TOPEKA, Kan. (Jan. 23, 2025) – A bill filed in the Kansas Senate would officially recognize gold and silver as legal tender and repeal state taxes on the metals. Passage into law would set the stage for the people themselves to undermine the Federal Reserve monopoly by introducing competition into the monetary system.

Under Senate Bill 39 (SB39), “specie legal tender” would be a “recognized medium of exchange for the payment of debts and taxes.” This would include gold and silver coins and bullion “issued by the United States government at any time” or that “a court of competent jurisdiction, by final and unappealable order, rules to be within state authority to make or designate as legal tender.

The passage of SB39 would make Kansas the sixth state to recognize gold and silver as legal tender, as they always should have been doing. Utah led the way, reestablishing constitutional money in 2011. Wyoming, OklahomaArkansas, and Louisiana have since joined.

IN PRACTICE

Practically speaking, this would allow Kansas residents to use gold or silver in both physical and electronic forms as money rather than as mere investment vehicles.

Passage of SB39 would represent a big first step against the fiat-based Federal Reserve system by creating a foundation to pull the rug out from under it on the state and local levels. In essence, it would set the stage for the people themselves to undermine the Federal Reserve monopoly by introducing competition into the monetary system.

The next step would be for people to start taking advantage of the status of gold and silver as money by using both as such instead of Federal Reserve notes.

The effect has been most dramatic in Utah where the Specie Legal Tender Act opened the door for the development of a robust gold and silver economy in the state. With some legal hurdles cleared away by the state’s legal tender law, the United Precious Metal Association (UPMA) in partnership with Alpine Gold Exchange set up the state’s first “gold bank.”

The Act has also led to the creation of the Goldback, 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.

New Hampshire also boasts a thriving gold and silver economy. While the state does not officially recognize bullion as legal tender, this has not deterred thousands of residents from using it in private transactions. Because there are no state tax barriers on precious metals, a favorable tax climate – combined with a population willing to embrace sound money – has positioned New Hampshire as another model for others to follow.

GOLD CONTRACT CLAUSE

Beyond the provisions to make gold and silver legal tender, the bill includes language recognizing gold or silver contract clauses.

“Kansas courts shall require specific performance as a remedy for breach of any contract designating a type or form of specie as tender.”

In practice, including this contract clause means if parties voluntarily agree to be paid, or to pay, in gold and silver coin or bullion, the Kansas courts could not substitute any other thing, e.g. Federal Reserve Notes, as payment.

The principle behind a gold clause contract is simple. It requires that payment must be made in a specific amount of gold or its paper equivalent. For example, a mortgage might stipulate that repayment must be in the form of 30 ounces of gold. Gold clauses protect the parties to a contract from currency debasement, and incentivize the use of sound money.

REMOVING TAXES

Under SB39, “The exchange of one 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.” This would effectively repeal all taxes on gold and silver specie.

It would also specifically repeal the state’s capital gains tax on gold and silver bullion.

Taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs.

Kansas 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.

Imagine if the IRS sent you a bill every time the dollar strengthened against the euro. That’s effectively what capital gains taxes on gold and silver do. As the precious metals prices go up due to the devaluation of the dollar, the government levies a tax on you. It is essentially a tax on the superior performance of gold and silver as 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 most states 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 paper 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.

State bills that facilitate and encourage the use of sound money create a playing field where people can push back against the Fed’s monetary malfeasance. Ultimately, it could create a scenario where people can drive out the “bad” fiat money with “good” sound money.

WHAT’S NEXT

SB39 was referred to the Senate Financial Institutions and Insurance Committee where it must get a hearing and pass by a majority vote before moving forward in the legislative process.

Mike Maharrey