Blockchain technology has upended traditional finance. To outsiders, take your pick of cryptocurrency and it appears you are doing nothing more than pulling the handle on a slot machine. The payouts are just as large too if you pick the right token and pay as little as possible. This is the reason why a couple of provisions in the Infrastructure Spending Bill were so fraught with danger to this new industry. The first was aprovision requiring crypto-miners, developers, wallet companies and others who deal with tokens to register and send 1099’s to those who bought, used or sold them. This directly impacts the anonymity of using currency rather than say, a check, to purchase goods or services. The second is more egregious and when combined with the first provision spells out why and how Uncle Sam will end the panoply of tokens and possibly institute a virtual dollar as the preferred cryptocurrency in the US.

The recent infrastructure bill that passed the House this week contained a provision requiring “Brokers” in cryptocurrency to be knowledgeable about their customers.They would be required to obtain their customer’s name, address, phone numbers and Social Security numbers. Resulting transactions that the broker performs would result in a 1099 being sent to the account owner at the end of the year, much like a stock. Owners of cypto had to know this was coming after much debate during the Trump administration. Recently,SEC chair Gary Gensler stipulated that nearly all cryptocurrencies are a security and should subject to reporting of initial purchase date and price, quantities and sale date and price.The market has had time to digest this and, well frankly, expected it given the large bull market that has hit tokens. If there is income, you can be sure that Uncle Sam wants his cut. There was a second provision waiting in the wings that makes things far worse.

A recently added piece of text now makes electronic assets including NFTs and cryptocurrency subject to 26 USC Section 6050i. This section of the Internal Revenue Code governs cash transactions of over $10,000. This means that that should an asset or collection of assets used in a transaction be valued at over $10,000, it must be treated as cash. If a person in the transaction were to conceal or be unable to provide the buyer/seller information associated with this transaction, they are guilty of a felony punishable up to 5 years per offense. Not only that, no person may assist in an effort to make a transaction fall under the $10,000 limit, have omission or misstatement about the assets or block a person in the transaction from filing with the IRS. If they do, that’s the same 5-year felony. If this sounds like a provision to prevent money laundering, it is!

Once President Biden signs the bill, the Treasury will have until 2024 to implement these rules. Typically, this is a very public process where a Notice of Potential Rulemaking (NOPR) is posted. Industry stakeholders and the general public are allowed to provide comment on the rules, regulators are supposed to take them under advisement and then provide the actual rule. Two years is a very accelerated timeline for many administrative regulations. Treasury Secretary Janet Yellen has already stated that she wants to tax unrealized gains. Now that NFTs and cryptocurrency are now deemed “cash”, it would be a very small stretch to implement a provision that any increase in a virtual asset’s value is not an unrealized gain but rather akin to a dividend or interest payment. Dividends and interest are subject to taxation even when the initial asset is never sold. It is my belief that Secretary Yellen will deem any increase in value in any token or cryptocoin as such and taxable at year end.

Should the US Treasury or Federal Reserve create the virtual dollar, how do they get everyone to convert to it? There are several stable coins already in existence and how does one go about seizing them without the lengthy battle over private property. Also, the developers of the winning stable coin get a nice payout from Uncle Sam. Enter President Biden’s nominee for Comptroller of the Currency Saule Omerova. Ms. Omerova has proposed a shadow unelected Congress called the National Investment Authority as well as a virtual currency system. In a recent white paper titled “The People’s Ledger: How to Democratize Money and Finance the Economy”, she details that the Fed should hold the actual bank accounts of people while community banks are merely pass-through organizations accepting physical deposits. She also advocated for the virtual dollar as a means of commerce and controlling the population’s spending habits.

“The core idea here is simply to allow all U.S. citizens and lawful residents, local governments, nonbanking firms and nonbusiness entities to open transactional accounts directly with the Federal Reserve, thus bypassing private depository institutions. In this sense, it is a variation on the familiar FedAccounts – or FedCoin or “digital dollar wallets” etc. – theme.”The People’s Ledger

Should a virtual dollar be created with bank accounts at the Federal Reserve, Treasury Secretary Yellen may simply write a letter stating that virtual dollars are exempt from 6050i as the Fed already has the person’s information on file. This is explicitly allowed in the statute. This gives the virtual dollar an enormous market advantage while reducing other electronic assets to transactions conducted entirely outside the United States. These transactions are exempted from 6050i per statute. No vote from Congress or action by the President required. The American Public will have been bypassed and robbed at the same time.

