LINCOLN, Neb. (April 26, 2024) – On Tuesday, Nebraska Gov. Jim Pillen signed a bill into law repealing state capital gains taxes on the sale of gold and silver bullion. Passage into law would relieve some of the tax burdens on investors and 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.
Sen. Ben Hansen introduced a capital gain tax as a standalone bill, but the provisions were ultimately included in Legislature Bill 1317 (LB1317) on Jan. 18. The extensive tax bill includes a provision that effectively repeals state capital gains taxes on the sale of gold and silver bullion, defined as “coins, bars, ingots, notes, leaf, foil, film, or commemorative medallions of gold, silver, platinum, or palladium, or a combination of these, for which the value depends primarily on its content and not the form.”
Under the Nebraska code, taxpayers use federal adjusted gross income as a starting point for state taxes. LB1317 would allow taxpayers to reduce their gross income for state purposes by the amount of any capital gains reported to the IRS on the sale of gold and silver. They would also add capital losses on the sale of the same.
LB1317 passed Nebraska’s unicameral legislature by a 49-0 vote. With Gov. Pillen’s signature, the tax provisions will go into effect for the 2025 tax year.
“Gold and silver are the only forms of currency mentioned in our Constitution and with that comes the people’s ability to use it as such without penalty from the government,” Hansen said. “Saving, and using, gold and silver is our right and one of the only checks and balances to our federal government’s unending devaluation of our paper currency. ”
LB1317 also includes a provision that excludes central bank digital currency (CBDC) from the state definition of money under the state tax code. The impact of this change is unclear, but ostensibly, it would prohibit the state from accepting tax payments in the form of CBDC and create a roadblock to its implementation in Nebraska.
KNOCKING DOWN BARRIERS
Nebraska is one of 45 states that have eliminated sales taxes on gold and silver bullion. 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 Nebraska’s capital gains tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Nebraska 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.
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.
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 Nebraska 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.
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 LB1317 removes another tax barrier that hinders the use of gold and silver as money in Nebraska.
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.
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