Financial news yesterday said the Trump Administration was considering a value added tax as part of its tax reform.
That should scare all coin collectors.
While a news story about consideration is a long way off from actual adoption, it is nevertheless bad news for us.
Such a tax, which works like a sales tax, can hit collectors where it hurts when they go to buy additions for their collections.
Prices will be higher – and not in a good way.
Now, when bullion investors and coin buyers encounter dealers who have to charge sales tax, they just keep moving.
Less business occurs in jurisdictions that levy sales taxes.
The Industry Council for Tangible Assets, our numismatic trade group, has done a wonderful job in winning sales tax exemptions in half of the states.
A value added tax will pose a bigger challenge.
Assume for a moment that a value added tax is levied on collector coin transactions.
VAT’s typically run at a rate of 20 percent.
Some are less. Some are more. But it is easier to think about a round number.
Will you hurry up and send your order to the Mint if a 20 percent tax is applied?
What about at your favorite coin show or shop?
Even under the best of circumstances where over time everybody gets used to the new reality, it will take a while.
What bullion investor will undertake new positions if it gets clipped by an extra 20 percent?
For that matter, would present owners stampede to get out ahead of the imposition of the tax, bringing down the prices of gold and silver as this unexpected wave of supply hits the market?
For a few weeks or months numismatic and bullion commerce could be stopped in its tracks with such a new tax regime.
How many dealers will be able to stay in business with their cash flow dried up for some unknowable length of time?
Coin collecting already has its work cut out in competing for the next generation.
A punitive tax environment will simply add to the appeal of doing something else.
Of course, these financial news stories could be trial balloons to be shot down and never thought of again.
That would be the best possible outcome.
However, if a VAT becomes a distinct possibility, you had better get friendlier with ICTA.
Here is the link to its website.
Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper “Numismatic News.”
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