Sound Money Promotion Act Re-Introduced

Earlier this month, Sen. Mike Lee of Utah introduced S. 768: Sound Money Promotion Act. This legislation seeks to treat gold and silver coins used as legal tender in the same manner as United States currency for taxation purposes.

Under current law, legal tender gold and silver coins are considered to be collectibles for taxation purposes. As such, any gain derived from the sale or exchange of such coins is typically subject to capital gains tax at a rate of 28%. Notably, this is almost double the long term capital gains tax rate of 15% which applies to most other assets such as stocks, bonds, and real estate.

The bill seeks to amend the Internal Revenue Code such that gold and silver coins declared legal tender by the Federal Government or any Sate government would not be subject to taxation.

The Federal Government issued legal tender gold coins for circulation before 1933 and legal tender silver coins for circulation before 1964. In more recent times, legal tender gold and silver bullion coins, such as American Gold and Silver Eagles, have been issued. A multitude of numismatic and commemorative gold and silver coins have also been issued with legal tender face values.

At the state level, Utah and Arizona have both approved measures to make gold and silver legal tender in their respective states. More than a dozen other states have introduced or considered similar measures.

In the 112th Congress, Sen. Jim DeMint of South Carolina had introduced the Sound Money Promotion Act on June 28, 2011. The bill died in committee.

The current bill S. 768 was introduced on April 18, 2013 and has been referred to the Senate Finance committee. The two co-sponsors of the bill are Sen. Ted Cruz of Texas and Sen. Rand Paul of Kentucky.

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UTAH GOVERNOR SIGNS GOLD & SILVER LEGAL TENDER BILL!

Utah has now become the first State on our list to actually enact a sound money bill into law.

On Friday, March 25th, Gov. Gary Herbert signed HB 317, the "Utah Legal Tender Act," into law.

The law recognizes gold and silver coins issued by the federal government as legal currency in the state. The coins do not replace the current paper currency, but may be used and accepted voluntarily as an alternative.

The law exempts the sale of gold and silver coins from the state capital gains tax, since you would simply be exchanging one form of legal tender currency for another. It also calls for a committee to study alternative currencies for the State and a means for Utahans to pay their taxes with gold and silver coins.

Gold and silver coins issued by the federal government are already legal tender, of course, and can be used to purchase items and pay debts owed. However, they could only be used at the face value of the coins -- which is ridiculously lower than the value of the precious metal content of the coins. If you were to use them at the actual value of the coins, you would face a capital gains tax on the "profit" you gained over the face value.

If nothing else, this law recognizes the inanity of imposing a tax on exchanging one form of legal tender currency for another. By removing that tax and officially recognizing the legal tender status of the gold and silver coins within the State of Utah, the way is now open for good and services to be priced in both Federal Reserve Notes denominations and Gold & Silver Coins denominations; likewise, banks should now be free to offer their customers accounts denominated in legal tender gold & silver coins, so that consumers will be able to make purchases based on those accounts, using their debit cards, checks, ATM cards, etc. Banks should also easily convert FRNs to Gold & Silver Coins and vice-versa, since they will now be treated as simple currency exchanges.

So... what bank will be the first to jump on board here? Because once that happens, the floodgates will open, and billions of dollars in new banking accounts will pour into Utah banks, from people who want to use sound money that keeps its value, rather than nearly-worthless pieces of paper whose purchasing power continues to plummet.

And you know who'll be one of the first in line!