The Quiet Theft
My mother sold her house last year to move into assisted living. She and my dad bought it in 1974 for $50,000, a four-bedroom colonial in a quiet suburb, red brick, with a big yard and a dogwood tree out front. They raised three children in it. They paid it off. My dad has been gone for eleven years. When my mother could no longer live alone, the house sold for $510,000.
The IRS claimed $54,000 from the sale.
That number is where the immorality of our current system hit me. My parents were not speculators. They bought a place to live, lived in it for fifty years, and paid property taxes on it every single year. It became the place we all think of when we think of home. And at the moment of their greatest vulnerability, the State’s position was that, somewhere in that sequence of events, a gain had occurred, and they were owed over fifty thousand dollars of it.
What was gained?
Phantom Gains
The house did not get bigger. It was not renovated into something grander. It shelters a family today in roughly the same way it sheltered a family in 1974. The same four bedrooms. The same dogwood tree. The utility of the thing itself did not change.
So where did the $460,000 come from?
It came from what happened to the dollar over those fifty years. The Federal Reserve’s own inflation calculator will tell you that $50,000 in 1974 had the purchasing power of roughly $320,000 today. By less generous measures of consumer prices, the real number is far higher. The house, in real terms, appreciated only modestly, a few thousand dollars a year over five decades; what you would expect for decent housing when you strip out the impact of currency devaluation.
This is the distinction the tax code refuses to make: the difference between nominal appreciation and real appreciation. Nominal appreciation means the number got bigger. Real appreciation means the thing represents more value in the real world - in terms of what it can buy or what it can do. When the dollar loses purchasing power, everything denominated in dollars carries a larger number. That is nominal appreciation. It is not wealth creation. It is the same wealth measured in smaller units.
Consider the same scenario with a monetary unit that had held its value over fifty years. The house would have sold for $65,000 or $70,000 - the modest real gain of a well-maintained home in a decent neighborhood. There would be almost nothing to tax because the nominal gain and the real gain would both be the same small number.
With an inflationary dollar, the number balloons to $510,000 because the unit used to measure it quietly collapsed. My mother held the same house, denominated in dramatically smaller units, not $510,000 in new wealth. The number got bigger because the ruler shrank. That is the entire story.
And yet the tax bill was real.
The Mechanism
The State has compulsory jurisdiction over its citizens, control over the currency those citizens must use, and a tax code that treats nominal appreciation as real gains. Together these three facts produce a self-funding extraction loop. The system extracts real wealth from people who simply tried to preserve what they had earned - people who never chose the currency they are compelled to use and who cannot opt out of the jurisdiction over which the State claims control. Despite the inescapability, hardly anyone objects because the same nominal appreciation that serves as the tax basis also creates the illusion of enrichment that keeps citizens from seeing they were taxed on a gain that never happened.
The self-concealing quality of this arrangement is the most insidious feature. Nominal appreciation is both the mechanism of extraction and the anesthetic that makes the extraction hard to perceive. Because the number in the asset column is going up, the citizen feels wealthier and the State appears to take only a modest percentage of a gain. The underlying reality, that the gain is an artifact of the currency debasement inherent in all fiat regimes, is invisible without deliberate inflation-adjusted accounting that almost no one performs and the tax code forbids.
And what this arrangement conceals is two separate acts of taking, not one.
Two Takings
The first taking is the debasement itself. When the State inflates the currency, the purchasing power of each dollar falls. Every dollar saved is worth a little less. This is a transfer of real wealth from savers to whoever receives the newly created money first, typically governments and the financial institutions closest to the mechanism of creation. It happens continuously, in the background, and it punishes those who would save their wealth in the State’s currency.
People want to save money because the future is uncertain, because liquidity has real value, because saving is rational and necessary. But when holding the monetary unit guarantees a slow loss of purchasing power, everyone is conscripted into becoming an investor whether they want to be or not. The person who simply wanted to save is forced into a house, a stock portfolio, a piece of land, something, anything that might hold value against the dollar. The State’s monetary policy left them no viable alternative. It disincentives exactly the behavior a healthy economy should reward: saving, deferring consumption, and building a foundation. And because millions of savers are forced to seek refuge in real assets, the prices of these assets rise beyond what utility alone would justify. A house that shelters a family becomes a savings vehicle, which commands a monetary premium. The people who simply need a place to live pay the price.