If Ms. Omerova is confirmed, and it thankfully doesn’t look good, she could certainly create the provisions and developer documents necessary to create the virtual dollar. The Comptroller of the Currency was actually created to supervise banks and implement a uniform bank note. It is up in the air if the Comptroller could unilaterally require the Fed to create bank accounts for individuals or implement other ideas from “People’s Ledger”. Most of this would have to be passed in Congress which is looking wearily at the 2022 midterms. Even if Ms. Omerova’s nomination is withdrawn or voted down, Secretary Yellen certainly now has what she needs to tax all cryptocurrency accounts on an annual basis as they are now fungible “cash”. Much like the Sales and Local Taxes (SALT) cap, once these revenue generators are created, they are very difficult to get rid of.

So how can the crypto community fix this or prevent it from coming to fruition? There are two alternatives left. One is to flood the NOPR process with comments and possibly cause enough rancor to slow the rule implementation. Second, and more importantly, help elect Libertarian Party members to Congress. Please hear me out on this.

The Republican Party is rather clueless when it comes to crypto and has a similar outlook on the industry. They may tax it less but they still want to tax it. Only the Libertarian Party understands that your cryptocurrency, and certainly your NFTs, have value and you are entitled to keep it! It’s the value the community or market places on it and it shouldn’t be devalued or cancelled by our Federal Government. They had no part in creating it.

Think of it this way, if I trade a rare football card for some rare baseball cards, there’s no taxable event and no records. Trading these assets should be no different. The Democratic Party has now instituted a system where I must pay taxes both on the gain in value of the card from when I bought it AND when I exchange it for something else. I must now also tell the government what other cards I own tell the government who I traded with. If I don’t, I face 5 years in prison. Libertarian Party candidates run on issues like these and they need this community’s help to get elected. Republicans will assuredly do nothing or make it even worse.

Enjoy the crypto-boom while it lasts. Help where and when you can. If things don’t change, please don’t be stuck in 2024 holding crypto-coins that will be subject to heavy reporting requirements the next time you make a trade or purchase.

The post Making Blockchain Infrastructure appeared first on Larry Sharpe, Libertarian.

Comedy club owner Dani Zoldan filed suit against the Cuomo Administration for unfair treatment. With help from Larry Sharpe, the 2018 Libertarian Party candidate for Governor and host of The Sharpe Way, he retained Constitutional Attorney James Mermigis to reopen Stand Up NY following New York restaurant and bar guidelines.

Venues in New York have been shuttered since the pandemic began, while restaurants, bars, bowling alleys, pool halls and movie theaters have been able to operate. Venue owners have received no guidance as to when they can reopen. Many New York institutions have already closed permanently including Dangerfield’s—the legendary comedy club which opened in 1969.

Sharpe convinced Zoldan to sue the Cuomo Administration after seeing Zoldan’s efforts to revitalize the comedy industry by holding pop up shows in parks, rooftops, houses of worship and train stations. Elon Musk’s January 13th “legalize comedy” tweet fortified his confidence to move forward.

“When I heard that Stand Up NY, a wonderful venue that my campaign used often in 2018, fell victim to Governor Cuomo’s stranglehold on small business, I knew that I had to help.”

Larry Sharpe

The Sharpe Way team worked with Stand Up NY to retain Attorney James Mermigis of the Mermigis Law Group, P.C., who has a history of success against Cuomo in court. Known as the “Anti-Shutdown Lawyer,” he has filed over half-a-dozen lawsuits against the state, Governor Andrew Cuomo and NYC Mayor Bill de Blasio on behalf of small businesses in New York including theaters, pool halls, family entertainment centers, restaurants, and gyms. Mermigis filed a class action on behalf of 1,500 gyms in August. His lawsuit was instrumental in opening gyms throughout the State of New York, as Governor Cuomo issued guidance just days before oral arguments. Mermigis defeated Cuomo and his 17 pool hall clients were granted an injunction when a State Supreme Court Judge in Syracuse, NY found no rational basis for distinguishing between billiards halls, on the one hand, and bowling alleys, casinos, large stores, restaurants and airports, on the other hand. This victory was the only case to defeat Governor Cuomo on a “rational basis” theory in the State.

