By Jp Cortez | Special to Idaho Freedom Foundation
The Founders of our nation established that gold and silver are money, but federal taxing authorities in recent decades have required taxpayers to pay taxes on this form of money when its exchange for Federal Reserve Notes results in nominal capital “gains.”
But that problem may soon be mitigated, at least in the Gem State.
A prominent Idaho state representative has advanced legislation to remove state income taxes when Idaho taxpayers sell their precious metals.
On February 23, House Majority Leader Mike Moyle introduced House Bill 206, which would amend Idaho revenue statutes, providing “that capital gains and losses on precious metals bullion and monetized bullion sales be added to or subtracted from Idaho taxable income.”
Similar to a bill recently passed by Arizona’s state House, Idaho House Bill 206 is a pure, tax-neutral proposal. That’s because both precious metals gains (income) and losses would be backed out of the calculation of one’s Idaho taxable income. Though the passage of HB 206 would have little fiscal impact as concerns Idaho tax revenues, it would have a large impact on Idahoans’ freedoms.
The Idaho legislation seeks to correct the misclassification of precious metals by the IRS as “property” rather than money. It is only because of this misclassification in the first place that precious metals income and losses are included in the federal-adjusted gross-income number that flows through to the taxpayer’s Idaho tax return.
Assessing Income Taxes on the Exchange of Money Is Unjust
Income taxes are one major way that government bureaucrats penalize holders of precious metals. If you own gold to protect against the ongoing devaluation of America’s paper currency (which results from the inflationary practices of the Federal Reserve), you may end up with a “gain” on your gold when it’s priced in dollars. This won’t necessarily be a real gain, mind you. It’s frequently nothing more than a nominal gain – but it’s nonetheless considered income, against which the government assesses a tax.
The Federal Reserve strives for and openly announces a target inflation rate, and it’s these policies that cause artificial gains which precious metals owners experience.
By removing precious metals from its state income tax, Idaho can stop compounding the problem and instead help promote the adoption and widespread use of constitutional money.
Though Idaho does not currently subject its citizens to double taxation in the form of sales taxes, in addition to income taxes on precious metals, more than 20 other states do. In most states with sales taxes, precious metals owners are taxed on their original purchase and then taxed again if they have nominal gains when they sell their precious metals.
But that’s not all. At the federal level, these dollar-denominated gains on precious metals are taxed at the discriminatorily high 28 percent long-term capital gains tax rate. Capital gains on other assets are taxed at 15 or 20 percent, depending on one’s income level.
Let’s hope Idaho House Bill 206 passes through both chambers this session and gets signed into law. With its passage, Idaho can be among the state leaders in restoring sound money.
Jp Cortez is the Assistant Director of the Sound Money Defense League, an Idaho-based organization working to bring back gold and silver as America’s constitutional money. Follow him on twitter, @JpCortez27