The IRS Wants 1/3 of Your Baseball Card Collection

Katherine Mangu-Ward | August 24, 2006

Oh how the mighty have fallen. When PayPal was getting started, its founders had big libertarian dreams: "PayPal will give citizens worldwide more direct control over their currencies than they ever had before," [co-founder Peter] Thiel predicted. "It will be nearly impossible for corrupt governments to steal wealth from their people through their old means..."

But this week the IRS let slip that it is (once again) going after hardened criminals selling baseball cards on eBay:

The IRS' attempts to promote better reporting of online profits has been stymied by the fact that most online transactions leave behind very little evidence for the tax man to track, especially if shoppers don't use a credit card or opt for an online payment system such as PayPal, which is also owned by eBay.

"A lot of things go unreported because there's no paper trail," explains Cindy Hockenberry, a tax information analyst at the National Association of Tax Professionals. "It will be an administrative nightmare to figure out who has to report and what has to be reported and trying to track these millions of people that buy and sell on the Internet," says Hockenberry.

So much for the founders' dream that "PayPal would grow to become an extra-governmental system of currency, something reminiscent of the world described in Neal Stephenson's novel Cryptonomicon, in which programmers use encryption to create an offshore data haven free from government control." Of course, the company was sold to eBay years ago. PayPal's former COO is still doing his part for freedom, though. He's a movie producer now. His first project? Thank You for Smoking.

Read the rest of Radley Balko's great review of The PayPal Wars here.

Comments

Dan T.|8.24.06 @ 3:13PM|#

Good. The job of the IRS is to collect taxes that are legally owed.

|8.24.06 @ 3:18PM|#

The job of the IRS is to keep the IRS and tax lawyers in business.

Jennifer|8.24.06 @ 3:19PM|#

Of course, even if they find the paper trail, they still have to prove that things like baseball cards were bought for the specific purpose of selling them at a profit, rather than somebody selling off something they already owned.

|8.24.06 @ 3:21PM|#

Dan T's right-I disagree w/ the principle, but if the taxes are in fact legally owed...

|8.24.06 @ 3:22PM|#

Hey, at least we get to read articles that quote people named Cindy Hockenberry. Is this a great country or what?

|8.24.06 @ 3:25PM|#

"Good. The job of the IRS is to collect taxes that are legally owed."

HAHA though this is indeed the job of the IRS, what is "legally owed" is in constant flux and is entirely dependent on how much money the govt needs for "whatever." law should be built on justice not on a whim and it is the job of the government to protect the rights of the individual. You and I are both individuals and our desire to keep our hummel collection tax-free should be respected by the government. A police force should be employed to protect the freedom of the individual not police the individual and rob him of his belongings.

Dan T.|8.24.06 @ 3:29PM|#

A police force should be employed to protect the freedom of the individual not police the individual and rob him of his belongings.

So how do we pay this police force?

|8.24.06 @ 3:48PM|#

Good. The job of the IRS is to collect taxes that are legally owed.

Yep, no matter what it costs!

|8.24.06 @ 3:48PM|#

You could have a volunteer police force, private security firms, let us actually vote on whether we want to fund a public police force and how much we'd be willing to be taxed for it, donations, etc, etc.

C'mon Dan, you'll have to do better than that. (I'm not even one of the great libertarian thinkers on this board, and I came up with a bunch of answers off the top of my head.)

|8.24.06 @ 3:58PM|#

Nevermind the fact that much of what is sold on eBay are used materials sold at a loss and, thus, not subject to taxation. Just because money changed hands doesn't mean a profit was made.

Jennifer|8.24.06 @ 4:02PM|#

Nevermind the fact that much of what is sold on eBay are used materials sold at a loss and, thus, not subject to taxation. Just because money changed hands doesn't mean a profit was made.

I seem to recall some brilliant and beautiful woman making that point already. Hmm. . . who could she be. . . .

|8.24.06 @ 4:39PM|#

So how do we pay this police force?

