Does President Obama Want to Confiscate Your Gold?

By Travis Johnson, Stock Gumshoe, October 19, 2010

Here’s how the headline reads for this latest teaser from the Taipan folks, for Zachary Scheidt’s New Growth Investor:

“Urgent Gold Investing Alert:

“President Obama Wants to Confiscate Your Gold

“Buried deep inside the healthcare reform bill is a law that could set the stage for the federal government to take away ALL your gold. By 2012, it probably won’t be safe to own gold bars, rare coins or gold ETFs.

“But there is one type of gold investment protected from this law…

“And it could turn $10,000 into $97,500 in the next 18 months.”

Sounds intriguing, right? They never mention black helicopters, the New World Order or the bizarre “Amero” claptrap about a new NAFTA currency, but with the political vitriol at such a peak they don’t really have to — they know that just mentioning Obama and the health care plan will make people furious, especially the core target demographic for investment newsletters (that may well be you, too — white men who are richer than average and in their 50s-70s).

But the copywriters here essentially build a case for gold, which we probably all know (in short, the race to competitively devalue every currency on earth is leading to increasing gold and silver prices as the only traditional “currency alternative”, and the emerging world, particularly China, is buying up gold to diversify away from the dollar and bring their gold reserves up to the standards of the rest of the world’s reserve banks).

On top of that, however, they add this confiscation threat — this time the threat is based on the health care bill, which does include a provision that makes coin trading more of a hassle (more on that in a minute) … but to be honest, copywriters haven’t ever really needed a “real” threat to conjure up thoughts of gold confiscation. They just bring up the memory of FDR in the 1930s, making private gold ownership illegal and forcing everyone to turn in their gold.

Of course, that was a very different turn of events than we’re probably going to see again in our lifetime: The US was on a gold standard at the time, so in effect what FDR did was call in all privately held gold (mostly coins) so that he could devalue the dollar and set a new gold standard.

It’s much harder to imagine a rationale for government confiscation of gold at this point — FDR had a purpose, one that we might not agree with, but, to simplify: he couldn’t devalue the dollar and pay for the New Deal without confiscating gold. As you might be thinking to yourself right now, the Federal Reserve and the US Government need no additional rights and none of your gold in order to devalue the dollar — they’ve been doing it for years and will probably continue, regardless of whether or not you have a few gold coins buried in the back yard. The ad goes into far more detail on this, including the re-telling of that FDR story, and the reminder that the “right” to own gold is actually a privilege that Congress can take away.

Taxing and tracking the “gold economy” is another matter, however, and that’s where this threat comes in from the healthcare bill. Here’s how the teaser describes it:

“The official law is in section 9006 of the Patient Protection and Affordable Care Act.

“Very few people have read all 10,909 sections of that bill and even fewer understand the ramifications of section 9006 on gold.

“The healthcare bill has nothing to do with gold, which is exactly why Congress hid this law there.

“They certainly weren’t going to put out a press release when they’re taking away the rights of private citizens.

“The law starts by facilitating the taxation of anyone wishing to sell over a certain amount of physical gold, even rare collectible coins.

“It also makes it easier for the federal government to keep track of who owns gold and how much they own.

“And it sets the stage for removing your right to own gold.”

You may well have heard of this provision before — I’ll personally go out on a limb and say that it probably started as some Congressional staffer’s idea for how to cut down on tax cheats, but the way the final law ended up being worded means that it creates, at the very least, a logistical nightmare for small businesses and the self employed. That provision of the law, intended, I’m sure, to help pay for the expensive health care legislation, essentially ups the requirement for filing 1099s for transactions — it keeps the $600 ceiling that’s already in the law, but instead of limiting it to services and exempting corporations it includes tangible goods and any business transactions.

That would serve to cut down on tax cheating if people followed it, I imagine — I’d have to file a few dozen 1099’s myself for various goods and services I pay for during the year, and I’m sure I’d receive a lot more 1099s from people and companies with whom I do some minor amount of business. I, of course, already report all those things on my taxes with complete openness, but I’m sure some people do not (no, I’m not looking at you. Why would I be looking at you?)

But it would also create a real stimulus for the accounting and bookkeeping industry, since keeping track of all these commercial relationships and filing such minor transactions with the IRS would dramatically increase the paperwork behind a lot of businesses. And of course, the IRS is probably in no shape to handle this additional burden, they already lack the ability to catch the people who brazenly cheat on their taxes.

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It’s also got pretty much everyone in an uproar on both sides of the aisle, and I’d wager that we’ll see some dramatic license in the way this law is enforced, or a significant change in the law, before it goes into force on January 1, 2012. But if the law does go into force as written, what happens?

Well, it probably means that if you buy a gold coin you have to report it on a 1099 — assuming that your total transactions w