Virginia Bill Would Take A Step Towards Supporting Sound Money

By Michael Boldin

A Virginia bill prefiled for the 2017 session would remove sales taxes from some purchases of gold and silver, a first step towards encouraging its regular use as currency and breaking the Federal Reserve’s monopoly on money.

Sen. Frank Wagner (R-Virginia Beach) prefiled Senate Bill 934 (SB934) this week. The legislation would exempt some bullion or currency purchases from state sales tax. The official bill summary reads, in part:

Exempts legal tender coins whose total transaction sales price exceeds $1,000 from sales and use tax.

Under the proposed legislation, the exemption would remain in place until June 30, 2022.

IN PRACTICE

Imagine if you asked a grocery clerk to exchange $1000 in cash for smaller bills and he charged you a $53 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 does.

By removing the sales tax on some exchanges of gold and silver, Virginia would move towards treating 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.

“This should set the foundation,” said Mike Maharrey of the Tenth Amendment Center. “In a state that has not been very friendly to sound money, we see this as a first step. But if passed into law, people should pressure the legislature – in future years – to eliminate both the sunset clause and the $1000 limit.”

Practically speaking, fully and permanently eliminating taxes on the exchange of gold and silver would open the door for people to begin using specie in regular business transactions. This would mark an important step toward currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency.

BACKGROUND INFORMATION

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 bill takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would set 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.

Enter to Win 50 American Silver Eagles (Ad)

Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.

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.