Will 2022 be “the year of sound money” in the United States?

Last year was a good year for sound money legislation at the state level across the United States. 2022 could be even better.

Building on the success of healthy money advocates in Arkansas and Ohio last year, more than half a dozen states are now considering legislation that reverses discriminatory taxes and regulations on the sale, use and purchase of gold and silver.

More states are removing sales taxes on gold and silver

To date, 42 states have removed all or part of the taxes on the purchase of gold and silver. And there are new bills pending in five of the remaining eight states, namely Tennessee, Mississippi, Kentucky, Hawaii and New Jersey.

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

States generally do not tax the purchase of investments. States do not impose sales taxes on the purchase of stocks, bonds, ETFs, currencies and other financial instruments. Gold and silver are held as forms of savings and investments. The taxation of precious metals therefore penalizes a single class of savers and investors.

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

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

Taxation of precious metals is detrimental to citizens trying to protect their assets. Buyers of precious metals are generally not large investors. Most people who buy precious metals do so in small increments in order to save money.

People buy precious metals, in part, to preserve their wealth from the ravages of inflation. Inflation particularly hurts the poorest among us, including pensioners, seniors on fixed incomes, wage earners and savers.

Levying taxes on precious metals is illogical and inappropriate. Purchases of computers, shirts and shoes are taxable for the final consumer. But precious metals are inherently held for resale, not “consumption,” which makes any idea of ​​taxing their purchase illogical in the first place.

Here’s a quick look at the pending sales tax repeal bills…

In the state of Bluegrass, Representative Kirk-McCormick introduced House Bill 272 last week to cancel Kentucky sales taxes on gold, silver, platinum and palladium coins and bullion.

In neighboring Tennessee, Rep. Gant and Senator Stevens are pursuing a similar measure. Their efforts are bolstered by a recently released study by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) that encourages the voluntary state to end the practice of precious metal taxation.

House Bill 514 and Senate Bill 870, introduced in 2021 by Rep. Gant and Senator Stevens respectively, will be considered this spring.

Even if lawmakers in Kentucky and Tennessee move forward, Mississippi could beat them to the punch by becoming the 43rd state to cancel sales taxes on monetary metals.

So far, three such bills have been introduced in Mississippi: House Bill 426, House Bill 518, and House Bill 729, introduced by Representative Ford, Representative Hopkins, and Representative Bomgar, respectively.

Hawaii is also set to end state sales taxes on gold and silver. House Bill 1184, introduced by Rep. Okimoto, went through two committees last year, passing unanimously on one … and passing with an overwhelming majority on the other. (The bill was shelved over concerns that passing tax cuts could jeopardize Biden’s grants to state legislatures last year.)

Meanwhile, New Jersey lawmakers also hope to eliminate sales taxes on precious metals. Last year’s sound money tax exemption effort was led by Assemblyman Dancer and Senator Doherty, and they’re championing that cause in the Garden State again this session.

Alabama and Virginia are among the states already on the right side of the sales tax issue. However, both exemptions expire this year.

Sound financial allies have already stepped up, introducing measures to extend the duration of these states’ exemptions — in particular, Senate Bill 13, sponsored by Senator Melson in Alabama, and Bill 936, sponsored by Of the. Batten in Virginia.

Let’s hope they succeed, because the reimposition of sales taxes on gold and silver turned out to be a debacle.

In recent years, the state of Ohio and Louisiana briefly experimented with resuming taxation of precious metal purchases, only to reverse the trend after companies, coinage conventions and tax revenues from the state have left the state.

More states want to end taxes on gold and silver

In 2019, the Sound Money Defense League partnered with sound money advocates in West Virginia to eliminate sales taxes on precious metals.

This year, Delegate Pritt introduced House Bill 3135 to go further by eliminating capital gains taxation on sound currency and reaffirming gold and silver as the currency in the state.

A similar effort will be considered in Olympia, Washington.

Introduced in the last session by Rep. Chase, House Bill 1417 seeks to remove all forms of taxation on metals. Rep. Chase wants to make sure the Evergreen State stays near the top of the Sound Money Index.

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 is often a nominal gain that results from the inflation created by the Federal Reserve and the concomitant decline in the purchasing power of the dollar.

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

Neutralizing the punitive tax treatment of monetary metals would remove the last major obstacle to the ownership and use of monetary metals.

The attack on sound money is rooted in federal politics

Of course, each state alone cannot bring solidity to the American monetary system. The root of the problem is the Federal Reserve, the US Treasury and Congress which have fully embraced fiat currency and abandoned monetary restriction.

With the consumer price index at its highest level in 40 years, inflation is becoming the most pressing economic problem of our time.

While federal policymakers are exacerbating the problem, some states are thankfully stepping up to give their citizens tools to protect themselves.

About Andrew Estofan

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