BOISE, Idaho (Feb. 12, 2017) – Today, the Idaho House passed a bill that would offset federal capital gains taxes on gold and silver specie, encouraging its use and taking another step toward breaking the Federal Reserve’s monopoly on money.
The House of Delegates Revenue and Taxation Committee Committee introduced House Bill 449 (H449) on Jan. 30. The legislation would exclude gains and/or losses on the sale of precious metals coins and bullion reported for federal tax purposes from an Idaho taxpayer’s taxable income. In effect, H449 would allow Idaho taxpayers to offset federal capital gains/losses reported to the IRS on their state taxes.
H449 would be a revenue neutral policy over the long run. That’s because both precious metals gains and losses are backed out of the calculation of taxable income for Idahoans.
In effect, the passage of H449 would help “legalize the Constitution” by treating gold and silver specie as money.
“Gold and silver are the only money mentioned in the U.S. Constitution, and they should not be subject to tax,” Money Metals Exchange president Stefan Gleason said. “This legislation will help Idaho citizens protect themselves from the inflation and financial turmoil caused by the Federal Reserve System.”
On Monday, the Idaho House approved H449 by a 60-9 vote.
With the backing of the Sound Money Defense League, the Idaho Freedom Foundation, and Money Metals Exchange (an Idaho-based national precious metals dealer), H449 seeks to correct the misclassification of precious metals by the IRS as “property” rather than money. It is only because of this misclassification in the first place that precious metals income and losses are included in the federal adjusted gross income number that flows through to the taxpayer’s Idaho tax return.
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 capital gains taxes on gold and silver bullion do. By canceling ou the federal government’s tax on the exchange of gold and silver, Idaho 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.
“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support of a similar bill that passed in Arizona last year. “Paper is not money, it’s fraud,” he continued.
The bill’s potential impact goes beyond mere tax policy. During an event after his Senate committee testimony, Paul pointed out that it’s really about the size and scope of government.
“If you’re for less government, you want sound money. The people who want big government, they don’t want sound money. They want to deceive you and commit fraud. They want to print the money. They want a monopoly. They want to get you conditioned, as our schools have conditioned us, to the point where deficits don’t matter.”
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 a state to return to a constitutional sound money system when it taxes gold and silver as a commodity.
This Idaho 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.
H449 will move to the Senate for further consideration.