NASHVILLE, Tenn. (Feb. 6, 2017) – Bills filed in the Tennessee House and Senate would exempt gold and silver bullion and coins from sales tax, encouraging their use and taking the first step toward breaking the Federal Reserve’s monopoly on money.
Sen. Frank Nicely (R-Strawberry Plains) introduced Senate Bill 350 (SB350) on Feb. 2. Rep. Bud Hulsey (R-Kingsport) introduced a companion bill (HB342) in the House. The legislation would exempt from state sales tax the sale of all coins, paper money, and bullion that are:
(1) Manufactured in whole or in part from gold, silver, platinum, palladium, or other material;
(2) Used solely as a medium of exchange, security, or commodity in this or another state, the United States, or a foreign nation; and
(3) Sold based on their intrinsic value as precious material or collectible items rather than their representative value as a medium of exchange.
Imagine if you asked a grocery clerk to break a $5 bill and he charged you a 35 cent tax. Silly, right? After all, you were only exchanging one form of money for another. But that’s essentially what Tennessee’s sales tax on gold and silver does. By removing the sales tax on the exchange of precious metals, Tennessee would treat specie as money instead of a commodity. This represents a small step toward reestablishing gold and silver as legal tender and breaking down the Fed’s monopoly on money.
Practically speaking, eliminating taxes on the sale of gold and silver would crack open the door for people to begin using specie in regular business transactions.This would mark an important small step toward currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency.
The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” States have simply ignored this constitutional provision for years. It’s impossible for states to return to a constitutional sound money system when it taxes gold and silver as a commodity.
These Tennessee bills takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would set the stage to undermine the monopoly of the Federal Reserve by introducing competition into the monetary system.
Constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.
“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state by state level is what will get us there.
As of this report, the legislation had not been referred to a committee. They will both need to pass committee by a majority vote before moving forward in the legislative process.