There are very few economic activities that Americans engage in that are not either encouraged or discouraged by the tax code. The tax code currently runs to over 70,000 pages and is involved minutely in most of the activities of our lives. We wake up in the morning and dress in clothes made of taxed textiles, then drive in cars run by gasoline whose price is influenced by oil depletion allowances, ethylene offsets, and state and local taxes. Investments all have tax incentives or disincentives from 401-Ks and 501C-3s to preferential tax treatment for capital gains, IRAs, dividends, and home interest deductions. About the only investment market that has no tax preferences is the collectibles market.
This was not always the case. In the late 1970s, collectibles, including stamps, were allowed in IRAs, and many stamp collectors had an investment portfolio of fine philatelic items. The concern in the 1970s, when philatelic material was rising so quickly in price, was that the lines between investment and the pleasurable use of an investment should be sharply drawn. Many investors had their IRA material in their albums, or, in the case of art collectors, on their walls. In the early 1980s, a young Massachusetts congressman, Barney Frank, added a piece to a House bill, and since then stamps have not been allowed in investment portfolios.
Removing collectibles from tax preferred investments helped usher in the collectibles depression of the 1980s. Stamp prices fell more than half between 1980 and 1985. Certainly Barney Frank, philately’s least favorite Congressman, had much to do with this, but the severe Reagan Recession didn’t help either. It took almost a decade for stamp prices to stabilize and begin to rise again, and today we have a hobby with no tax preferences. Those who collect do so because they love the hobby, nothing more. The hundreds of thousands of collectors worldwide have created a stable and active market that does not depend on any indirect government subsidies.