Friday, August 28, 2009

A Case of the IRS and the Fed Again Working to Cover Each Others Butt

For the life of me, I cannot figure out what Las Vegas businessman Robert Kahre has done to deserve a federal criminal indictment and now conviction. From what I can tell, Kahre is the victim of a brutal, heavy-handed Justice Department that is acting at the behest of the IRS and possibly even officials of the Federal Reserve.

On August 15th, Kahre, 48, was found guilty in a federal trial facing a 57-count indictment. Now that he’s been convicted on all counts, he could end up spending the rest of his life in jail.

From what I can tell, the feds are going after Kahre for two main reasons, both of which appear to me to be ludicrous abuses of prosecutorial power. First, the feds are upset that Kahre paid his workers with gold and silver coins. Second, they’re upset that he treated his workers as independent contractors rather than as salaried employees.

Let’s look at the coin allegation.

Federal officials issue gold coins and silver coins. The coins are denominated in dollars. For example, the silver coin is a one-dollar silver coin. The gold coins are issued in various denominations, the largest being the 50-dollar American Eagle.

The U.S. government has declared that these coins are legal tender at their face value. In other words, suppose a person wants to buy a concert ticket that costs fifty dollars. He can take his American Eagle gold coin and tender it to the ticket seller. Under the law, the ticket seller must accept the gold coin in payment of the ticket.

Now, most every intelligent person knows that a buyer would never do that, at least not today. Why not? Because in the marketplace that one-ounce gold coin is worth about 1,000 dollars in Federal Reserve paper money, which is also considered legal tender.

Thus, the ticket buyer would be better off selling his gold coin for 1,000 dollars in paper money, paying 50 dollars in paper money to the ticket seller, and pocketing the other 950 dollars in paper money.

Nonetheless, the law is the law. If the buyer wishes to use his gold and silver coins at face value, he is perfectly within his legal rights to do so.

So, here’s what Kahre did. He offered his workers a rate of pay based on the face value of gold and silver coins. For example, suppose Kahre and a worker had agreed on annual pay of 50,000 dollars in paper money. Kahre then says to the employee, “Look, instead of paying you 50,000 dollars a year, I’ll pay you 2,500 dollars a year, payable in 50 American Eagle gold coins”

The worker says, “Fine.” Why would the worker do that? Because he’s just as well off as if he had accepted the 50,000 dollars in paper money because he can sell the coins in the marketplace for 50,000 dollars in paper money.

But there are some major differences for the worker. For one thing, the worker’s annual income is 2,500 dollars rather than 50,000 dollars. That places him under the threshold that requires him to file an income tax return. For obvious reasons, that would not sit well with the IRS.

Second, I’m no expert in tax law but it would seem to me that while the worker would have to pay capital gains tax when he sells the coins, he could defer that tax by saving the coins over a long period of time rather than selling them.

So, what have Kahre and the workers done wrong? Or to be more precise, what have they done that is illegal? If federal officials are stupid enough to make gold coins and silver coins legal tender, then what’s wrong with Americans’ using such coins as legal tender?

If Kahre had been living sometime between 1787 and the early part of the 20th century, he wouldn’t have been convicted of income-tax evasion. The reason? Our American ancestors understood that an income tax and an IRS were antithetical to a free society. That’s why the United States was income-tax free for more than a century.

Then the progressive income tax came to America, along with all the socialist and interventionist schemes it funds and the myriad of economic crimes and tax crimes by which government officials are able to keep businessmen in line.

But it’s not just the IRS that was upset with Kahre. Lurking behind his prosecution is another federal agency, one that is just as powerful and destructive, if not more so, than the IRS — the Federal Reserve.

Let me tell you what I think their “crime” is: They’ve embarrassed U.S. officials by exposing what the Federal Reserve has done to people’s money, which is a likely reason that Federal Reserve officials, along with the IRS, are pushing this criminal prosecution.

What many Americans don’t realize is that the United States was founded on a monetary system of gold coins and silver coins. Paper money was prohibited, both at the state and federal level because our American ancestors understood that government officials throughout history had used paper money to plunder and loot the citizenry through inflation.

The gold coin/silver coin standard came to a formal end when Franklin Roosevelt nationalized gold and made it a federal crime for Americans to own gold. That act opened up the floodgates to the massive inflation of paper money that Americans have experienced ever since.

The enormous extent of the monetary debasement that had taken place since the 1930s became clear once gold ownership was re-legalized in the 1970s. How? Because Americans could easily compare the face value of gold coins issued by the mint to the price in paper money that the coins bring in the marketplace.

Suppose a person owes one hundred dollars in income taxes to the IRS. Let’s say he has inherited 5 gold coins issued by the U.S. mint, each one having a face value of $20. Let’s assume that each gold coin weighs one ounce and that the person is able to sell the coin in the marketplace for one thousand paper dollars. That means that the person’s 5 gold coins have a value of 5 thousand paper dollars.

Let’s assume that the person sends in his five $20 gold coins to the IRS, in payment of his one-hundred dollar tax bill. Will the IRS issue him a refund, representing the difference between the fair market value of the coins and the amount of the tax owed, i.e., 4,900 dollar bills?

Absolutely not. The IRS will say that the coins are legal tender at face value. They will keep the coins, sell them, and pocket the difference.

But as Kahre has demonstrated, the government’s representation that the gold coins are legal tender is false and fraudulent.

Kahre and his workers struck a deal in which he agreed to pay his workers, say, 5 gold coins. That meant that their income was one hundred dollars. But the IRS and the federal prosecutors cried, “No! For purposes of the IRS, the workers are required to report the free-market value of the coins, not their face value.”

In other words, those gold coins and silver coins are not legal tender after all. It’s all just a charade, one that Kahre had the audacity to expose.

Why is a $20 gold coin worth one thousand paper dollars instead of twenty paper dollars?

That’s where the Federal Reserve comes into the picture.

At one time, prior to the creation of the Federal Reserve, a $20 gold coin did trade for 20 paper dollars. In fact, the real money was the gold coin and the twenty-dollar bill was nothing more than a promise to pay the gold coin.

Then the U.S. government called into existence the Federal Reserve System, nationalized and confiscated people’s gold, and decreed a paper-money standard. Over the decades, it printed gobs and gobs of paper money to fund its ever-increasing welfare-warfare programs.

Thus, the reason that a twenty-dollar gold coin today exchanges in the marketplace for one-thousand paper dollars, instead of twenty paper dollars, is because the Federal Reserve has been flooding the marketplace, decade after decade, with paper money to fund the government’s operations.

But the feds don’t like people figuring that out because it might cause them to begin wondering whether the Federal Reserve should be abolished for having inflicted so much damage on the American people through monetary debasement. Kahre exposed in a very real way what the Federal Reserve has done to our money.

In other words, a fifty-dollar gold coin does not trade for 50 paper dollars. It trades for 1000 paper dollars. That’s because the government officials, decade after decade, have inflated the paper money supply to finance their ever-growing government projects.

So, what Kahre has done is bring people’s attention to that phenomenon. That’s his real crime. That’s why they’re going after him.

Folsom Prison Blues:


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