Last summer, Ohio Gov. Mike DeWine signed a bill into law that exempts gold and silver bullion and coins from sales tax. This will not only relieve some of the tax burdens on investors in the state; it will also take a step toward treating gold and silver as money instead of as commodities.
House Bill 110 (HB110) – the 2022-2023 budget appropriations bill – was introduced back in February. Provisions in the omnibus bill repeal the sales tax on gold and silver, along with platinum and palladium bullion and coins.
DeWine signed the appropriations bill on June 30. The provisions relating to sales tax on precious metals went into effect. Oct. 1
Ohio exempted the sale of gold and silver bullion from the sales tax until the legislature passed a bill levying a tax in 2019. As a result, there was reportedly an exodus of small businesses, coin conventions, and investment activity from Ohio.
Rep. Kris Jordan (R) and Rep. Riordan McClain (R) pushed for the tax repeal.
“These efforts are common sense. We should not be taxing money,” Jordan said.
KNOCKING DOWN BARRIERS
Ohio was the 41st state to eliminate sales taxes on gold and silver bullion. The only states still living taxes on the sale of precious metal bullion are Vermont, New Jersey, Maine, Tennessee, Kentucky, Wisconsin, New Mexico, Mississippi and Hawaii. The District of Columbia also taxes physical gold and silver purchases.
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 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, Arkansas will 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.
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.
The enactment of HB110 removes one of the tax barriers that hinder the use of gold and silver as money in Ohio, and could 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.
In a paper presented at the Mises Institute, 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.
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