by Peter Schiff, Schiff Gold:
A bill introduced in the Alaska House would exempt gold and silver bullion from local sales tax and make them both legal tender in the state. Ending the sales tax would relieve some of the tax burden on investors, and take a step toward treating precious metal bullion as money instead of a commodity.
Rep. Kevin McCabe (R) introduced House Bill 3 (HB3) on Jan. 9. The legislation would exempt the exchange of specie from any sales or use tax levied in the state. Specie is defined as gold or silver valued primarily based on its metal content and in the form of a coin or bullion that is stamped or imprinted with its weight and purity.
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Alaska does not have a state income or sales tax, but local jurisdictions can levy sales taxes.
HB3 would also make gold and silver specie legal tender in the state, recognizing it as a medium of exchange for the payment of debts and taxes. In effect, gold and silver specie would be treated as money, putting it on par with Federal Reserve notes in Alaska.
Under the proposed law, specie legal tender would be defined as specie issued by:
(1) the federal government at any time
(2) a foreign government at any time
(3) the state government if a court of competent jurisdiction, by final and unappealable order, ruled the specie to be within state authority to designate as legal tender.
By allowing the court to designate additional specie to be used as legal tender, Alaska could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coins. More importantly, the people of the state of Alaska would be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their competing currency by Washington DC
Repealing taxes on gold and silver is an important step toward sound money. It reduces the tax burdens on investors and those who want to use gold and silver in transactions.
KNOCKING DOWN BARRIERS
Currently, 42 states have eliminated sales taxes on gold and silver bullion.
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.
Also, 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’s 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, states 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 US 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 goes 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 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.
