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.

Using propaganda with half-baked ideas, politicians tempt us with promises of financial or physical security. They can never deliver those. Worse, the price they ask is your freedom.

By Dan Smith

“Power tends to corrupt”, Lord Acton tells us.  When you give away the power to run your own life as you see fit, politicians tend to use that power to look after their own needs, first and foremost.

The lesson is that you should be suspicious of any slogan or philosophy which asks you to hand over that power. A great many popular political philosophies ask you to do just that. Be wary of such potentially bad philosophy. It’s everywhere and politicians are trying to get you to vote for it, and then use it against you.

Many politicians and pundits will claim they are not linked to any philosophy or ideology. They will claim they just do “what works.” Such supposed pragmatism is often just what sounds good in the moment, as long as you don’t ask too many questions or look at where similar ideas have been tried before. But they’re rooted in philosophy, nevertheless.

Politicians and “thought leaders” will propose all manner of slogans, policies and ideas to see what gets accepted by the public. They drop the ones which don’t catch on and pursue those which the media or their constituents find appealing. While this might sound like representing the will of the people, it really is just groping around trying to find a way to sell bad ideas. Many of the ideas are old failures, repackaged to appear as though they’re new and worthy of trial.

Further, the ideas seem to benefit politicians and their friends a lot more than you or me.

These slogans tend to have one thing in common. They want to cut a deal: you give away more of your personal freedom and the money you’ve earned and, in return, the politicians and elites promise they’ll punish some group you don’t like or make sure you’re safe and taken care of.

That’s been tried, many times and in many forms. It doesn’t work. It’s a raw deal—every time.

Here are a few of those sentiments and philosophies which have been popular over the years [along with commentary about some underlying issues].

• “It takes a village” – originally an African proverb about raising children, Hillary Clinton popularized the idea that modern society should be run like a small village, where everyone shares the burdens of everyone else and village elders (politicians and elites) make decisions for the villagers [forgetting that the elites and elders whom you’ve never met have no idea what’s best for you and your family; oh, and we’re not living in a small village!]
• “Promoting family values” – strong families tend to produce productive and kind people, so our laws should subsidize and enforce such a morality, while punishing deviant behaviors [such as defining marriage to that written in scripture, promoting the subprime mortgage crisis and unleashing the brutality of the failed War on Drugs]
• “You didn’t build that” – Barack Obama’s idea that no one is successful on their own—the public roads deliver products and the public schools trained you and your workers, so the successful should “give back”—offer to forfeit more of their income to the collective who support them [forgetting the fact that taxes and fees were already paid for those things; and you weren’t given your success—you risked, sacrificed, created value and exchanged that value freely . . . so there’s no obligation to ‘give back’]
• “Protecting our vital national interests” – as Secretary of State Rex Tillerson has said many times, the United States should intervene in World affairs if our national interests are at risk [our “interests” are usually a nebulous concept, but seem to involve oil or allies who purchase our weapons systems]
• “The paradox of choice” – life today has too many options and choices, you become confused and make bad choices [and you should surrender many of your options—to politicians and intellectual elites who somehow know best]
• “The wealthy become indifferent to human suffering” –social experiments show that the wealthy lose touch with other human’s problems, they are bad people and politicians and elites should help them be better people [as if politicians and elites corner the market on goodness; and despite the vast amounts of charity that the wealthy contribute]
• “We must be policeman of the World in order to spread American values”—the United States is the indispensable, exceptional nation which must force its values on other nations [often through occupations, hand-picking dictators, election tampering, bombings, invasions and buying foreign officials]
• “Inequality of outcomes is wrong and dangerous”– pointing to the French Revolution, warriors for economic justice claim that inequality of outcomes is unjust and will tear our society apart; they wish to redistribute wealth to correct for such injustice [despite the curious lack of historical examples of free societies facing these dire outcomes; forgets the incredible standard of living our “unjust” system has created; forgets that redistribution locks people into dependency and stunts investment; and doesn’t consider that a large, active state may be the cause of much of the inequality]

There are other examples which don’t lend themselves directly to policy, but which lay a foundation for permitting the government to take away more of your money and freedoms. There’s today’s popular postmodern philosophy claims that there may be no reality, so one can justify any policy or action which feels appropriate.  There’s also the view that science is showing that there is no free will—our decisions are predetermined, so you might as well submit to your fate [which is apparently defined as what politicians and elites have prescribed for you].