The second taking is the capital gains tax levied on the nominal gains the first taking caused. The saver is forced out of the currency and into a real asset as a refuge. Then, without any real-world change in the asset, the nominal appreciation that debasement produced on that asset is taxed as though it were real gain. The State takes twice: once by destroying the savings instrument, and once by harvesting the asset the saver was forced to flee into. The State creates the problem. The saver finds a solution. The State taxes the solution.
This is where the immorality of the system is laid bare: it taxes something that does not exist. A genuine gain in wealth means more real purchasing power than before. Inflation-driven nominal appreciation means no such thing. The number is larger. The wealth is not. The citizen pays a tax on a numeric sleight of hand, on phantom gains the shrinking dollar conjured into existence.
My mother’s estate became nominally larger and the IRS took $54,000 of it because of an accounting trick. We were compelled to surrender a significant portion of something we owned to a government that unapologetically creates the very conditions that made the number so large.
A moral society should not grant the State the right to claim over 10% of the house we grew up in. It is the same house, the same four bedrooms, the same dogwood tree.
A New Standard
Some people, seeing this mechanism clearly, have reached for a different kind of money.
Bitcoin is a monetary asset with a fixed supply. There will never be more than 21 million. No institution can expand it. No government can debase it. It is a savings instrument whose supply cannot be manipulated by the entities that also control the tax code.
When someone buys bitcoin and holds it, they are deferring consumption, storing value, and choosing a unit the State cannot quietly destroy. Bitcoin is structured to resist exactly the debasement that made dollar savings untenable in the first place.
As a relatively new technology, Bitcoin has gone up from a few cents to tens of thousands of dollars in its first seventeen years. Much of that appreciation reflects adoption, a real gain in value as the network becomes more useful. But a meaningful share of the increase is simply the dollar losing value, the same phenomenon that turned a $50,000 house into a $510,000 house. And the direction is clear: as Bitcoin matures, as adoption spreads, as it functions more as a global monetary reserve, the adoption premium shrinks as a share of total price movement. Over time, any price movements measured in debasing fiat units will be entirely nominal.
The moral case against taxing those gains strengthens every year. A monetary instrument held as savings should not generate a taxable event - holding money is not a transaction. Bitcoin’s price is a mirror held up to fiat currency. It is the same phenomenon as my mother’s house, expressed in a harder asset. And Bitcoin provides our best hope for an escape from the extraction loop.
The Way Ahead
The corruption lives in the structure: an inflationary fiat currency paired with a tax code that treats nominal appreciation as real gain. This structure extracts real wealth based on phantom gains, but remains politically sustainable because most people are placated by a rising number.
My parents did not know any of this. They bought a house because they needed a place to live and because they trusted that what they paid for was what they would eventually own. They never considered that the currency they were forced to value things in was being quietly hollowed out the entire time. And they certainly never expected the State to present a bill on a home they had owned for fifty years that had barely changed.
The $54,000 bill was a tax on fifty years of saving in something ultimately denominated in a currency the State was destroying. Most people pay it without knowing what it is. That is precisely how the structure is designed to work.
Bitcoin does not merely offer a refuge from this system. It eliminates the mechanism entirely. A monetary asset with a permanently fixed supply cannot produce phantom nominal gains. There is no debasement to inflate the number. There is no growing denominator to mistake for wealth. Under a Bitcoin standard, the second taking transforms from unjust to impossible. The thing the tax code calls a gain is simply never conjured into existence.
That world is not here yet. Instead of a Bitcoin standard, Bitcoin is still priced in the very unit it exposes as broken and still subject to the tax code it renders philosophically incoherent. But even now, holding Bitcoin is the most rational response available to someone who sees the mechanism clearly. It is a savings instrument no central bank can debase, held without permission from the institutions running the extraction loop, and a way to opt out of a fiat standard. Every other refuge remains denominated in the State’s currency and subject to the State’s accounting. Bitcoin is its own standard.
My mother did not have this option. Thank God my children do.
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