OKLAHOMA CITY, Okla. (Jan. 23, 2019) – A bill prefiled in the Oklahoma Senate would eliminate state capital gains taxes on gold and silver specie, encouraging its use as currency. If passed, the law would help undermine the Federal Reserve’s monopoly on money.
Sen. Nathan Dahm (R-Broken Arrow) filed Senate Bill 272 (SB272) for introduction on Feb. 4. Under the proposed law, any amount of net capital gains included on a federal income tax return that results from the sale or exchange of gold or silver for another form of legal tender would be exempt from inclusion as taxable income on the state tax return.
In effect, passage into law will “legalize the Constitution” by treating gold and silver specie as money.
ANOTHER IMPORTANT STEP FORWARD
In 2014, Oklahoma took the first step and declared Gold and silver coins issued by the United States government are legal tender in the State of Oklahoma. That bill also expanded the sales tax exemption on gold and silver.
Passage of SB272 would take another step supporting sound money by effectively repealing the state capital gains tax on the exchange of gold and silver. In other words, individuals selling gold or silver bullion, or utilizing gold and silver in a transaction, would no longer be subject to state income taxes on the exchange.
Sound Money Defense League Policy Director Jp Cortez testified during a committee hearing for a similar bill that passed in Wyoming last year, saying that charging taxes on money itself is beyond the pale.
“In effect, states that collect taxes on the sale of precious metals are inherently saying gold and silver are not money at all.”
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 taxes on gold and silver bullion do. By removing the taxes on the exchange of gold and silver, Oklahoma would treat specie as money instead of a commodity. This represents a 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 Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state.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.
Passage of SB272 would remove a tax barrier to using gold and silver in everyday transactions and take another important 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 freedom of choice expanded by SB272 would help Oklahoma residents to secure the purchasing power of their money.
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.
SB272 would take a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly or 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 could create a “reverse Gresham’s effect,” drive out bad money, 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.
The Oklahoma legislature convenes on Feb. 4. At that time SB272 will receive a committee assignment where it will have to pass by a majority vote before moving forward in the legislative process.