HONOLULU, Hawaii, (Jan. 28, 2020) – A bill introduced in the Hawaii House would exempt the sale of gold and silver bullion from the state excise tax. Enactment of this legislation would eliminate one barrier to using gold and silver in everyday transactions, a foundational step for people to undermine the Federal Reserve’s monopoly on money.
A coalition of four Republicans introduced House Bill 1830 (HB1830) on Jan. 17. The legislation would exempt the gross proceeds or income arising from the sale of precious metal bullion within Hawaii from the state excise tax. The bill defines precious metal bullion as “coins, bars, or rounds, minted primarily of refined gold, silver, or other precious metals, that are marked and valued by their weight, purity, and content; or minted by a government authority.
With the passage of HB1830, Hawaii would take a step toward treating gold, silver, platinum and palladium as money instead of commodities. As Sound Money Defense League policy director Jp Cortez testified during a committee hearing on a similar bill in Wyoming in 2018, charging taxes on money itself is beyond the pale.
“In effect, states that collect taxes on purchases of precious metals are inherently saying gold and silver are not 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 Hawaii’s excise tax on the sale of gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Hawaii 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.
“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state.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 HB1830 would go 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 effect has been most dramatic in Utah where United Precious Metals Association (UMPA) was established after the passage of the Utah Specie Legal Tender Act and the elimination of all taxes on gold and silver. UPMA offers accounts denominated in U.S. minted gold and silver dollars. The company also recently released the “Utah Goldback.” UPMA describes it as “the first local, voluntary currency to be made of a spendable, beautiful, physical gold.”
If sound money gains a foothold in the marketplace against Federal Reserve notes, the people will be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency.
Constitutional tender expert Professor William Greene wrote that when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it could create a “reverse Gresham’s effect,” drive out bad money, 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.
HB1830 must be referred to a House committee and then pass by a majority vote before moving forward in the legislative process.
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