Note that these are simplifications of ideas summarized by someone who finds them largely repugnant. So, you should research and consider them yourself. But be sure to look at the examples where they’re put into practice—because reality is the best yardstick of a philosophy’s worth.

But looking at these slogans and philosophies, one notices a pattern:  you should not live your life as you see fit. Rather, elites and politicians should be making critical decisions for you and everyone else.

The propaganda is designed to sell you on that idea—to get you outraged . . . to say, “something ought to be done!”. Proponents of these ideas want you to surrender your rights and give elites the power to take some portion of what you’ve earned and run ever-larger portions of your life for you.

They use guilt, fear, pride, envy or anger—primitive emotions to keep you from using your logic and reason which might have you question the half-baked, self-nullifying behavior of giving such people more power over you.

They all presume you are a tool of the collective and can be directed by elites to the presumed benefit of the collective. In such a World, your needs and desires are secondary, at best. Many of the same people who claim to fight for diversity also fight to make outcomes and our lives uniform. You are being asked to forsake logic and reason. Your individuality is lost as you become a pawn of the collective.

What could go wrong?

People want “justice”. That’s a good and proper thing. But there’s a huge difference between:  justice in the form of being left alone to pursue your dreams, versus the justice of pursuing equality of outcomes. The former promotes individuality and leads to prosperity. The latter is a dead end. It gives power to people who will invariably use it to benefit themselves. Yielding freedom doesn’t even achieve its primary goal—as elites always end up with better outcomes.

Freedom is the one thing that works, again and again.  People free to make their own social and financial choices, and free to make and learn from their own mistakes, tends to generate the best outcomes.

Question these slogans. Hold onto your options. Consider choosing freedom.

The post Bad Philosophy appeared first on Larry Sharpe, Libertarian.

by Dan Smith

If energy policy makes your eyes roll back into your head, I get it. And if all the regulations, bans, subsidies, taxes combined with all the different forms of energy leave you confused, I get that, too.

It’s likely by design.

That’s because the players probably wouldn’t like you taking too close of a look at the big bucks at stake ($40 billion per year in New York) and how it’s all tightly controlled by state and federal officials—giving way to lots of favors and taxpayer handouts, as we’ll see.

One should probably start with New York’s 2015 Clean Energy Standard. By 2030, 50% of electricity generated in New York will be from renewable energy sources: wind, solar, hydro, nuclear, biomass, et. al., up from 24% in 2016. That’s a big gap to close, so it’s phased in starting in 2017 and grows each year until 2030. Companies which produce non-renewable energy—oil, coal and natural gas, face a significant and growing tax (called “alternative compliance payments”).

The Clean Energy Standard is a big reward for energy companies to immediately start increasing investment in wind and solar, among others. Renewable energy technologies are being given special privilege over coal, oil and natural gas, who are quickly facing a big, new cost for failure to switch. Such an advantage is a call for investment money to start rolling in from banks and other private investors to fund the expansion into renewable energy in New York.

Unfortunately, there’s one big investor who is funding a lot of this: New York taxpayers, via Governor Andrew Cuomo.  

Governor Cuomo has promised $5 billion of New Yorkers’ tax dollars to the Clean Energy Fund—subsidies which are being given to renewable energy firms.

Setting aside whether or not you like the rule requiring more renewable energy, this situation begs the question:

Why do we need both . . . the Clean Energy Standard and also taxpayer funded subsidies?

Put another way, the Clean Energy Act was put in place to reward those who invest in Governor Cuomo’s vision of moving toward renewable energy, so why must taxpayers also payoff renewable energy companies now, before the fact, as well?

