(Kitco News) – Stubbornly high inflation has taken its toll on consumers’ purchasing power; however, there is a growing political push to give U.S. citizens new options to protect their wealth through gold and silver bullion.
Federal Legislation Supporting Gold and Silver
While there has been a growing trend at the state level to recognize gold and silver as legal tender, legislation has now been introduced at the federal level, adding further weight to gold’s and silver’s roles as important monetary metals.
On May 8, U.S. Representative Alex Mooney (R-WV) reintroduced The Monetary Metals Tax Neutrality Act (H.R. 8279), a piece of ‘sound money legislation’ that proposes removing all federal income taxation from gold and silver coins and bullion.
“My view, which is backed up by language in the U.S. Constitution, is that gold and silver coins are money and are legal tender,” Rep. Mooney said in a statement.
Reps. Scott Perry (R-PA) and Randy Weber (R-TX) joined Mooney as original cosponsors.
The legislation is backed by the Sound Money Defense League (SMDL), Money Metals Exchange, and free-market activists who have said that the proposed changes “would clarify that the sale or exchange of precious metals bullion and coins are not to be included in capital gains, losses, or any other type of federal income calculation. Gold and silver would be treated as a non-entity for tax purposes, putting it on par with the U.S. dollar.”
The Case Against Taxing Gold and Silver
Under current tax laws, the Internal Revenue Service classifies gold and silver as “collectibles,” in the same category as artwork, Beanie Babies, and baseball cards – which subjects the monetary metals to a discriminatorily high long-term capital gains tax rate of 28%.
“If they’re indeed U.S. money, it seems there should be no taxes on them at all. So, why are we taxing these coins as collectibles?” Mooney said.
The Sound Money Defense League also noted that bullion coins produced by the U.S. Mint have a face value in U.S. dollar terms, adding to the argument that it is legal tender.
At the same time, the League argued that capital gains on precious metals are not real gains in value.
“It is often a nominal gain that simply results from the inflation created by the Federal Reserve and the attendant decline in the Federal Reserve Note dollar’s purchasing power,” the league said in a statement.
“U.S. inflation is not caused by CEOs of grocery stores or by outside world leaders; it is caused by the Federal Reserve and federal policy,” said Jp Cortez, executive director of the Sound Money Defense League, in a statement. “The federal government has a responsibility to remove disincentives for people seeking alternatives to the Federal Reserve note dollar to protect their savings.”
State-Driven Initiatives
The Federal bill comes as a growing number of states are recognizing gold and silver as legal tender.
Last month, Nebraska became the 12th state to pass legislation to remove capital gains taxes on sales of gold and silver. Alabama approved a version of this policy earlier this year. Arizona, Arkansas, and Utah approved similar measures in recent years.
Iowa, Georgia, Oklahoma, Missouri, and Kansas also considered income tax exemptions in 2024, with several approving the bill across multiple committees and chambers.
Meanwhile, last month, Kentucky became the 45th state to end sales taxes on gold and silver.
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Additional Insight:
The growing support for gold and silver as alternatives to traditional currency reflects a broader sentiment among some individuals and policymakers who are concerned about the potential impact of inflation and government monetary policy. As more states and now the federal government consider measures to remove tax burdens on these precious metals, it highlights a shift towards greater diversification and protection of individual wealth against economic uncertainties. This movement may also encourage further debate on the role of gold and silver in the modern financial system.
