Time to stop taxing gold and silver

By Johannes Schmidt
Last month, Oklahoma Governor Mary Fallin signed Senate Bill 862 into law, once again recognizing gold and silver as legal tender and an acceptable means of payment of debts in the Sooner State. While this treatment would seem self-evident, noting Article I, Section 10 of the U.S. Constitution, precious metals in Oklahoma were previously taxed as assets, thus disincentivizing individuals from using them as a means of long-term savings and as an alternative to the fiat dollar. As Sean Fieler, Chairman of American Principles in Action, notes, “with the Federal Reserve actively suppressing interest rates and eroding the purchasing power of the U.S. dollar, it is welcome news to see one more state give its citizens free access to money that holds its value over time.” With limited wartime exceptions, gold and silver have been the foundation of the United States monetary system until Richard Nixon closed the “gold window” in 1971. Since then, the United States has adopted a “fiat” dollar, a currency that is backed by little more than federal legislation. Because it is not backed by any tangible commodity, the modern dollar is worth only as much as individuals are willing to trust the government. Throughout history, there have been several examples of “fiat” currencies, yet none have ultimately been successful. In April of 1912, for example, the Weimar mark was exchanged at 12 marks to the dollar. In December of 1923, a mere 11 years later, that number jumped to 4.2 trillion marks. When the going gets tough, central banks that are not tied to a metal standard instinctively print money. In so doing, governments bring about inflation and effectively cut the value of their citizens’ money; this is a tax that is imposed on individuals without their knowledge or consent. As Steve Forbes famously noted: “when an individual prints money, it’s counterfeit; when a government prints money, it’s stimulus.” That is why gold, silver and other alternative currencies are important; they provide an alternative to fiat money that cannot be devalued by irresponsible monetary policies. Governments should not prevent, or even disincentivize, their citizens from using these. That is why the decision in Oklahoma is important for all of us. If gold and silver are treated as legal tender by the state, then individuals are given an alternative to a dollar that is vulnerable to the global economic climate, the best judgment of bankers at the Federal Reserve and policy makers in Washington. If we are free to buy and sell gold and silver without being subject to unconstitutional taxation, we can invest the fruits of our labor and investments in a commodity that is proven by history to keep its value. Currently, at least 30 states tax gold in one way or the other. It is considered a commodityand not legal tender, as is mandated by the Constitution and thus is subject to both sales and capital gains taxation. Imagine the implications of those same taxes on your dollars; they make very little sense. I will not pretend to believe that we as a country will ever return to a gold or silver standard, but I am hopeful that legislation such as SB 862 in Oklahoma could make it to the desk of my own Governor. The ability to choose which currency I put my trust in is a fundamental pillar of the free society that I hope to live in. While I don’t see myself going out and investing in gold, silver or some obscure crypto-currency in the near future, I would like to know that the government would not be the one to stop me when I do.

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