Legislation to Eliminate Federal Tax on Gold and Silver Reintroduced

Introduction

U.S. Representative Alex Mooney (R-WV) has once again introduced legislation aimed at eliminating all federal income taxation from gold and silver coins and bullion.

Monetary Metals Tax Neutrality Act

The Monetary Metals Tax Neutrality Act (H.R. 8279), which is supported by the Sound Money Defense League, Money Metals Exchange, and free-market activists, proposes that the sale or exchange of precious metals bullion and coins should not be included in capital gains, losses, or any other type of federal income calculation. This would put gold and silver on the same level as the U.S. dollar for tax purposes. Representatives Scott Perry (R-PA) and Randy Weber (R-TX) have joined as original cosponsors.

Gold and Silver as Legal Tender

Representative Mooney argues that gold and silver coins are money and legal tender, as stated in the U.S. Constitution, and therefore should not be taxed. The Internal Revenue Service (IRS), however, has classified gold and silver as “collectibles” like artwork and baseball cards, subjecting them to a high long-term capital gains tax rate of 28%.

Controversy Over IRS Policy

Many have argued that it is inappropriate to apply any federal income tax, regardless of the rate, against the only kind of money named in the U.S. Constitution. The IRS has not provided a defense for its position. The U.S. Mint continually mints coins of gold, silver, platinum, and palladium, each with a legal tender value denominated in U.S. dollars, further highlighting the oddity of the IRS’s tax treatment.

Details of the Monetary Metals Tax Neutrality Act

The Monetary Metals Tax Neutrality Act proposes that no gain or loss should be recognized on the sale or exchange of precious metals minted and issued by the Secretary or refined bullion, coins, bars, rounds, or ingots valued primarily based on their metal content and not their form. Under the current IRS policy, a taxpayer who sells his precious metals may end up with a capital “gain” in terms of Federal Reserve Notes and must pay federal income taxes on this “gain”. However, this “gain” is often a nominal gain that results from the inflation created by the Federal Reserve and the decline in the Federal Reserve Note dollar’s purchasing power.

Reaction to the Bill

Supporters of the bill argue that U.S. inflation is caused by the Federal Reserve and federal policy, not by grocery store CEOs or world leaders. They believe that the federal government should remove disincentives for people seeking alternatives to the Federal Reserve note dollar to protect their savings. Critics argue that it's unfair for the IRS to assess a capital gains tax when citizens hold gold and silver to protect them from the Fed’s policy of currency debasement.

National Trend

The Monetary Metals Tax Neutrality Act aligns with a broader national trend. Most states have already eliminated sales tax on the purchase of precious metals, and state legislatures are increasingly introducing and approving measures to eliminate state income taxation of gold and silver. Alabama and Nebraska each passed their version of this policy this year, and 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.

Conclusion

The Monetary Metals Tax Neutrality Act is a significant step towards a shift in the way precious metals are taxed. It raises important questions about the nature of money and the role of the Federal Reserve. What are your thoughts on this legislation? Do you think it's fair to tax gold and silver as collectibles? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.