Maine Bill Would Remove Roadblock to Using Gold and Silver as Money

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A bill introduced in the Maine House would exempt gold and silver coins from sales tax, encouraging their use and taking the first step toward breaking the Federal Reserve’s monopoly on money.

Rep. Justin Fecteau (R-Augusta), along with nine Republican cosponsors, introduced House Bill 1446 (LD1446) on April 2. The legislation would exempt gold and silver specie from the state’s sales and use tax. The proposed law defines specie as “coins with gold or silver content, or refined gold or silver bullion that is coined, stamped or imprinted with its weight and purity and the value of which is based primarily on its metal content and not on its form.”

Fecteau said Ron Paul inspired him to introduce this legislation.

“Seven years since his 2012 run for President, the monetary policy lessons of Congressman Ron Paul still stick out to me. This bill is an important first step to restore sound money in Maine by refusing to tax the conversion from one legal tender to another.”

“Policies that discourage precious metals ownership reduce the likelihood that Mainers will take steps to insulate themselves from the inflation and financial turmoil that flows from the Federal Reserve system. Current Maine law provides a disincentive to protect against economic disruption in the form of gold and silver – a disincentive that is removed by this bill,”  Sound Money Defense League policy director JP Cortez said.

IN PRACTICE

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 Maine’s sales tax on gold and silver does. By removing the sales tax on the exchange of precious metals, Maine would treat 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 Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state.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.

“If you’re for less government, you want sound money. The people who want big government, they don’t want sound money. They want to deceive you and commit fraud. They want to print the money. They want a monopoly. They want to get you conditioned, as our schools have conditioned us, to the point where deficits don’t matter.”

Practically speaking, eliminating taxes on the sale of gold and silver would crack open the door for people to begin using specie 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, 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.

LD1446 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.

“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.

WHAT’S NEXT

At the time of this report, LD1446 had not been assigned to a committee. Once it receives a committee assignment, it must pass by a majority vote before moving forward in the legislative process.

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