TRENTON, N.J. (Jan. 9, 2024) – Yesterday, the New Jersey House and Senate gave final approval to a bill that would exempt gold and silver bullion from state sales and use taxes. Enactment of this legislation would not only relieve some of the tax burdens on investors, but 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. Louis Greenwald introduced Assembly Bill 5294 (A5294) on Mar. 16. The legislation would exempt the sale of investment metal bullion (bars and coins) and investment coins from the state sales and use tax.
Investment metal bullion is defined as “any elementary precious metal that has been put through a process of smelting or refining, including, but not limited to, gold, silver, platinum, and palladium, and that is in such a state or condition that its value depends on its content, not its form.” An “investment coin” is defined as “any numismatic coin manufactured of gold, silver, platinum, palladium, or any other metal, including non-precious metals.”
On Jan. 8, the Senate passed A5294 by a voice vote. Later that day, the Assembly concurred with Senate amendments. The bill now goes to Gov. Phil Murphy’s desk for his consideration.
“Even the most tax-revenue hungry states are seeing the failings (political, moral, and otherwise) of taxing sound money, especially in an inflationary environment,” Sound Money Defense League Executive Director Jp Cortez said in a tweet after the vote.
KNOCKING DOWN BARRIERS
Currently, 43 states have eliminated sales taxes on gold and silver bullion. Repealing sales taxes on precious metal bullion takes 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. 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 New Jersey’s sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, New Jersey 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 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 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 the legal tender law repealed all taxes on gold and silver bullion, opening the door for the development of a gold and silver market in the state. With some legal and tax hurdles cleared away by the state, the United Precious Metal Association (UPMA) in partnership with Alpine Gold Exchange set up the state’s first “gold bank.” The Utah Specie Legal Tender Act has also led to the creation of Goldbacks, a local, voluntary medium of exchange. Goldbacks are notes made from fractions of an ounce of physical gold. The company created a process that turns pure gold into a spendable physical form for small transactions.
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 New Jersey 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 A5294 would remove one of the tax barriers that hinder the use of gold and silver as money in New Jersey.
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.
Gov. Murphy will have 45 days from the date A5294 is transmitted to his office to sign or veto the bill. If he takes no action, the bill will become law without his signature.
EDITOR’S NOTE: This report was revised to reflect a Senate committee amendment that removed the $1,000 limit in the definition of “investment coin.”