Now in Effect: Virginia Law Takes First Step to Support Sound Money
On Jan. 1, a Virginia law that repeals sales taxes from some purchases of gold and silver went into effect. It represents an important first step toward encouraging its regular use as currency and breaking the Federal Reserve’s monopoly on money.
A bipartisan coalition of delegates and senators sponsored House Bill 1668 (HB1668) and Senate Bill 934 (SB934). The legislation exempts gold, silver, and platinum bullion or legal tender coins whose sales price exceeds $1,000 from state sales tax. Each piece of gold, silver, or platinum or legal tender coin need not exceed $1,000, provided that the sales price of one entire transaction of such pieces exceeds $1,000. With gold over $1,000 an ounce, a single bullion coin will exceed this threshold.
Under the new law, the exemption will remain in place until June 30, 2022.
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 that’s essentially what Virginia’s sales tax on gold and silver did. By removing the sales tax on the exchange of gold and silver, Virginia will treat precious metal specie as money instead of a commodity. This represents a small step toward reestablishing gold and silver as legal tender, and breaking down the Fed’s monopoly on money.
“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.
The new law’s impact goes beyond mere tax policy. During an event after his Senate committee testimony, Paul pointed out that it’s really about the size and scope of government.
Practically speaking, eliminating taxes on the sale of gold and silver cracks open the door for people to begin using precious metals in regular business transactions. This would mark an important small step toward currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency.
The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” States have simply ignored this constitutional provision for years. It’s impossible for states to return to a constitutional sound money system when it taxes gold and silver as a commodity.
This Virginia law takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic sets the stage to undermine the monopoly of the Federal Reserve by introducing competition into the monetary system.
Constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state by state level is what will get us there.
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