Bills Introduced in Mississippi and Tennessee Would Repeal Sales Tax on Gold and Silver
Bills introduced in the Mississippi House and the Tennessee Senate would repeal state sales taxes on precious metals bullion. This would not only relieve some of the tax burdens on investors in those states; it would also take a small step toward treating gold and silver as money instead of commodities.
In Mississippi, Rep. Henry Zuber (R-Ocean Springs) and Rep. Brady Williamson (R-Oxford) introduced House Bill 375 (HB375) on Jan. 18. The proposed law would exempt gold, silver, platinum and palladium bullion from the state sales tax. To qualify for the exemption under the proposed law, bullion must “be refined and contain at least ninety percent (90%) gold, silver, platinum, or palladium or some combination of these metals, and the sales price of the item must fluctuate with and depend on the market price of the underlying precious metal, and not on the item’s rarity, condition, age, or other external factors.”
In Tennessee, Sen. Rusty Crowe (R-Johnson City) introduced Senate Bill 251 (SB251) on Jan. 20. The proposed law would exempt certain coins, currency and bullion from the state sales tax. To qualify for the exemption, it must be manufactured in whole or in part from gold, silver, platinum, palladium, rhodium, or other precious metal; used solely as legal tender, security, or commodity in this or another state, the United States, or a foreign nation; and be sold based on its intrinsic value as a precious material or collectible item rather than its representative value as a medium of exchange.
KNOCKING DOWN BARRIERS
Sales taxes on gold and silver raise investment costs. Repealing these taxes knocks down one barrier that might keep some investors from considering physical metal for their portfolios.
With the advent of electronic payment services, it’s easier than ever to use precious metals in everyday transactions. Companies like GoldMoney facilitate this. But taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs. Passage of these bills would take a small step toward undermining the Federal Reserve monopoly on money by eliminating one hurdle to using gold and silver in everyday transactions.
In effect, states that collect taxes on purchases of precious metals act as if gold and silver aren’t 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, Mississippi and Tennessee 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 an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he contin
The impact of enacting this legislation would 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.
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 the US are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress, or with coins issued by the US 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.
Passing these bills in Mississippi and Tennessee would remove one of the tax barriers that hinder the use of gold and silver as money, and would also begin the process of abolishing the Federal Reserve’s fiat money 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.
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.
These two bills make up part of a broader movement at the state level to support sound money.