CHARLESTON, W. Va. (Feb. 18, 2019) – Today, the West Virginia Senate passed a bill that would take an important first step towards treating gold and silver as money instead of a commodity.ย
Sen. Craig Blair (R-Martinsburg) introduced Senate Bill 502 (SB502) on Feb. 1. The legislation would repeal sales and use tax on gold and silver bullion.
SB502 defines “investment metal bullion” as “elementary precious metal which has been put through a process of smelting or refining, including gold, silver, platinum, and palladium, and which is in such a state or condition that its value depends upon its content and not its form.” It defines investment coins to include numismatic coins or other forms of money and legal tender manufactured of gold, silver, platinum, palladium, or other metal and of the United States or any foreign nation with a fair market value greater than any nominal value of such coins.
The Senate Finance Committee approved SB502 on Feb. 13. Today, the full Senate passed the bill by a vote of 33-0.
Passage into law would eliminate a significant barrier to using gold and silver in everyday transactions, a foundational step for people to undermine the Federal Reserveโs monopoly on money.
A bill pending in the West Virginia House would go further, repealing all state taxes on gold and silver.
IN PRACTICE
With the passage of SB502, West Virginia would take a step toward treating gold, silver, platinum and palladium as money instead of a commodity. Asย Sound Money Defense Leagueย Policy Director Jp Cortez testified during a committee hearing onย a similar bill in Wyomingย last year, charging taxes onย money itselfย is beyond the pale.
โIn effect, states that collect taxes on purchases of precious metals are inherently saying gold and silver are not money at all.โ
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 thatโs essentially what West Virginia’s sales tax on gold and silver bullion does. By removing the sales tax on the exchange of gold and silver, West Virginia 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 Fedโs monopoly on money.
“We ought not to tax money โ and thatโs a good idea. It makes no sense to tax money,โ former U.S.ย Rep. Ron Paul said during testimony in supportย an Arizona billย that repealed capital gains taxes on gold and silver in that state. โPaper is not money, itโs fraud,โ he continued.
The proposed lawโs impact would go beyond mere tax policy. Duringย an event after his Senate committee testimony, Paul pointed out that itโs really about the size and scope of government.
โIf youโre for less government, you want sound money. The people who want big government, they donโt 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 donโt matter.โ
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 stepย toward currency competition. If sound money gains a footholdย in the marketplace against Federal Reserve notes, the people will be able to choose the time-tested stability of gold and silver over the central bankโs rapidly-depreciating paper currency.
BACKGROUND INFORMATION
The United States Constitution states in Article I, Section 10, โNo State shallโฆmake any Thing but gold and silver Coin a Tender in Payment of Debts.โ States have simply ignored this constitutional provision for years. Itโs impossible for a state to return to a constitutional sound money system when it taxes gold and silver as a commodity.
SB502 would take a step toward establishing gold and silver as legal tender in the state and that constitutional requirement, ignored for decades in every state. This sets 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 could create a โreverse Greshamโs effect,โ drive out bad money, effectively nullify the Federal Reserve, and end the federal governmentโs monopoly on money.
โOver 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 โreverse Greshamโs Lawโ 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 stateโs treasury, an influx of banking business from outside of the state โ as people in other states carry out their desire to bank with sound money โ and an eventual outcry against the use of Federal Reserve notes for any transactions.โ
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.
WHATโS NEXT
SB502 will now move to the House, where it will first need to pass out of committee before the lower chamber can concur.
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