Bringing gold and silver back as America's Constitutional money

State Laws Can Help Restore Gold and Silver as Money


A growing number of Americans understand that the reckless creation of fiat currency by the Federal Reserve System is causing many of our economic problems. They want to abolish the Fed and return to the gold-backed currency that brought America and the world unprecedented prosperity throughout the 19th century.

But that will not happen overnight. Big banks and other special interests reap enormous profits from the present system, while many Americans are accustomed to paper money and do not grasp the deep connection between sound money and lasting prosperity.

That’s why sound money activists are launching exciting initiatives at the state level to challenge the monetary monopoly of the Fed. The Sound Money Defense League is taking a multi-pronged approach to removing the shackles that bound sound money.

Our strategy is based in making changes to state sales taxation on precious metals purchases and state capital gains taxation on precious metals holdings, while working to establish state gold depositories, reestablishing gold and silver as money, and encouraging states to hold reserves in precious metals.

The movement to advance the sound money cause at the state level has grown dramatically in recent years. This is likely to continue in an era of unprecedented inflation and geopolitical uncertainty. The legislative success sound money efforts have experienced are indicative of a frustration many Americans feel with the out-of-control money printing by the Fed and their corresponding desire for a return to sound, constitutional money.

From Alabama to Wyoming, states across the U.S. continue to pass legislation to eliminate taxes on gold and silver, establish in-state depositories, protect state taxpayer funds with sound money, and more.

States Continue Removing Sales Taxes on Gold & Silver

To date, 43 states have removed some or all taxes from the purchase of gold and silver. Of the seven states that still apply this outmoded tax to purchases of precious metals, five of them considered legislation to end this tax in 2023. 

Taxing the exchange of Federal Reserve Notes for the monetary metals is an atrocious policy, for several reasons.

States generally don’t tax the purchase of investments. States don’t slap sales taxes on the purchase of stocks, bonds, ETFs, currencies, and other financial instruments. Gold and silver are held as forms of savings and investment. So taxing precious metals penalizes a single class of savers and investors.

Taxing precious metals actually reduces a state’s tax revenues. A Michigan analysis revealed that the sales tax revenue extracted was actually exceeded by revenue lost from conventions, businesses, and economic activity driven out of the state.

And states with sales taxes on precious metals are at a competitive disadvantage to neighboring states that have ended the practice.

Taxing precious metals is harmful to citizens attempting to protect their assets. Purchasers of precious metals generally aren't fat cat investors. Most who buy precious metals do so in small increments as a way of saving money.

People purchase precious metals, in part, to preserve their wealth against the ravages of inflation. Inflation especially harms the poorest among us, including pensioners, senior citizens on fixed incomes, wage earners, and savers. 

Levying taxes on precious metals is illogical and inappropriate. Purchases of computers, shirts, and shoes are taxable to the final consumer. But precious metals are inherently held for resale, not "consumption," making the entire notion of taxing their purchase illogical from the start.

More States Want to End Income Taxes on Gold & Silver

In 2019, the Sound Money Defense League teamed up with sound money advocates in West Virginia to eliminate sales taxes on precious metals. Several states have introduced similar legislation since.

A capital gains tax on precious metals is often a tax on imaginary gains.

Under current law, a taxpayer who sells precious metals may end up with a capital “gain” in terms of Federal Reserve Notes. This capital “gain” is not necessarily a real gain, it’s often a nominal gain that results from the inflation created by the Federal Reserve and the attendant decline in the dollar’s purchasing power.

Yet this nominal gain is taxed at the federal level – and, because most states use federal adjusted gross income (AGI) as a starting point for income calculations, this nominal gain is taxed again by the state (in most cases).

Neutralizing punitive income tax treatment of the monetary metals would remove the last major disincentive that stands against the ownership and use of the monetary metals.

Not Just Taxes, States Do More to Restore Sound Money

State legislative efforts don’t end with taxation. Legislation to establish an in-state gold depository, and protect taxpayer reserve funds with gold and silver. Measures that would permit – but not require – the State Treasurer to hold some portion of state funds in physical gold and silver would help secure state assets against the risks of inflation and financial turmoil. These bills have enjoyed grassroots support across several states.

Ultimately, individual states cannot bring soundness to America’s monetary system on their own. The root of the problem is the Federal Reserve, U.S. Treasury, and Congress who have fully embraced fiat money and abandoned monetary restraint.

With the Consumer Price Index running at its highest rate in 40 years, inflation is becoming the most pressing economic issue of our time. States must not waste time in restoring sound money.

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