The passing of any of these bills would result in the elimination of state capital gains taxes on the sale and exchange of gold and silver bullion. Both of these states are already part of the 42 states that do not impose sales taxes on gold and silver bullion. By exempting the sale of these precious metals from taxes, the cost of investing in them is reduced. Additionally, this move signifies a shift towards considering gold and silver as forms of currency rather than commodities. Taxes on precious metal bullion create obstacles to using gold and silver as money by increasing transaction costs.
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Imagine if you asked a grocery clerk to break a $5 bill and they charged you a 35-cent tax. It would seem absurd, right? After all, you were simply exchanging one form of money for another. However, this is essentially what a sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Missouri and Oklahoma would recognize these metals as money rather than commodities. This represents a small step towards reinstating gold and silver as legal tender and reducing the Federal Reserve's monopoly on currency.
The impact of enacting this legislation extends beyond tax policy. During an event following his Senate committee testimony, Paul highlighted that it is ultimately about the size and reach of the government. "If you advocate for a smaller government, you support sound money. Those who desire a larger government do not want sound money. They aim to deceive and commit fraud. They want to print money and maintain a monopoly. They want to condition you, as our schools have conditioned us, to the point where deficits no longer matter."
GOLD AND SILVER AS LEGAL TENDER
According to the provisions in the Missouri bill, gold and silver, whether in physical or electronic form, would be recognized as legal tender and accepted as payment for all debts incurred within the state of Missouri. The state would be obligated to accept gold and silver for the settlement of public debts, while private debts could be settled in these metals at the discretion of the parties involved.
In practical terms, this would enable residents of Missouri to utilize gold and silver as a form of currency.
BACKGROUND
According to Article I, Section 10 of the United States Constitution, no State is allowed to make any form of payment for debts except for gold and silver coins. However, in the present day, debts and taxes in the US are primarily settled using Federal Reserve Notes (dollars) which were authorized as legal tender by Congress. The US Treasury also issues coins, but only a small fraction of these coins contain gold or silver.
As time goes on, if residents of the state continue to use both Federal Reserve notes and gold and silver coins, the coins' ability to retain their value better than the notes will result in a phenomenon known as the "reverse Gresham's Law." In this scenario, the superior quality of the gold and silver coins will cause them to replace the inferior Federal Reserve notes. This shift can trigger a series of events, including the accumulation of real wealth in the state's treasury, an increase in banking activities from individuals in other states who prefer to bank with stable currency, and eventually, a widespread opposition to the use of Federal Reserve notes for any transactions.
Once this situation arises, Federal Reserve notes would lose their desirability and relevance among ordinary people.
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