BOISE, Idaho (March 9, 2020) – A bill introduced in the Idaho House would exempt the sale of gold and silver from state capital gains tax, encouraging its use and taking the first step toward breaking the Federal Reserveโs monopoly on money went into effect.
The House Revenue and Taxation Committee introduced House Bill 602 (H602) on March 5. The legislation would exclude gains and losses from the sale of precious metal bullion or monetized bullion from state income tax calculations.
IN PRACTICE
Idaho has already exempted the sale of gold and silver bullion from state sales tax. Passage of H602 would take another step toward treating gold and silver as money instead of as commodities. As Sound Money Defense Leagueย policy director Jp Cortez testified during a committee hearing onย a similar bill in Wyomingย in 2018, 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 taxes on the sale of gold and silver bullion do. By eliminating capital gains taxes on the exchange of gold and silver, Idaho would take another step toward treating 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.
โWe 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 Ron Paul said during testimony in supportย an Arizona billย that repealed capital gains taxes on gold and silver in that state.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 impact of enacting H602 would go beyond mere tax policy. During 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 cracks open the door for people to begin using gold and silver in regular business transactions. This marks an important small step toward currency competition.
The effect has been most dramatic in Utah whereย United Precious Metals Associationย (UMPA) was established after the passage of the Utah Specie Legal Tender Act and the elimination of all taxes on gold and silver. UPMA offers accounts denominated in U.S. minted gold and silver dollars. The company also recently released the โUtah Goldback.โ UPMA describes it as โthe first local, voluntary currency to be made of a spendable, beautiful, physical gold.โ
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 bankโs rapidly-depreciating paper currency.
Constitutional tender expert Professor William Greene wrote that 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
The House Revenue and Taxation Committee must pass H602 by a majority vote before the bill can move forward in the legislative process.
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