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Comment by dcow | Hacker News Reader

There are two modalities to crypto and the law needs to treat them differently. Running a node on a crypto currency network does not generate securities. It generates commodities. We don't tax people on the FMV of gold when they dig it out of the ground. But, speculating on the price of gold by creating a virtual token/contract/etc. and selling that, well that’s obviously a security. Just because people buy gold speculatively does make it a security. So buying bitcoin or chia (no longer eth) is still buying a commodity. Anything else, yeah, seems like it passes the sniff test for a security.

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> We don't tax people on the FMV of gold when they dig it out of the ground.

Uh, yeah, we definitely do. I have relatives who sell the oil under their property, and that absolutely is taxable income.

The sale is taxable obviously and of course. The same is true for gold and crypto.

But your relatives didn't get a tax bill for 25% of the value of the oil the moment it was prospected, did they? Their land value went up but they weren’t taxed on the value increase either (that happens when the land is sold).

Maybe I'm mistaken, but my property taxes increase as the value of the property increases. The sales tax is a tax on the sale itself when sold at price $X.

Sorry I meant you're not taxed on the value of the oil at the moment it increases the property value. You are correct that eventually the property value might increase in the eyes of the county assessor or via sale of the property and there would be a measurable effect in that regard.

Generally though, you also don't pay property taxes on securities (property tax is a pretty specific tax and a unit of crypto currency doesn't directly translate). I don't have any apropos objection to a property tax on crypto at the moment mostly because that's not the point being discussed. We just don't do it currently. The more appropriate analogy would be like you have barrels out and oil rained from the sky. Now you have some barrels of oil. Your land value doesn't increase, but also you don't get taxed because you collected oil from the sky. You get taxed when you sell the oil. Maybe we do need a tax on the latent potential of your property to generate crypto, or that information should be factored into property value, but again that's not quite what we're discussing.

> We don't tax people on the FMV of gold when they dig it out of the ground.

The IRS considers found gold to be gross income and taxes are owed on it.

Dig out of the ground != found gold, look at the caselaw

In my youth it was illegal to own gold at all unless it was jewelry. You'd be surprised what "we" do when it comes to wealth.

> We don't tax people on the FMV of gold when they dig it out of the ground.

Why shouldn't we? We tax people on the FMV of something valuable created out of thin air, why should gold be an exception?

It isn't exempt. The miner will have to pay VAT when they try to sell the gold.

> We tax people on the FMV of something valuable created out of thin air,

There are income taxes which apply when goods or services are sold.

There are sales taxes when goods are purchased.

There are property taxes when goods are owned.

Nothing gets taxed on creation.

And there are excise taxes when goods are created.

Excise taxes are a product-specific sales tax.

For example, on gasoline. The tax occurs at the pump, not at the refinery.

No, that's exactly wrong https://en.wikipedia.org/wiki/Excise.

"An excise, or excise tax, is any duty on manufactured goods that is normally levied at the moment of manufacture for internal consumption rather than at sale."

I'm very familiar with how the excise tax on alcohol works, it's definitely a tax on creation not consumption.

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