MONTGOMERY, Ala. (Jun. 9, 2017) – Alabama’s Republican-dominated House killed a bill that would have removed sales taxes from the sale of gold and silver, encouraging their use and taking the first step toward breaking the Federal Reserve’s monopoly on money.
Rep. Lynn Greer (R-Rogersville) introduced House Bill 238 (HB238) in February. The legislation exempted the gross proceeds from the sale of gold, silver, and platinum bullion, and coins from sales and use tax in the state.
The House Ways and Means Education committee passed HB238 on April 6, but the bill never came to the House floor for a vote. On May 17, the bill was “indefinitely postponed” and never taken up again.
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 Alabama’s sales tax on gold and silver does. By removing the sales tax on the exchange of gold and silver, Alabama could have treated specie as money instead of a commodity. This would have taken 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. As it is, the status quo will remain in place in Alabama, and the state will continue to tax the exchange of one kind of money for another.
BACKGROUND INFORMATION
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 Alabama bill would have taken a step toward 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.
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