Testimony in Defense of Sound Money in Maine

AUGUSTA, Maine (June 1, 2021) – Jp Cortez of the Sound Money Defense League, submitted testimony in support of a bill that would exempt gold and silver bullion and coins from sales tax. The proposed law would relieve some of the tax burdens on investors, and it would also eliminate one barrier to using gold and silver in everyday transactions, a foundational step for people to undermine the Federal Reserve’s monopoly on money.

Rep. Justin Fecteau (R-Augusta) introduced House Bill 1277 (LD1277) on March 25. The legislation would exempt both gold and silver bullion (bars) and coins from the state’s sales and use tax.

Addressing the Maine Joint Committee on Taxation, Jp Cortez had this to say in support of LD1277;

“Under current law, Maine citizens are discouraged from insuring their savings against the devaluation of the dollar because they are penalized with taxation for doing so. Passage of this measure would remove disincentives to holding gold and silver for this purpose. LD 1277 is important for a few reasons:

•Taxing precious metals is unfair to certain savers and investors. Gold and silver are held as forms of savings and investment. Maine does not tax the purchase of stocks, bonds, ETFs, currencies, and other financial instruments.

•Levying sales taxes on precious metals is inappropriate. Sales taxes are typically levied on final consumer goods. Computers, shirts, and shoes carry sales taxes because the consumer is “consuming” the good. Precious metals are inherently held for resale, not “consumption,” making the application of sales taxes on precious metals inappropriate.

•Studies have shown that taxing precious metals is an inefficient form of revenue collection. The harm is exacerbated when you consider that Maine’s only neighbor (New Hampshire) does not tax gold and silver.

•Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers will take their business to New Hampshire (which does not charge sales tax on precious metals), thereby undermining Maine jobs. Levying sales tax on precious metals harms in-state businesses who will lose business to out-of-state precious metals dealers. Investors can easily avoid paying $107.25 in sales taxes, for example, on a $1,950 purchase of a one-ounce gold bar.In total, 40 states have reduced or eliminated sales tax on the monetary metals. 4 more are currently considering eliminating the tax on gold and silver, including Maine

.•Taxing precious metals is harmful to citizens attempting to protect their assets. Purchasers of precious metals aren’t fat-cat investors. Most who buy precious metals do so in small increments as a way of saving money. Precious metals investors are purchasing precious metals as a way to preserve their wealth against the damages of inflation. Inflation harms the poorest among us, including pensioners, Mainers on fixed incomes, wage earners, savers, and more.Bills to remove taxation on sound, constitutional money are also being, or have been, introduced in Alabama, Hawaii, Iowa, South Carolina, Tennessee, and more.

KNOCKING DOWN BARRIERS

Repealing sales taxes on precious metal bullion would take a step toward treating gold and silver as money instead of commodities. Taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs.

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 Maine’s sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Maine 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 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 of enacting this legislation would 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 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.

The effect has been most dramatic in Utah where United Precious Metals Association (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 “Utah Goldback.” UPMA describes it as “the first local, voluntary currency to be made of a spendable, beautiful, physical gold.”

BACKGROUND

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.” Currently, all debts and taxes in Maine are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress or with coins issued by the U.S. Treasury — very few of which have gold or silver in them.

The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat currency. Without the backing of gold or silver, the central bank can easily create money out of thin air. This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the U.S. government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world.

Passage of LD1277 would remove one of the tax barriers that hinder the use of gold and silver as money in Maine.

Repealing taxes on gold and silver would also take the first step in the process of abolishing the Federal Reserve system by attacking it from the bottom up – pulling the rug out from under it by working to make its functions irrelevant at the state and local levels, and setting the stage to undermine the Federal Reserve monopoly by introducing competition into the monetary system.

In a paper presented at the Mises Institute, Constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would 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.

Tags: Constitutional Tender, Federal Reserve, Gold and Silver, LD1277, Maine, Sound Money