The following article was written by Sound Money Defense League Assistant Director Jp Cortez. It was originally published at www.soundmoneydefense.org.
The Framers of our nation established that gold and silver are money, but federal taxing authorities in recent decades have required taxpayers to pay taxes on this form of money when its exchange for Federal Reserve Notes results in nominal capital “gains.”
But that problem may soon be mitigated, at least in Idaho.
A prominent Gem State state representative has advanced legislation to remove state income taxes when Idaho taxpayers sell their precious metals.
House Majority Leader Mike Moyle introduced House Bill 206 on February 23rd to amend Idaho revenue statutes, providing “that capital gains and losses on precious metals bullion and monetized bullion sales be added to or subtracted from Idaho taxable income.”
Similar to a bill recently passed by Arizona’s state House, Idaho HB206 is a pure and tax neutral proposal. That’s because both precious metals gains (income) and losses are backed out of the calculation of one’s Idaho taxable income. While HB206’s passage will have little fiscal impact as to Idaho tax revenues, it will have a larger impact on Idahoans’ freedoms.
Enjoying the backing of the Sound Money Defense League, the Idaho Freedom Foundation, and Money Metals Exchange (an Idaho-based national precious metals dealer), the Idaho proposal seeks to correct the misclassification of precious metals by the IRS as “property” rather than money. It is only because of this misclassification in the first place that precious metals income and losses are included in the federal adjusted gross income number that flows through to the taxpayer’s Idaho tax return.
Assessing Income Taxes on the Exchange of Money Is Unjust
Income taxes are one major way government bureaucrats penalize holders of precious metals. If you own gold to protect against the ongoing devaluation of America’s paper currency (which results from the inflationary practices of the Federal Reserve), you may end up with a “gain” on your gold when it’s priced in dollars. Not necessarily a real gain, mind you. It’s frequently nothing more than a nominal gain – but it’s nonetheless considered income against which the government assesses a tax.
The Federal Reserve strives for and openly announces a target inflation rate, and it’s these policies that cause these artificial “gains” which precious metals owners experience.
By removing precious metals from the state income tax, Idaho can stop compounding the problem and instead help promote the adoption and widespread use of constitutional money.
While Idaho citizens are not currently subjected to “double taxation” in the form of sales taxes, more than 20 other states do. In most states with sales taxes, precious metals owners are taxed on their original purchase and then taxed again if they have nominal “gains” when they sell their precious metals.
But that’s not all. At the federal level, these dollar-denominated gains on precious metals are taxed at the discriminatorily high 28% long-term capital gains tax rate. Capital gains on other assets are taxed at 15% or 20%, depending on one’s income level.
And, unless a state passes a bill like the one under consideration in Idaho, the “income” one receives from owning and selling gold and silver increases the taxes they must pay at the state level too.
Let’s hope Idaho House Bill 206 passes through both chambers this session and gets signed into law.