US: Missouri and Oklahoma might end capital gains tax on Gold and Silver
Missouri and Oklahoma are at the forefront of legislative efforts to treat gold and silver as money rather than commodities
Recent bills filed in both states seek to eliminate state capital gains taxes on the sale of these precious metals and take steps to recognize them as legal tender.
In Missouri, Rep. Doug Richey filed HB1867 on Dec. 11, and Rep. Bill Hardwick filed HB1955 on Dec. 15, with companion bills in the Senate by Sen. William Eigel. In Oklahoma, Sen. Shane Jett filed SB1507, and Sen. Nathan Dahm introduced SB1508.
This proposed legislation aligns with the existing trend in both states, where sales taxes on gold and silver bullion are already non-existent. The exemption from capital gains taxes further lowers the investment cost of these metals and promotes the idea of treating them as a form of money rather than commodities.
Gold and silver as legal tender
Under the proposed Missouri bill, gold and silver, whether in physical or electronic form, would be accepted as legal tender. These precious metals would be receivable for all debts contracted within the state, and the state itself would be required to accept gold and silver for the payment of public debts. Private debts could also be settled in gold and silver at the discretion of the parties involved.
This move goes beyond the investment realm, allowing Missourians to use gold or silver coins as actual forms of currency, placing them on equal footing with Federal Reserve notes.
Similar initiatives have been taken in Utah, Arkansas, and Oklahoma in 2014. The proposed Missouri law also includes provisions for the state to invest in gold or silver, further cementing their recognition as valuable assets.
How to interpret the United States Constitution?
‘Gold bugs’ typically argue that the United States Constitution, in Article I, Section 10, explicitly states that no state should make anything but gold and silver coin a tender in payment of debts. However, the current monetary system relies on Federal Reserve Notes without the backing of precious metals. In their eyes, the repeal of capital gains taxes on gold and silver is not just a tax policy change; it challenges the Federal Reserve’s fiat money system.
The official interpretation, however, begs to differ.
Article I, Section 10, Clause 1:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
The ‘Constitution Annotated’ website, containing the interpretation and analysis of the U.S Constitution, states:
“Relying on this clause, which applies only to the states and not to the Federal Government1, the Supreme Court has held that, where the marshal of a state court received state bank notes in payment and discharge of an execution, the creditor was entitled to demand payment in gold or silver. Because, however, there is nothing in the Constitution prohibiting a bank depositor from consenting when he draws a check that payment may be made by draft, a state law providing that checks drawn on local banks should, at the option of the bank, be payable in exchange drafts, was held valid.”
William Greene, a libertarian Assistant Professor of Political Science at South Texas College, suggested that as people in multiple states increasingly use gold and silver instead of Federal Reserve Notes, it could nullify the Federal Reserve and end the federal government’s monopoly on money.
Reverse Gresham’s Law?
He added that this shift could lead to a reverse Gresham’s Law effect, where sound money drives out fiat currency, making Federal Reserve notes unwanted and irrelevant for ordinary transactions. The potential outcome is a significant change in the dynamics of the monetary system at both state and federal levels.
The same arguments have been made by cryptocurrency proponents, but even in the few cases where Bitcoin was made legal tender, no reverse Gresham’s Law took place.
El Salvador became the first country to officially adopt Bitcoin in mid-2021. However, in November 2021, a poll conducted by the Centro de Estudios Ciudadanos at Francisco Gavidia University revealed that a significant majority of Salvadorans, 91%, expressed a preference for using the US dollar over Bitcoin.
Could Gold and Silver make true in the United States what didn’t happen with Bitcoin in El Salvador? Probably not, but Missouri and Oklahoma residents might soon be free from capital gains tax on Gold and Silver trades. Good for them.