MADISON, Wisc. (Aug. 8, 2019) – A bill introduced in the Wisconsin Assembly would take an important step toward treating gold, silver and cryptocurrency as money instead of a commodity.
Rep. Shae Sortwell (R-Two Rivers) introduced Assembly Bill 200 (AB200) on May 8. The legislation would exempt the sale, use, or other consumption of precious metals from the state’s sales and use tax. It would also exempt the sale of cryptocurrency.
An amendment to the bill submitted by the sponsor on July 17 would define “precious metal bullion” as “coins, bars, rounds, or sheets that contain gold, silver, copper, platinum, or palladium and that are marked with weight, purity, and content or for which the government issuer has certified the weight, purity, and content.”
Passage of AB200 would eliminate a significant barrier to using gold, silver and cryptocurrencies in everyday transactions, a foundational step for people to undermine the Federal Reserve’s monopoly on money.
With the passage of AB200, Wisconsin could a step toward treating gold, silver, copper, platinum and palladium, along with cryptocurrencies, as money instead of a commodity. As Sound Money Defense League policy director Jp Cortez testified during a committee hearing on a similar bill in Wyoming in 2018, charging taxes on money itself is beyond the pale.
“In effect, states that collect taxes on purchases 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 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 Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state.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 law’s impact will 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, silver and crypto 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.
AB200 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 “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.
Widespread adoption of cryptocurrency could have the same practical effect. In a nutshell, the passage of AB200 would take a step toward currency competition in Wisconsin and undermine the Fed’s monopoly on money.
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