By Stefan Gleason | Special to Idaho Freedom Foundation
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 walk into a local precious metals dealer in more than 25 states and exchange 20 Federal Reserve notes for an ounce of silver. If you do that kind of money exchange, you will get hammered with a sales tax. That’s one example of the price one will pay for trying to buy the only true money mentioned in the U.S. Constitution.
Thankfully, Idaho is a state which recognizes that charging sales taxes on money itself is beyond the pale – and the Gem State therefore exempts precious metals from that levy. However, the injustice of taxation on gold and silver savings still looms large in Idaho.
Assessing income taxes is another way in which government bureaucrats penalize holders of precious metals. Unfortunately, Idaho is not an exception in this case.
If you own gold to protect against devaluation of America’s paper currency, you may end up with a “gain” when the gold is priced in Federal Reserve Notes (commonly referred to as the dollar). It’s not necessarily a real gain in terms of increased purchasing power, mind you, it’s often just a nominal gain -- i.e. an increase in its price in Federal Reserve Notes -- which simply results from currency debasement of the Federal Reserve. But the government will assess a tax on your nominal gain anyway.
The Federal Reserve openly seeks to create consumer price inflation at a target inflation rate of 2% or higher. In fact, since the United States severed the last link between the dollar and gold 45 years ago, the purchasing power of the Federal Reserve Note has fallen more than 90 percent. It’s such policies and this inflation that lead to the taxable “gains” precious-metals holders experience.
Idaho has within its ability to loosen the shackles of taxation on gold and silver.
Specifically, exempting precious metals from state income taxes is a step Idaho should take to promote the adoption and use of constitutional money. Fortunately, the current sales tax exemption means that precious metals are not subjected to double taxation by Idaho; however, nominal gains in precious metals vis a vis the Federal Reserve Note are still subject to the state income tax.
At the federal level, nominal gains on precious metals are also taxed as capital gains – and 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 your income level). Your gain from owning constitutionally recognized money also increases your taxable income at the state level too.
Every day more American people open their minds to the historic role that sound money has played. Of late, a few presidential candidates have talked about it.
A few state legislatures, too, have recognized the danger of being totally reliant on a monetary system based on debt and unbacked fiat money, and they’re taking concrete steps to liberalize their laws surrounding gold and silver ownership. Idaho could be at the forefront of this movement if it were to exempt the monetary metals from Idaho’s income tax – an important step toward sound money.
As more states reduce the costs and barriers to precious metals ownership, people who diversify some of their savings into hard money will continue to grow, and the concept of sound money will become more widely accepted.
While there is a tremendous amount of work to do, we should be encouraged that the stranglehold central planners have over our money is showing signs of loosening. People are taking notice that something about the debt-laden economy and their money isn’t right. More folks are switching some of their cash into the safety of gold and silver.
Idaho should help lead the way back to sound money by eliminating all taxation on precious metals.
Stefan Gleason is President of Money Metals Exchange, a national precious metals company based in Eagle, Idaho selected as 2015's "Dealer of the Year" in the United States by an independent global ratings group.