by Mike Maharrey
RALEIGH, N.C. (July 26, 2017) – Yesterday, North Carolina Gov. Roy Cooper signed a bill into law exempting the sale and purchase of gold and silver from state sales taxes. The new law will remove an important roadblock in the way of their everyday use as money, taking the first step toward breaking the Federal Reserve’s monopoly.
Rep. Dana Bumgardner (R-Gastonia) and Rep. Jeff Collins (R-Rocky Mount) introduced House Bill 434 (H434) in March. The legislation exempts precious metals in various forms from state sales tax, including investment metal bullion, U.S. Mint-produced gold and silver, investment coins and non-coin currency.
The House passed H434 on second reading by a 104-8 vote in May. It then gave final approval on the third reading by a voice vote. The Senate concurred with a vote of 35-13 on June 27. With the governor’s signature, the law went into effect retroactively to July 1, 2017.
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 North Carolina’s sales tax on gold and silver did. By removing the sales tax on the exchange of gold and silver, North Carolina will 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.
Practically speaking, eliminating taxes on the sale of gold and silver cracks open the door for people to begin using gold and silver 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.
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 North Carolina law takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic sets 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.
William Greene is the author of the original Constitutional Tender Act, a bill template that can be introduced in every State legislature in the nation, returning each of them to adherence to the United States Constitution’s actual legal tender provisions. He is an Assistant Professor of Political Science at South Texas College.