A Kentucky bill prefiled for the 2017 session would remove sales taxes from the purchase of gold and silver, encouraging its use and taking the first step toward breaking the Federal Reserve’s monopoly on money.
Sen. John Schickel (R-Union) prefiled BR156 on Oct. 11. The legislation would exempt bullion or currency purchases from state sales tax. This would include gold, silver, platinum, or palladium bars, ingots or commemorative medallions for which the value depends on its metal content, not its form. It would also exempt coins or currency made of gold silver or other metals paper currency used as legal tender.
Under the proposed legislation, the exemption would remain in place for five years.
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 Kentucky’s sales tax on gold and silver does. By removing the sales tax on the exchange of gold and silver, Kentucky 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.
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 states to return to a constitutional sound money system when it taxes gold and silver as a commodity.
This Kentucky 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.
Michael Maharrey [send him email] is the Communications Director for the Tenth Amendment Center, where this article first appeared. He proudly resides in the original home of the Principles of ’98 – Kentucky. See his blog archive here and his article archive here. He is the author of the book, Our Last Hope: Rediscovering the Lost Path to Liberty. You can visit his personal website at MichaelMaharrey.com and like him on Facebook HERE