create a “wallet” which allows you to establish and track a secret digital key that will give you access to your currency. Since it is a secret digital key, you can execute private transactions with other currency holders who have their own secret digital keys.
For example, if you want to purchase something using cryptocurrency, you simply transfer currency from your wallet to the seller’s wallet. Although these transactions can be seen publicly, there is no way to identify who owns the wallets.
The other part of Bitcoin that appeals to many is that there is a finite number of Bitcoins that can be created. Once that number is reached, it cannot be exceeded. This is in sharp contrast to the U.S. dollar and most other currencies which can be created at the whim of government.
MAYOR OF MIAMI, ELON MUSK AND OTHER “SMART INVESTORS” ON CRYPTOCURRENCY
Miami Mayor Francis Suarez is pushing to make bitcoin a part of his city's economic future. In this interview published at Axios.com, Mayor Suarez said:
- For people who invest in bitcoin, the allure is precisely that: It's not backed by a central government. So, a central government can’t manipulate it.
- Obviously, the federal government has the ability and the right to have their currency and to create whatever kind of policy that they believe will promote American values.
- And then, that's the beauty of capitalism, people get to decide which train they want to be on.
- Elon Musk had invested nearly 10% of Tesla’s cash reserves into bitcoin.
- Insurance giant MassMutual, in business since 1851, purchased $100 million of bitcoin for its general investment fund and acquired a $5 million minority equity stake in institutional crypto manager NYDIG.
- Square, PayPal and Visa all announced investments and ventures allowing bitcoin payments on their platforms.
- Business intelligence firm MicroStrategy said in December it had purchased a total of 40,824 bitcoins, current value $1.7 billion, and had sold bonds to raise the capital to do so.
- Douglas Borthwick, chief marketing officer and head of business development at crypto trading platform INX, said was not just distrust of the dollar but distrust of all fiat currencies manipulated by government that makes cryptocurrencies so attractive.
Bitcoin is no longer just something promoted by computer geeks who never leave their basements. It has now gone very mainstream and has a market capitalization of $1 trillion. This rapid growth in the acceptability of cryptocurrency is what frightens people like Treasury Secretary Janet Yellen.
They are understandably fearful that an increasing number of unverifiable cryptocurrency transactions will ultimately lead to a reduction in tax revenue. And they don’t particularly like what the popularity of cryptocurrencies says about people’s faith in their government.
Presently there are a number of people who purchased cryptocurrency as a hedge against the devaluation of government-created currencies. They were also motivated in large part by the desire to have something that a government couldn’t arbitrarily take away.
Many of these cryptocurrency owners never had any intention of using cryptocurrencies as a way to evade their income taxes. They always tried to lead their lives in accordance with the law and with common sense. Now, they are being forced to make a choice—do I report on my 1040 that I have a cryptocurrency account or do I violate the law?
Under the FAIRtax, the above choice is no longer necessary:
- There is no income tax and, thus, no income tax forms to be filed with the federal government under penalty of perjury.
- Investment gains are not taxed until they are used to purchase new goods and retail services.
- There is no more IRS to abuse and pursue American citizens.
- The economy will boom.
- U.S. jobs will grow because our tax code no longer favors imports over American-produced products.
It is time that the American people demand that the tax code by used exclusively for raising the revenue needed to fund the government. The tax code has no business trying to impose standards of conduct that change every time the leadership of Congress changes.
Now, many otherwise law-abiding Americans will likely choose to file an improper tax return—not because they are trying to evade federal taxes, but because they believe that they have a right to protect themselves against a government that is destroying the U.S. currency.
When the U.S. Constitution was written in 1787, Thomas Jefferson was in Paris. When he received a copy of it, he wrote the following to William Stephens Smith, the son-in-law of John Adams:
And what country can preserve its liberties if their rulers are not warned from time to time that their people preserve the spirit of resistance? Let them take arms. The remedy is to set them right as to facts, pardon and pacify them. What signify a few lives lost in a century or two? The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.
We can “preserve the spirit of resistance” not with bullets, but by replacing the corrupt and incomprehensible federal income tax with the FAIRtax.
Many may justify not disclosing their ownership of cryptocurrency by referring to the quote from Martin Luther King.
One has not only a legal, but a moral responsibility to obey just laws. Conversely, one has a moral responsibility to disobey unjust laws.
The only solution—ENACT THE FAIRTAX. By eliminating the income tax, the FAIRtax eliminates the IRS and the abuses that come with it. With the FAIRtax, you pay your federal taxes at the cash register when you make retail purchases of new goods and services. No tax returns. No audits.
If you have friends who don’t know about the FAIRtax, send them to FAIRtax.org. Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.
Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.
Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
Is it hopeless? When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?”