Alabama Bill Would Exempt Gold and Silver Bullion from Sales Tax; Help Encourage Its Use as Money

by SchiffGold 0

A bill prefiled in the Alabama House for the 2018 session would exempt the purchase of gold and silver bullion from state sales and use tax, encouraging its use and taking the first step toward breaking the Federal Reserve’s monopoly on money.

Rep. Ronald Johnson (R-Sylacauga) prefiled House Bill 19 (HB19). The legislation would exempt the gross proceeds from the sale of gold, silver, platinum, and palladium bullion and coins from sales and use tax in the state.

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 Alabama’s sales tax on gold and silver bullion does. By removing the sales tax on the exchange of gold and silver, Alabama 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.

Practically speaking, eliminating taxes on the sale of gold and silver would crack open the door for people to begin using specie in regular business transactions.This would mark an important small step toward currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency.

Earlier this year, governors in Louisiana and North Carolina signed similar bills into law. A new Arizona law that went into effect in August eliminated state capital gains taxes on gold and silver specie, removing another barrier.

Of course, this is all good news for gold and silver dealers and investors. But it has much broader implications. These bills effectively remove taxes from the exchange of one kind of legal tender for another kind of legal tender – after all, gold and silver are money. In other words, individuals buying gold or silver bullion, or utilizing gold and silver in a transaction, would no longer be subject to state taxes on the exchange. This should encourage and facilitate the use of gold and silver in everyday transactions.

As Ron Paul said during testimony in favor of the Arizona bill, “We ought not to tax money – and that’s a good idea. It makes no sense to tax money.”

This legislation is part of a broader movement at the state level to break the Fed’s monopoly over the US financial system.

BACKGROUND INFORMATION

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.” States have simply ignored this constitutional provision for years. It’s impossible for a state to return to a constitutional sound money system when it taxes gold and silver as a commodity.

This Alabama bill takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would set the stage to undermine the monopoly of the Federal Reserve 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. Nullifying the Fed on a state by state level is what will get us there.

This article was based on a report originally published at the Tenth Amendment Center.

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