ST. PAUL, Minn. (May 18, 2018) – On Wednesday, the Minnesota legislature gave final approval to a bill that would exempt the sale of gold and silver bullion coins from state sales and use tax, encouraging their use and taking another step toward breaking the Federal Reserve’s monopoly on money.
Rep. Jim Knoblach (R-St. Cloud) and Sen. Jerry Relph (R- St. Cloud) initially proposed the provision in separate bills filed in the House and the Senate. The language was later amended into House Bill 4385 (HB4385), a 203-page omnibus tax bill. The provision related to precious metals would exempt the sale of bullion coins from sales and use tax.
The bill defines bullion coins as any coin “containing silver, gold, platinum, palladium, or other precious metal.”
Precious metal bullion defined as “bars or rounds that consist of 99.9 percent or more by weight of either gold, silver, platinum, or palladium and are marked with weight, purity, and content” are already exempt from sales tax. Enactment of HB4385 would expand the exemption to include bullion coins.
After going through a conference committee process to iron out various amendments, both the House and Senate gave final approval of HB4385, sending it to Gov. Mark Dayton’s desk.
With these provisions tucked into a massive omnibus bill, other provisions may or may not be positive. We haven’t evaluated the entire bill.
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 Minnesota’s sales tax on bullion coins does. By removing the sales tax on the exchange of gold and silver coins, Minnesota would treat bullion 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 Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.
The proposed law’s impact would go 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.”
Practically speaking, eliminating taxes on the sale of gold and silver coins would crack open the door for people to begin them 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 a state to return to a constitutional sound money system when it taxes gold and silver as a commodity.
These Minnesota bills take 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.
How long Dayton has to act on HB4385 will depend on when it’s transmitted to his office. Under Minnesota law, during the session, the governor must sign or veto legislation within 3 days after transmittal (excepting Sundays), or it becomes law without his signature. Legislation going to the governor in the last three days of the session must be acted upon by the governor within 14 days of session adjournment, or it is pocket vetoed. The session is scheduled to end May 21.
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