JEFFERSON CITY, Mo. (May 8, 2024) – Today, a Missouri House committee passed the “Constitutional Money Act,” a bill that would treat gold and silver as legal tender, and eliminate state capital gains tax on the same.
Sen. William Eigel along with Sen. Mike Moon filed Senate Bill 735 (SB735) on Dec. 1. Under the proposed law, gold and silver would be accepted as legal tender and would be receivable in payment of all debts contracted for in the state of Missouri. The state would be required to accept gold and silver for the payment of public debts. Private debts could be settled in gold and silver at the parties’ discretion.
On May 8, the House Emerging Issues Committee passed SB735 by a 10-3 vote. Last month, the Senate approved the measure by a 21-10 vote.
The Director of the Department of Revenue would be tasked with “promulgating rules on the methods of acceptance of specie legal tender as payment for any debt, tax, fee, or obligation owed.”
Practically speaking, this would allow Missourians to use gold or silver as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same footing as Federal Reserve notes.
Passage into law would make Missouri 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.
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.
REMOVING TAXES AND FUNCTIONAL MONEY
SB735 would also exempt the sale of gold and silver bullion from the state’s capital gains tax.
Missouri is already one of 45 states that do not levy sales tax on gold and silver bullion. Exempting the sale of bullion from capital gains taxes takes another 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 a sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Missouri 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.
Additional provisions to include the electronic transfer of 100 percent-backed gold and silver are crucial in this digital age. It would make gold and silver “functional money.” According to Citizens for Sound Money, a grassroots group supporting the bill, accepting electronic gold and silver for payment of goods and services would save business owners between 200 and 400 percent on credit card transaction fees.
FEDERAL CONFISCATION SCHEMES
SB735 includes provisions prohibiting any state or local cooperation with federal actions to confiscate gold or silver or that interfere with a person’s right to use legal tender in Missouri.
“Under no circumstance shall the state of Missouri or any department, agency, court, political subdivision, or instrumentality thereof enforce or attempt to enforce any federal acts, laws, executive orders, administrative orders, rules, regulations, statutes, or ordinances infringing on the right of a person to keep and use specie legal tender and electronic currency as provided in this section.”
Based on James Madison’s advice for states and individuals in Federalist #46, a “refusal to cooperate with officers of the Union” provides an extremely effective method to render federal laws, effectively unenforceable because most enforcement actions rely on help, support, and leadership from the states. This legislation could effectively end enforcement of any federal laws deemed to violate the Constitution.
Fox News senior judicial analyst Judge Andrew Napolitano agreed this type of approach would be extremely effective. In a televised discussion on federal gun laws, he noted that a single state refusing to cooperate with enforcement would make federal gun laws “nearly impossible” to enforce.
The federal government relies heavily on state cooperation to implement and enforce almost all of its laws, regulations, and acts. By simply withdrawing this necessary cooperation, states can nullify in effect many federal actions. As noted by the National Governor’s Association during the partial government shutdown of 2013, “States are partners with the federal government on most federal programs.”
The provisions prohibiting the state from enforcing or implementing certain federal acts rest on a well-established legal principle known as the anti-commandeering doctrine. Simply put, the federal government cannot force states to help implement or enforce any federal act or program – whether constitutional or not. The anti-commandeering doctrine is based primarily on five Supreme Court cases dating back to 1842.
BACKGROUND
The provisions in SB735 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 Missouri 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 SB735 would allow Missourians 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
SB735 can now move to the full House for further consideration. Should it pass without amendment, it will go to the Governor’s desk.
