Liberating the Monetary Metals

Congress gets yet another bill to start the return to honest — and constitutional — money.

AP/Richard Drew
Warehouse retailer Costco has begun selling gold to customers looking for an inflation hedge, but they face a tax bite from Uncle Sam. AP/Richard Drew

We’re happy to be the first newspaper to endorse the bill just introduced in Congress as the Monetary Metals Tax Neutrality Act. It would remove any excise or other taxes on gold and silver. They are the constitutional currency. We were the first newspaper to endorse an earlier version of this bill, introduced by Senator Paul and others, in 2011. Our editorial didn’t carry the day then, and likely won’t now. More’s the glory, we say.

The bill, introduced by Representative Alex Mooney of West Virginia, seeks to amend the International Revenue Code of 1986 to bar taxes based on the “gain or loss on the sale or exchange of certain coins or bullion.” The measure would bring America a step closer to restoring honest money — meaning a dollar that is convertible into gold at a fixed rate by law, as it was under the gold standard. 

Currently, when Americans trade their paper dollars in for gold, sales tax is often levied on the transaction. Worse, if the paper dollar falls in value, holders of gold can face a capital gains tax when they spend their gold. Call it a tax on inflation. The practical impact of this kind of taxation is hitting home for buyers of gold at, of all places, Costco, the Wall Street Journal reported in April.

Shoppers at the warehouse retailer “are spending as much as $200 million monthly on gold,” the Journal says, citing an estimate by Wells Fargo. These customers “are part of a new wave of gold buyers,” the Journal says, “who have taken an interest in precious metals to protect their wealth against inflation and economic disaster.” As the dollar plunges to less than a 2,300th of an ounce of gold, they face a hefty tax bill.

That’s because the IRS “typically treats gold as a collectible,” the Journal reports, meaning it can be subjected to a “capital-gains tax rate can be as high as 28%” — even higher than trading in stocks. This tax treatment of gold would appear to be at odds with language in the Constitution that prohibits the states from making “any thing but gold and silver coin a tender in payment of debts.”

Where did the IRS get the authority to demonetize American coinage to begin with? That’s a question posed by constitutional lawyer and monetary scholar, Edwin Vieira Jr.  “The real question is what power does a taxing authority have to declare that money created by Congress in the form of coinage is not in fact money?” he tells the Sun. “The IRS has no banking authority or regulatory authority with respect to that matter.”

The taxes on buying and spending gold and silver serve as the largest barrier to the widespread use of precious metals as money, says the director of the Sound Money Defense League, Jp Cortez. Most states have already removed sales tax on the purchase of gold and silver, and 11 states have eliminated state capital gains taxes on the sale of gold and silver coins. The federal government, though, has yet to act on this head.

Let us say, we have no illusions about the difficulty of the debate ahead. America was launched on a silver standard in which gold also played a monetary role. Bimetallism, as our system was known, obtained, with some interruptions, for more than 100 years until the late 19th century when the gold standard emerged as the better system. The current debate erupted after America abandoned the gold standard  in the early 1970s.

Which puts us 50 years — a Biblical span, incidentally —  into the age of fiat money. The bill just introduced is just the sort of marker we would expect and welcome amid a larger battle to restore sound money. With the Fed facing difficulties bringing inflation under control and the gold value of the fiat dollar hovering around record lows, calls for legislation like that being put forward by Mr. Mooney grow ever more logical.

The New York Sun

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