Coming up on today’s program we’ll have a special report on some important new developments in sound money legislation at the state level. Be sure to stick around to find out which states are in the process of advancing the cause of restoring gold and silver as money. First, though, let’s take a brief look at this week’s market action in the precious metals.
Precious metals markets can certainly be volatile from week to week, but over time they are a more reliable store of value than Federal Reserve Notes. Gold and silver remain the world’s most enduring and most widely recognized form of money. And, as spelled out in the U.S. Constitution, gold and silver coins are legal tender. Individual states thus can formally recognize gold and silver coins as legal tender alternatives to Federal Reserve Note dollars.
Both Utah and Oklahoma have passed legal tender laws in recent years recognizing gold and silver as money. The metals can be used freely as a means of payment and are free from all state taxes. More than 20 states have already removed sales taxes from precious metals transactions, with Alabama, Tennessee, and Maine now considering their own proposals to do so as well.
Other states, including Arizona and Idaho, are moving forward on legislation to exempt gold and silver bullion from capital gains taxes. Since Money Metals Exchange is located in Idaho, we would be particularly excited to see it become a haven for sound money.
Last Thursday a bill to eliminate capital gains taxes on precious metals passed the Idaho House Committee on Revenue and Taxation. Money Metals President Stefan Gleason testified before the Committee. Here is some of what he had to say:
Stefan Gleason: Our mission is to educate people also about precious metals and help them diversify into this reliable and more stable form of money, really truly a Constitutional money with tremendous history going back to the founding of our country. Gold and silver have been chosen for thousands of years as money because of their qualities as financial insurance, as a store of value, and its practicality as a medium of exchange. The bill I want to talk about today is a straightforward bill. Basically, we don’t want to tax money in Idaho. Idaho already does not tax precious metals with its sales tax, and we’re asking for it to be removed from the calculation of income tax in Idaho.
The Founders of our nation dealt with the collapse of the un-backed continental dollar, and that was fresh in their minds when they created our monetary system and established gold and silver as our nation’s money. In fact, the dollar was defined as a fixed amount of silver, and even in the Constitution the Founders restricted states from making payment in anything other than gold and silver coins for payment of debt. For the first hundred years, our nation’s money gold and silver coinage maintained its purchasing power pretty much consistently, except for a small period of time during the Civil War when we went off the gold standard.
But then about 100 years ago the Federal Reserve was created, and since that time we’ve seen a dramatic decline in the purchasing power of what is now considered the dollar but really is called the Federal Reserve Note. Of course, the last link to gold was severed officially in 1971, and that has led to an acceleration of this devaluation in purchasing power and an explosion in federal government debt during that same period of time.
The people that are most harmed by inflation are wage earners and savers. When the dollar goes down in purchasing power, they lose. Fortunately, an increasing number of citizens are recognizing that owning gold and silver as an alternative form of savings is a good way of protecting some of their wealth, protecting some of their purchasing power, and standing against this ongoing devaluation. It’s also something that helps in periods of financial turmoil, which seem to be increasing under our current system. Gold and silver are a safe haven.
Under current law, however, when a taxpayer sells their precious metals, they may end up with a capital gain because it’s measured against the Federal Reserve Notes that they sell it for. Now it may not be a real gain. In most cases, it’s not a real gain. It’s a nominal gain. It’s an illusory gain. Yet it’s still something that triggers taxation at the federal level, and a taxpayer has to include that in their taxable income if they sold gold and silver bullion or coins.
It’s even taxed at a discriminatorily high 28% rate for long-term capital gains… It’s 15 and 20 for other types of assets. Then Idaho in the calculation of Idaho taxable income essentially carries forward that income number, and then there’s some adjustments that are made on various things according to Idaho statutes to arrive at the Idaho taxable income.
This legislation simply would back out the federal income or loss that somebody reports on precious metals out of their Idaho taxable income. This is something that Idaho can do. Obviously, we can’t mess with federal tax laws, but Idaho decides what it’s taxing as income, and we propose with this legislation that precious metals be removed, because it’s money.
Also, weighing in on behalf of Idaho’s bill to free precious metals from state taxation was an executive of a freedom minded group in the Gem State.
Fred Birnbaum: My name is Fred Birnbaum, with the Idaho Freedom Foundation and I’m here to speak in support of this bill. I’ll be very brief. I think Mr. Gleason covered just about everything. But I’ll make a parallel point. Recently, actually this week, there was a lot of debate about a constitutional amendment, article five convention. I’m not going to re-open that debate. But I think it’s relevant, to some extent, to this bill. I certainly don’t want to overplay that point. What came up and one of the central issues was the unbalanced federal budget, if you will.
And the fact that we’ve accumulated about 20 trillion of federal debt and I think sometimes it’s hard to think of the inflation that we currently have as inflation. It certainly varies. It hasn’t been very significant, say in gasoline. It is in property. But the potential for inflation is huge because the Federal Reserve has now issued about 4 trillion dollars of digital money into the economy. It’s pushed it since the recession. So, I think what this bill does, in many ways, is it’s a prospective measure in that those folks who either own gold or silver now or may in the future, if we do have a real bout of inflation, this will protect them from that.
One of the challenges in getting this and similar bills passed is educating legislators on why gold and silver, being constitutional money, are different from other asset classes. Some politicians just don’t grasp the fundamental distinction.
Committee Chairman: Questions for Mr. Gleason? Representative Gannon?
Rep. Gannon: Thank you Mr. Chairman. Sir, one question I always have asked of me is, if we pass a bill like this, is,