OKLAHOMA CITY, Okla. (Feb. 19, 2024) – Today, an Oklahoma House Committee passed a bill that would eliminate state capital gains taxes on gold and silver specie, and clarify and expand the definition of gold and silver as legal tender in the state.
In 2014, Oklahoma took the first step and declared gold and silver coins issued by the United States government are legal tender in the State of Oklahoma. That law also expanded the sales tax exemption on gold and silver. Rep. Cody Maynard filed House Bill 3027 (HB3027) this year to improve and clarify the definition of specie legal tender.
Under the revised definition, specie legal tender would defined as “Specie coin issued by the United States Government, or Other specie that an Oklahoma court rules to be within state authority to make or designate as legal tender.”
By allowing state courts to designate additional specie to be used as legal tender, Oklahoma could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coins as legal tender. More importantly, the people of the state of Oklahoma would be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their money by Washington D.C.
Today, the House Banking, Financial Services and Pensions Committee passed HB3027 with a vote of 5-2.
HB3027 also includes a contract clause under which, “If a valid contract expressly designates a type or form of specie as tender, then an Oklahoma court asked to adjudicate the breach of such a contract shall require, as a remedy for the breach, the specific performance of tendering the type or form of specie specified in the contract.”
This wording would reaffirm a court’s ability to require specific performance when enforcing such contracts. If voluntary parties agree to be paid, or to pay, in gold and silver coin, the Oklahoma courts could not substitute any other thing, e.g. Federal Reserve Notes, as payment.
Utah led the way, reestablishing constitutional money in 2011. Wyoming and Arkansas have followed Utah’s lead along with Oklahoma.
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.
TAX REFORMS
HB3027 would explicitly eliminate all taxes on the sale and exchange of one specie legal tender for another.
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. The purchase, sale, or exchange of any type or form of specie shall not give rise to any tax liability.
The 2014 legal tender bill expanded the sales tax exemption on the sale of gold and silver bullion. HB3027 would take another step by effectively repealing the state capital gains tax on the exchange of gold and silver. In other words, individuals selling gold or silver bullion, or utilizing gold and silver in a transaction, would no longer be subject to state income taxes on the exchange.
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 the sale 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 taxes on gold and silver bullion do. By removing the taxes on the exchange of gold and silver, Oklahoma would treat specie as money instead of a commodity. This represents a 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.
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.”
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 Oklahoma 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.
Making gold and silver legal tender also takes another 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.
WHAT’S NEXT
HB3027 will now be available for debate and vote in the full House.
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