BOISE, Idaho (Feb. 26, 2024) – A bill introduced in the Idaho House would make gold and silver legal tender in the state and repeal all taxes on the same. Passage of the legislation would set the stage to undermine the Federal Reserve’s monopoly on money.
The House State Affairs Committee introduced House Bill 627 (H627) on Feb. 22. The legislation would make “gold and silver coin minted foreign or domestic” legal tender in the state of Idaho.
Legal tender is defined as “a medium of exchange, currency, or money that may be offered and accepted for the satisfaction of debts under the laws of the state of Idaho or of the United States.”
Passage into law would make Idaho the fifth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Wyoming, Oklahoma, and Arkansas have since joined. Practically speaking, this would allow Idaho residents to use gold or silver coins as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same practical footing as Federal Reserve notes.
The effect has been most dramatic in Utah where the legal tender law opened the door for the development of a gold and silver market in the state. With some legal 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 bill also specifically excludes any legal tender transactions from state taxes.
No specie or legal tender shall be characterized as personal property for taxation or regulatory purposes.
The exchange of one (1) type or form of legal tender for another type or form of legal tender shall not give rise to any tax liability of any kind.
The purchase, sale, or exchange of any type or form of specie shall not give rise to any tax liability of any kind.
Idaho has already repealed the sales tax on gold and silver bullion. These provisions would eliminate all other taxes on gold and silver specie coins including the state capital gains tax.
Repealing 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 Idaho’s capital gains tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Idaho 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 of an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.
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 Idaho 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.
Repealing taxes on gold and silver and treating both as legal tender also takes the first steps against 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. It also sets the stage for the people to undermine the Federal Reserve monopoly by introducing competition into the monetary system.
The next step would be for people to start using gold and silver instead of Federal Reserve notes.
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.
WHAT’S NEXT
The House State Affairs Committee will need to hold a hearing on H627 and it will need to pass the committee by a majority vote before moving forward in the legislative process