I believe there is no good reason. It’s just another excuse for Governor Cuomo to hand out more taxpayer money to cronies and for him to gather more power.

But there’s got to be a stated reason. New York renewable energy advisor, Phoenix Energy cites a common storyline, “generators of renewable sources . . . warned they would sell their generated energy to other states, and wind farms even went so far as to threaten authorities with a complete shutdown if subsidies were not granted . . . and New York Governor Andrew Cuomo announced that 11 large renewable energy projects would be getting a total of $360 million in subsidies.”

Did you get that?

The companies who know they’re needed under Cuomo’s law, who were given the huge business advantage in 2015, had the audacity to come along in 2016 and threaten New Yorkers’ access to electricity if they didn’t get taxpayer money to subsidize them, as well.

They held New Yorkers hostage. Andrew Cuomo capitulated.

Let’s examine the threat. There are a great many problems in believing it. It’s easy to imagine this was all designed to get Cuomo’s cronies a $5 billion taxpayer payday.

But taking the claims at face value, the first problem is that wind and solar already have been receiving generous federal subsidies which should have seen them through their industries’ formative years. Why should New Yorkers pay more on top of that?

Further, individuals and businesses themselves can receive New York tax incentives for installing things like on-grid solar energy facilities, smaller, off-grid residential and commercial solar installations and small wind turbines, thereby getting some taxpayers to fund expensive panels and installation  for others.

But what’s most curious is that it makes no sense for them to move away from New York at the moment they were being handed a big regulatory advantage—one that would allow them to undercut competitors and/or raise prices when their non-renewable competitors had to pass their compliance tax onto customers.

Wind and solar weren’t alone in the “take New York hostage” game. Separately in 2016, several upstate nuclear power plants threatened to shut down if they didn’t get their own subsidies. Always generous with New Yorkers’ money, Governor Cuomo rewarded them with $500 million per year going forward. Reports are that the nuclear plants’ excuse for requiring the subsidies is that they can’t compete with another renewable energy source, biomass.  

This is becoming insane. Why should New Yorkers subsidize one renewable energy source and punish another? Isn’t the goal getting renewable energy . . . does it matter which one?  

And don’t lose sight of the irony here—nuclear is a less efficient and more costly than biomass and Andrew Cuomo has forced New Yorkers to back the less efficient technology. This isn’t isolated. It’s happening across the board, as New York’s energy efficiency has fallen from third in the nation in 2013 to seventh in 2017, and is expected to continue falling under these policies.  And inefficiency means higher energy prices, on top of the big tax bills Governor Cuomo is leaving us with.

One would be quite reasonable to start questing these policies and believe that taxpayer money could be better spent elsewhere. Perhaps someone should consider investigating how this all came about.

But is this the way one earns goodies from Andrew Cuomo—threaten to do something deeply illogical and hope New Yorkers don’t recognize the silliness of your empty threat?  Do we have to hand out taxpayer money and also see higher electricity costs as the “benefit”?

Sadly, it appears this is the way business is done in New York.

The subsidies themselves make no sense to anyone with a basic understanding of economics.

Governor Cuomo has piled billions in New York taxpayer funded subsidies on top of favorable mandates and rules which are on top of a many years of other federal and New York state subsidies which themselves run into the tens of billions of dollars.

And basic economics also instructs us that energy prices are very likely to go up as the non-renewable tax is passed on to consumers and wind and solar are free to raise their prices in response. When combined with our falling efficiency, that spells trouble for New Yorkers’ electric bills.

So New Yorkers can expect to get hit now and later, just as Californians have with the nation’s most-aggressive renewables programs and, not coincidentally, the nation’s highest electricity costs—paying 41% more than the national average.

These policies make sense only in the world of corruption and wasteful spending of Albany under the direction of our governor, Andrew Cuomo.

The post Energy Firms Hold NY Taxpayers Hostage, Cuomo Pays the Ransom appeared first on Larry Sharpe, Libertarian.