The question isn't how we pay for it, the question is how we determine what a fair price is.

|8.24.06 @ 4:42PM|#

"taxes legally owed".........Ford, Chrysler, & GM decide to strike against thier biggest competetors. Used cars. They buy the requisite pols (pennies on the dollar) and levy $500 annual taxes on every registered vehicle 20 or more years old. For the environment, of course.
That tax is "legally" owed.
Or, say, some urban "redevelopement" syndicate wants your block. they buy politicians, for pennies on the dollar, to add 4k a year on "service" taxes for single family dwellings, because, of, ummmmm... the children.
that tax is "legally" owed.
You are missing the point that taxes can be bought by interests with enough leverage to buy politicians.

|8.24.06 @ 4:47PM|#

"taxes legally owed".........Ford, Chrysler, & GM decide to strike against thier biggest competetors. Used cars. They buy the requisite pols (pennies on the dollar) and levy $500 annual taxes on every registered vehicle 20 or more years old. For the environment, of course.
That tax is "legally" owed.
Or, say, some urban "redevelopement" syndicate wants your block. they buy politicians, for pennies on the dollar, to add 4k a year on "service" taxes for single family dwellings, because, of, ummmmm... the children.
that tax is "legally" owed.
You are missing the point that taxes can be bought by interests with enough leverage to buy politicians. Or do you think that leverage is limited to tax breaks?

|8.24.06 @ 4:48PM|#

"taxes legally owed".........Ford, Chrysler, & GM decide to strike against thier biggest competetors. Used cars. They buy the requisite pols (pennies on the dollar) and levy $500 annual taxes on every registered vehicle 20 or more years old. For the environment, of course.
That tax is "legally" owed.
Or, say, some urban "redevelopement" syndicate wants your block. they buy politicians, for pennies on the dollar, to add 4k a year on "service" taxes for single family dwellings, because, of, ummmmm... the children.
that tax is "legally" owed.
You are missing the point that taxes can be bought by interests with enough leverage to buy politicians. Or do you think that leverage is limited to tax breaks?

|8.24.06 @ 4:48PM|#

"taxes legally owed".........Ford, Chrysler, & GM decide to strike against thier biggest competetors. Used cars. They buy the requisite pols (pennies on the dollar) and levy $500 annual taxes on every registered vehicle 20 or more years old. For the environment, of course.
That tax is "legally" owed.
Or, say, some urban "redevelopement" syndicate wants your block. they buy politicians, for pennies on the dollar, to add 4k a year on "service" taxes for single family dwellings, because, of, ummmmm... the children.
that tax is "legally" owed.
You are missing the point that taxes can be bought by interests with enough leverage to buy politicians. Or do you think that leverage is limited to tax breaks?

|8.24.06 @ 4:49PM|#

Lowdog

"let us actually vote on whether we want to fund a public police force and how much we'd be willing to be taxed for it, donations, etc, etc."

In my state/town I already get to vote on this kind of stuff...what's stopping you? Voter registration is easy.

Volunteer police force? Works in a small community, but I am gonna guess it is an idea that would fall apart when scaled up city sized... gimme a break.

Donations? Why not just charge people directly for police protection? Here you go sir, we found your daughter's killer, that will be $250,000, no checks please.

|8.24.06 @ 4:55PM|#

I seem to recall some brilliant and beautiful woman making that point already. Hmm. . . who could she be. . . .

Well, come on now, we all know that until it has been expressed by a man it isn't really a "point." It's more like a nascent thought or simple musing still in need of the refinement and polishing only a male brain can provide before it can be said to rise to the level of being a fully developed good point.

|8.24.06 @ 5:01PM|#

eBay respects its customers' privacy? Holy crap, that's a good one. They ask "how high" every single time the government asks them to jump. Total BS statement on their part.

I'm pretty sure they'll be just fine with doing what the IRS wants as soon as it builds the infrastructure.

|8.24.06 @ 5:16PM|#

I seem to recall some brilliant and beautiful woman making that point already. Hmm. . . who could she be. . . .

