The second state in less than a month has made a direct challenge to the Federal Reserve monopoly on money, by forwarding a bill that would “eliminate capital gains taxes on gold and silver specie.” The Idaho House voted by a margin of 56-13 on March 14 to pass House Bill 206, following the Arizona House’s approval of a similar bill.
According to the Tenth Amendment Center:
The legislation would amend Idaho revenue statutes, providing “that capital gains and losses on precious metals bullion and monetized bullion sales be added to or subtracted from Idaho taxable income.…
Idaho H206 is a revenue neutral proposal over the long run. That’s because both precious metals gains (income) and losses are backed out of the calculation of taxable income for Idahoans. While H206’s passage will have little fiscal impact on Idaho tax revenues, it will have a larger impact on Idahoans’ freedoms.
Capital gains tax on gold and silver is an insidious disincentive based on intentional dollar devaluation. When the dollar’s purchasing power goes down, the metals’ nominal dollar value goes up, triggering a “gain” which is taxed.
If the bill can survive the attack of central economic planners who believe that crushing debt and inflation is the best path toward prosperity, it could pave the way for currency competition. Critical to the Fed’s campaign is perpetuating the belief that gold and silver are merely investments and speculation – rather than the market opportunity is it of creating sound money.
Even though the Constitution recognizes gold and silver as money, the Internal Revenue Service classifies them as “property” which should be taxed as a commodity. It’s no coincidence that the personal income tax (16th Amendment) and the Federal Reserve were established in the same year, 1913. Prior to this, America was experiencing its greatest period of economic growth in history.
Arizona and Idaho seek to join two other states, Utah and Oklahoma, in freeing gold and silver from taxation in the interest of pursuing currency competition and sound money. While these four states are certainly not the most enlightened in other areas – namely the War on Drugs – their efforts at challenging the Federal Reserve are laudable.
Passage into law would mark an important step towards 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. The freedom of choice expanded by H206 would allow Idaho residents to secure the purchasing power of their money.
“This isn’t going to end the fed’s monetary monopoly overnight, but it sets the foundation and opens the door for more market activity by the people,” Tenth Amendment Center executive director Michael Boldin said. “This is an important part of the overall strategy, and activists in Idaho should continue working to get this bill passed.”
Arizona Rep. Mark Finchem, when introducing the sound money bill in his state, argued that any perceived capital gain from gold and silver is not actually a gain, but a protection against losing money in the inflationary federal reserve system.
“Let’s say it takes 1,200 of them to buy a U.S. Mint gold coin today, but tomorrow it takes 1,300 of those federal reserve notes,” said Finchem. “You’ve actually experienced a loss. It’s called inflation. The Internal Revenue Service for many, many years has been taxing inflation as though it was a gain.
“The U.S. Mint is charged with protecting the value of money, but the Federal Reserve creates nothing but debt,” Finchem continued. “Yet Congress authorized a tax when making the exchange of precious metals for dollars. It’s illegal and they know it, this bill is an effort by one state to protect the people from such confiscation.”