COLUMBUS, Ohio (April 10, 2024) – A bill introduced in the Ohio House would take several steps to treat gold and silver as money, including requiring the state to accept gold and silver as payment, repealing the state capital gains tax on gold and silver, and requiring the state to hold bullion reserves.
Rep. Riordan McClain and Rep. William Seitz introduced House Bill 482 (HB481) on April 8. The legislation would require the state to accept “allocated bullion or specie” as payment for any debt, tax, fee, or obligation owed. “Allocated bullion or specie” is defined as bullion or specie that is stored in a secure facility and is specifically segregated, or allocated, to a particular investor. “Specie” is defined as “gold and silver coin that is issued by the United States.”
While not explicitly declaring gold and silver legal tender in Ohio, the enactment of HB481 would take a significant step in that direction.
Utah led the way, reestablishing constitutional money in 2011. Wyoming, Oklahoma, and Arkansas have since joined.
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.
HB481 would also require the state treasurer to keep gold and silver reserves greater than or equal to 2 percent of all state funds.
Holding gold and silver would allow the state of Ohio to shield its assets and hedge against rapidly depreciating Federal Reserve notes. Holding gold and silver in reserve would also create a pathway for Ohio to maintain financial independence should the U.S. dollar collapse, a very real possibility as the world moves away from the greenback as its reserve currency.
Ohio is already one of 44 states that do not levy a sales tax on gold or silver bullion. The passage of HB481 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.
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.
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, Ohio 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 provisions in HB481 would treat gold and silver more like money instead of commodities. They would also lower barriers to using gold and silver in transactions, and they would help undermine the Federal Reserve’s monopoly on money.
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 Ohio are either paid with Federal Reserve Notes (dollars) 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. Passage of HB481 would allow Ohioans to pay state obligations with gold and silver.
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.
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
At the time of this report, HB481 had not been referred to a committee. Once it receives a committee assignment, it must get a hearing and pass by a majority vote before moving forward in the legislative process.
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