OLYMPIA, Wash. (April 23, 2019) – Thanks to intense activist pressure, efforts to impose a sales tax on gold and silver were shut down in Washington state last week.
Since last month, a few misguided Washington State senators and representatives have been trying to ram through a new tax on constitutional money.
Efforts stalled out last month on the Senate side and on Friday, the House Finance Committee voted decisively against imposing a new sales tax on precious metals. The introduced version of House Bill 2157 (HB2157) included language repealing the sales tax exemption on gold and silver. The committee removed that language and passed a substitute measure.
Maintaining current law and not levying sales taxes on gold and silver coins and bullion reaffirms their status as money in Washington state, in keeping with Article 1, Section 10 of the U.S. Constitution.
The work of grassroots activists was integral in getting the section repealing the sales tax exemption removed from HB2157. The Sound Money Defense League, local dealers, and other in-state groups provided compelling testimony to maintain current protections for gold and silver investors in these states, stopping the efforts of tax-hungry politicians.
Washington passed its sales tax exemption on the monetary metals almost 35 years ago. Sound Money Defense League’s Jp Cortez testified before the legislature in Olympia, Washington, saying that “taxing gold and silver is a de facto penalty on the only form of money mentioned in the Constitution.”
Local dealers also testified that their businesses could be damaged or destroyed — and coin conventions and the economic activity they bring would leave the state — if sales taxes were suddenly slapped on gold and silver investors.
In addition to the compelling testimony, the politicians proposing the new taxes faced an angry backlash from citizens across Washington who learned of their scheme.
Both Washington and Nebraska have turned back attempts to repeal their long-standing tax exemptions this year.
In reality, the national trend is toward removing rather than re-imposing unjust sales taxation from precious metals.
Last month, the governor of West Virginia signed a bill to repeal the sales tax on gold and silver, and legislatures in Tennessee, Kansas and Maine are considering similar measures.
In total, 39 states have now wholly or partially exempted the monetary metals from sales and use taxes.
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 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 will 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 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 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.”
Practically speaking, eliminating taxes on the sale of gold and silver cracks open the door for people to begin using specie in regular business transactions. This marks an important small step toward currency competition. If sound money gains a foothold 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 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.
SB502 takes 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 “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.
JP Cortez of the Sound Money Defence League contributed to this report.