by Michael Maharrey, Schiff Gold:
A bill introduced in the Wisconsin Senate would create a state sales tax exemption on the sale of gold and silver bullion. By effectively repealing the sales tax, the bill would relieve some of the tax burden on investors, and take a step toward treating precious metal bullion as money instead of a commodity.
A coalition of 23 Republicans introduced Senate Bill 33 (SB33) on Feb. 3. The legislation would create a sales and use tax exemption for precious metal bullion. The bill defines “precious metal bullion” as coins, bars, rounds, or sheets that contain at least 35 percent gold, silver, copper, platinum, or palladium.
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Repealing taxes on gold and silver is an important step toward sound money. It reduces the tax burdens on investors. It also knocks down barriers for people 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 Ron Paul said during testimony in support of an Arizona bill that repealed capital gains taxes on gold and silver in that state.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.