I don't see any posts from smacky on this thread. [ducks]

|8.24.06 @ 5:54PM|#

MainStream - whatever, I was just coming up with some examples, I didn't say they were optimal or even feasible.

I am registered to vote, but unfortunately, there's not a lot of people to vote for that vow to actually put a rein on the police.

Why would a volunteer force fall apart on a city-sized scale? Here in Phoenix, we have a number of volunteer sheriff officers and city police. If it wasn't for the bullshit drug war, I would volunteer.

At least with donations you get to decide whether you want to contribute to something or not. Yes, the rich would be able to afford more protection, but can't they already? Not everything has to be "fair". I would submit that even under our current system the rich have the upper hand because they can hire good lawyers and are, in general, more educated so they know they have rights to assert.

Also, I tend to be a minarchist and not an anarchist...the police would be one area where I wouldn't mind paying taxes. I would prefer, however, that the police did more police work, and less kicking down of doors with automatic weapons and body armour.

Hopefully you can at least agree with me on the last part.

|8.24.06 @ 6:57PM|#

oops...GMTA

|8.24.06 @ 7:10PM|#

"I would prefer, however, that the police did more police work, and less kicking down of doors with automatic weapons and body armour."

I believe we are on the same page on that and the drug war.

As for volunteer police, they work at the neighborhood level in cities (neighborhood watchish programs are great), but I think coordination of a city sized force requires some professionals with time and serious training.

As for donations, we could do a hybrid, like public radio, some basic coverage from the city, with a donations drive each year to raise the primary chunk of change. Might make the police force more responsive to community pressures...

Hmmm. I'll think about it some more.

|8.24.06 @ 7:36PM|#

People, Dan T. is right in saying that the IRS is doing what it's supposed to be doing, enforcing tax laws.

If it's OK to break a law because you think it's stupid, on what grounds do y'all criticize Bush for violating FISA with the NSA wiretapping program?

|8.24.06 @ 7:53PM|#

Even though a lot of things on Ebay are sold at a loss, their owners have gotten a lot of use out of them. Items depreciate in value over time as they get used. Therefore, the bike you bought for $200 and sold on Ebay for $100 might actually have given you a profit.

I suppose the only solution is for the IRS to treat all consumer goods as investments, because they might eventually be sold on Ebay. Therefore, consumers should get to deduct all of their purchases from their incomes, just like businesses often get to deduct all their investments immediately when they are purchased.

|8.24.06 @ 8:37PM|#

If it's OK to break a law because you think it's stupid, on what grounds do y'all criticize Bush for violating FISA with the NSA wiretapping program?

The laws that keep him from eavesdropping on anyone he wants without oversight are not, in fact, stupid, whereas the tax laws we advocate breaking actually are. It's a case-by-case kinda thing.

|8.24.06 @ 9:08PM|#

Anonymo,

Right, the rule of law is overrated. :8-| (attempted roll-eyes)

|8.24.06 @ 9:12PM|#

PayPal never was "reminiscent of the world described in Neal Stephenson's novel Cryptonomicon." The ecurrency that most closely resembles that vision is e-gold. It's true free-market money, though one still would be wise to declare any income received through it, as transactions are not anonymous. Unfortunately, relatively few people use e-gold compared to PayPal.

|8.24.06 @ 9:42PM|#

Therefore, consumers should get to deduct all of their purchases from their incomes, just like businesses often get to deduct all their investments immediately when they are purchased.

I don't think that's correct. A business cannot deduct the purchase of an investment, like a CD. When a business purchases an asset, like a computer, for its own use, the value of the asset is depreciated over time, its deduction is not immediate. The IRS assumes that the computer's value will trend toward zero.

I'm not sure what happens when a business purchases an asset like real estate, where the value may go up or down.

Anyway, I doubt the average taxpayer will be delighted by the extra accounting work that would be required were he treated like a business.

|8.24.06 @ 11:24PM|#

Innocent until proven guilty unless its taxes where you're damned until proven broke.