Last week, Alabama Gov. Kay Ivey signed a bill into law exempting the sale of gold and silver bullion from state sales and use tax, encouraging its use and taking the first step toward breaking the Federal Reserve’s monopoly on money.
Sen. Tim Melson (R-Florence) introduced Senate Bill 156 (SB156) on Jan. 11. The new law exempts the gross proceeds from the sale of gold, silver, platinum, and palladium bullion in the form of bars, ingots or coins from sales and use tax in the state for five years after the date of enactment.
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 Alabama’s sales tax on gold and silver bullion did. By removing the sales tax on the exchange of gold and silver, Alabama will 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 Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state.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 law’s impact will 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 will crack open the door for people to begin using specie in regular business transactions.This will mark an important small step toward currency competition. 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.
There are already signs of the tax repeals impact. According to Coin Week, the state can now host major coin shows.
“We have discussed the possibility of hosting a show in Alabama, however, we have been reluctant because of the sales-tax obstacle,” President of Whitman Publishing president Mary Burton said. “The new law allows us to once again give serious consideration to hosting a successful show in Alabama.”
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 a state to return to a constitutional sound money system when it taxes gold and silver as a commodity.
This Alabama tax repeal takes a small step toward 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.
The law will go into effect June 1, 2018.