SALT LAKE CITY, Utah (March 29, 2022) – Last week, Utah Gov. Spencer Cox signed a bill into law that exempts the sale of “Goldbacks” from the state sales tax. This will further the use of gold as money and take another step to undermine the Federal Reserve’s monopoly on money.
Rep. Brady Brammer (R) and Sen. Curtis Bramble (R) introduced House Bill 268 (HB268) on Jan. 28. The new law makes several changes to the state’s sales and income tax code. It includes a sales tax exemption on the sale of “goldback” notes.
The “Utah Specie Tender Act of 2011” removed all taxes levied against precious metals and reaffirmed gold and silver’s status as money. The law had a practical impact with the establishment of Alpine Gold Exchange. Alpine offers accounts denominated in U.S.-minted gold and silver dollars. The company also released the “Utah Goldback.” They describe it as “the first local, voluntary currency to be made of a spendable, beautiful, physical gold.”
These bills denominated at $1, $5, $10, $25 and $50 contain small amounts of gold and can be used in everyday transactions.
But up until the passage of HB268, the sale of goldbacks was subject to Utah sales tax. Language in the bill repeals the tax. The law exempts “sales of a note, leaf, foil, or film, if the item: (a) is used as currency; (b) does not constitute legal tender of a state, the United States, or a foreign nation; and (c) has a gold, silver, or platinum metallic content of 50% or more, exclusive of any transparent polymer holder, coating, or encasement.”
The passage of this law removes a barrier to using goldbacks in everyday transactions.
KNOCKING DOWN BARRIERS
The state sales tax exemption on goldbacks takes another step toward treating gold as money instead of a commodity. Taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs. As Sound Money Defense League policy director Jp Cortez testified during a committee hearing on a 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 Arkansas’ sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Arkansas 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 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 also 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 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 South Carolina 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.
The passage of HB268 knocks down another tax barrier that hinders the use of gold as money in Utah.
Repealing taxes on gold and silver also takes 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.