“In New York now, Saturday Night Live is doing live shows every week, Jimmy Fallon is doing live shows, Jazz Supper Clubs are open and restaurants with incidental live music are open but Stand Up NY is still shut down. The State’s refusal to open Stand Up NY amounts to an unconstitutional content-based restriction on speech. The State has no power to restrict expression because of its message, its ideas, its subject matter or its content.”

James Mermigis

The trio announced the lawsuit on The Sharpe Way show online, on Monday March  1, 2021. In addition to the lawsuit, they are asking people to support the reopening of Stand Up NY and to sign the petition at LegalizeComedy.NYC.

About Stand Up NY: A Manhattan landmark, Stand Up NY opened in 1986. Comics like Chris Rock, Jerry Seinfeld and Louis CK are regulars in what New York Magazine calls the “incubator of stand-up nobility.” Tucked into a residential block of 78th Street on the Upper West Side, it features superstars as well as the brightest young talent in the business.

About The Sharpe Way: The Sharpe Way show was founded by Larry Sharpe, the 2018 Libertarian Party candidate for Governor of New York  to help heal the nation’s political divide between liberals and conservatives.

PRESS CONTACT
media@standupny.com
(646) 229-1650 (voice/text)
Dani Zoldan

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Small Business Ownership

Larry said that there is a systemic lack of ownership that’s noticeable in lower-income, Black and Brown communities and among immigrants. Business-minded people come to the United States with a high level of enthusiasm, and visions of a better life than the one they left. People everywhere imagine owning their homes and starting businesses. Yet, our system of governance puts major obstacles in the way of their success.

Here in New York, they are faced with a wall of regulations and occupational licenses for everything you can imagine, from braiding hair at a whopping $20,000 required spend on education and other prerequisites, to its crackdown on unlicensed dog-walkers. Seriously?

How is a person expected to respond to such entrepreneurial spirit-killing over-regulation? Unsurprisingly, Larry says that with limited choices, these impoverished people begin looking at high-risk activities and crime. Those people who turn to crime will prey on their neighbors, where these crimes often go unreported, particularly in immigrant communities where undocumented people fear deportation, or where previously incarcerated individuals don’t want to increase their own risk of recidivism. According to Larry, this endless cycle continues, increasing incentives for human trafficking, the illegal drug trade, protection rackets, and sweatshops.

Larry believes that one approach to reducing poverty in these communities is by creating incentives for business ownership. For example, licensing requirements can be replaced with non-compulsory credentials. A hair-braider can just braid hair if they want to, without a license, or they may take the courses necessary to qualify for credentials in which some people may find value. This is especially true for low-risk jobs that do not involve dangerous activities. In this regard, a hair braider or dog-walker may get to work right away to earn an honest living, and they may also choose to get credentialed after they have the necessary funds in hand. As a result, consumers have more choices and can make rational decisions. They may choose the lower-priced, non-credentialed dog-walker, or they may choose to pay more to the dog walker who took a 12-hour class on animal care.

Home Ownership, and Poverty

According to Larry, wealthy, and often middle-class people are able to give their children an edge with the savings they accumulate through homeownership, but impoverished people have no corresponding equity. This leaves their children in a cycle of dependence and poverty, where money spent is money lost, as is the case with rent,  and a community that encourages the use of government programs that are funded by taxpayers.

Larry wants to see these communities thrive. People from every background are eager for homeownership, business ownership, and self-ownership. Yet because of barriers to ownership, people stay on welfare and stay poor.

Larry believes that public housing should have a path to ownership, too. Renting housing to low-income families is a bandaid, even when rental costs are low. Instead, Larry believes that we should give people the chance to purchase their public housing units. Instead of throwing away money on rent every month, people can invest in their property. In addition, when people own their property, they take better care of it. This is a win for society, and for the new homeowner. London already has a similar model for homeownership, where low-income families can have shared ownership in property, without investing the full market rate.

