AUGUSTA, Maine (March 8, 2017) – A bill introduced in the Maine legislature would eliminate the sales tax on precious metals purchases, removing a powerful disincentive for individuals to protect themselves against the disastrous effects of the Federal Reserve.
Sen. Eric Brakey (R-Androscoggin), with a bipartisan coalition of four cosponsors, introduced Senate Bill 664 (LD664) on Feb. 28. The legislation would provide a sales tax exemption for sales of gold and silver coins and bullion.
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 Kentucky’s sales tax on gold and silver does. By removing the sales tax on the exchange of gold and silver, Maine 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.
LD664 follows the lead of many other U.S. states that have already affirmed it is wrong to assess a tax on precious metals purchases. Removing Maine sales tax from monetary metals would have multiple benefits.
First, policies that discourage precious metals ownership reduce the likelihood that Mainers will take steps to insulate themselves from the inflation and financial turmoil that flows from the Federal Reserve System.
Through the issuance of unbacked Federal Reserve Notes, commonly referred to as “dollars,” savers have been losing significant purchasing power over time. Holding savings in gold and silver — the only money mentioned in the United States Constitution — is an effective way to protect purchasing power.
Second, purchasers of precious metals coins, bars, and rounds are not “consuming” them, making the notion of assessing a sales and/or use tax invalid. Precious metals purchasers are really holding these metals for resale or exchange, like an investment or currency.
And third, removing Maine’s sales tax from precious metals will benefit in-state businesses currently losing sales to out-of-state precious metals dealers. Investors won’t want to pay, for example, $87.50 in sales taxes on a $1,250 purchase of a one-ounce gold bar. It’s a competitive marketplace, so buyers will simply go online or leave the state to purchase gold and silver investments from out-of-state businesses, thereby undermining Maine jobs and state income tax revenues.
As more states reduce the costs and barriers to precious metals ownership, those who diversify some of their savings into hard money will continue to grow, and the concept of sound money will become more widely accepted.
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.
This Maine bill 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.
Every day we are seeing the American people open their minds to the historic role that sound money has played. We’ve seen a few presidential candidates talk about it. A few state legislatures, too, have recognized the danger of being totally reliant on a monetary system based on debt and unbacked fiat money, and they’re taking concrete steps to liberalize the laws surrounding gold and silver ownership.
While there is a tremendous amount of work to do, we should be encouraged that the stranglehold central planners have over our money is beginning to loosen. People are taking notice that something about the debt-laden economy and their money isn’t right. And people are realizing that money backed by nothing isn’t actually money at all.
It’s time for Maine leaders to end the unjust taxation on those citizens who wish to own the monetary metals.
LD664 was referred to Join Committee on Taxation where it will need to pass by a majority vote before moving forward in the legislative process.
Michael Maharrey contributed to this report
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