Fixing Families and Prison Reform

Larry Sharpe applies this concept to the idea of taking ownership of your life. This is most apparent in Brown and Black populations, where men are incarcerated at a considerably high rate. These people–predominantly men get convicted for nonviolent crimes like drug-related offenses, resulting in fatherless homes. The other people in these populations who actually have productive lives are incentivized to work for the government, where their lives aren’t self-owned, either.

Larry believes that we can do a lot of good by eliminating the fear among potential employers when it comes to hiring less-skilled, minority, and immigrant employees. Presently, employers may be targeted by the government if they fail at complying with any number of regulations, and so they hire the “safer” employees.

Want to know more? Watch the video, below:

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The goal of IDAs is admirable. We can all agree that a strong economy and job growth is a positive thing. But there are many problems with their implementation and execution. The idea that businesses will be drawn to certain areas based on incentive packages and tax breaks holds some merit, but programs like these are no more than crony capitalism, or corporatism.

Crony capitalism is what happens when businesses profit from having money given to them (or having less taken from them in taxes) through a deal between the business and the government. Instead of taking a certain amount of risk, they are insulated from risk by your tax dollars. This is how an IDA works. For example, an agency may lease tax exempt property or issue bonds to a company that is planning on moving to or expanding in that area. Giving these benefits to big corporations while taxing local businesses makes an unequal playing field, giving advantages to special interest over small businesses. Not only that, but it shifts the property tax burden from big businesses to working families.

But IDAs have more problems than simply the underlying corruption. The criteria that decide which types of businesses get these benefits are often inconsistent. There is also a history of inaccurate reporting and billing. For businesses which are exempt from certain taxation, they make PILOT agreements with the IDA for payments overtime. The PILOT (payments-in-lieu-of-taxes) agreements in 2005 underbilled more than $51,000 from some businesses and overbilled more than $38,000 from others. These mistakes were due to vague term agreements and inadequate communication and monitoring.

This mismanagement is concerning, but not surprising. Government agencies are notorious for their inefficiencies. But worse, the main goal of IDAs, to create additional jobs than would be created without them, isn’t even achieved. Many of the jobs claimed to have been generated by IDAs would have been created without agency involvement.

The problems with government claiming it creates jobs are that 1) government does NOT create jobs. Entrepreneurs do. And 2) if the main goal is to create jobs (not to finish a project, or to sell a product/service), it will be at a loss of money and time. For instance, it would create a lot of jobs to require everyone to use spoons instead of shovels—thousands of digging jobs would be “created.” But that would be a drag on the economy as all of those people could instead be pursuing something more productive. Thus, IDAs have no incentive when doling out tax breaks to reach any goal efficiently, if the goal of “job creation” appears to be accomplished. The use of IDAs for this task is unnecessary and, at the least, must be scaled back.

So what can government do to make it easier for job growth to happen? Making the market as free and open as possible by making it easy for local businesses to open will increase job growth. After all, businesses are simply people who believe they have an idea, product, or service that will help others so much that people are willing to pay them for it. How will job growth happen? By getting government out of the way of people who want to offer a product or service to others at better price or quality than what is currently available.

As one example, New York should stop raising the state minimum wage. Every time the wage is raised, it makes it more difficult for people to hire employees to help them offer better products and services to the public. With a high minimum wage, businesses can’t afford to keep as many employees, automation takes over, and it makes it difficult for people to start at entry-level positions. It makes it nearly impossible for low-skilled workers to find work. And it also makes it hard for start-up companies to compete with large corporations who can afford to pay the higher wages.

Another way to keep government out of the economy is to eliminate occupational licensing. Under the current rules, if people want to start a business braiding hair, for example, they must go through thousands of hours and dollars to get a cosmetology license. This is unnecessary and no doubt stifles business development. Protecting consumers from accidents or other hazards is important and market regulations would still be in place to do that.

But current state regulations are too burdensome on business owners like a hair braider. And the thousands of dollars that need to be spent to obtain a cosmetology license will get passed down to the consumer to balance out that cost. So if the hair braider didn’t have to spend the money to obtain the license, the service would most likely be less expensive. Also, according to the Obama administration, these burdensome regulations keep employment down for licensed professions.

Don’t listen to a politician when they tell you they created X amount of jobs whether because of IDAs or some other incentives. As John Stossel writes, “jobs come from government getting out of the way and letting employers produce goods”. Government leaders need to empower business owners to run their businesses the way that works best for them.

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