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Saturday, June 22, 2024

Mo. Senate Votes to End Income Taxes on Gold and Silver, Hold Monetary Metals in Reserve

(Jp Cortez, Sound Money Defense League) The Missouri Senate today passed legislation that would prompt the state treasurer to hold at least 1% of state funds in gold and silver while eliminating all state income taxes on monetary metals.

In a growing national backlash to the rampant inflation caused by massive federal spending, debt, and central bank money printing, more than a dozen states are already moving forward on sound money bills during their 2023 legislative sessions.

Sponsored by Sen. Bill Eigel, Senate Bill 100 passed the Missouri Senate by a vote of 21-12 and now heads to the House.

If ultimately signed into law, SB 100 would reaffirm that gold and silver are money in Missouri and: 1) exempt taxpayers from state income taxes on “capital gains” from gold and silver reported on their federal income tax returns; 2) require the state treasurer to hold “an amount of gold and silver greater than or equal to one percent of all state funds;” 3) require the state to “accept gold and silver coinage as payment for any debt, tax, fee, or obligation owed.”

The Show Me State rightfully exempted gold and silver from state sales taxes years ago. Removing income taxes from the precious metals, holding gold and silver as reserve assets, and accepting gold and silver as payment are among the next steps a state can take to promote sound money.

Arizona, Utah, and Wyoming have already enacted similar income tax exemptions into law.

Meanwhile, the Wyoming Senate just passed a measure last week that would similarly prompt its state treasurer to hold gold and silver in order to protect the state’s assets, as well as create a mechanism so certain state taxes could be paid in gold or silver.

Removing income taxation from gold and silver is good policy for several reasons:

  • Current Missouri law assesses taxes on imaginary gains. Under current law, a taxpayer who sells precious metals may end up with a capital “gain” in terms of Federal Reserve Notes. This capital “gain” is not necessarily a real gain, it’s often a nominal gain that results from the inflation created by the Federal Reserve and the attendant decline in the dollar’s purchasing power.

Yet this nominal gain is taxed at the federal level – and, because Missouri uses federal adjusted gross income (AGI) as a starting point for Missouri income calculations, this nominal gain is taxed again by the Show Me State.

  • Inflation harms the poorest among us. Inflation is a regressive tax. The hardest hit are wage earners, savers, and pensioners on fixed incomes – as well as those who own few or no tangible assets.
  • Taxing imaginary gains is harmful to citizens attempting to protect their assets. Investments in precious metals coins and bullion are rightly exempt from Missouri’s sales tax. Neutralizing Missouri’s income tax treatment of the monetary metals would remove the last major disincentive in Missouri that stands against the ownership and use of the monetary metals.

Meanwhile, Ohio is the only state currently known to hold physical gold as part of its state funds, even though the inclusion of precious metals in a financial portfolio has been shown to increase real returns while also reducing volatility.

Most states have substantial exposure to debt paper (such as bonds), most of which have a substantially negative real rate of return as a result of inflation rates that are substantially higher than the nominal yield on the bonds.

Current economic circumstances have sparked increased interest in many states to hold gold and silver as a form of financial insurance. Other bills to facilitate gold and silver holdings have also been introduced this year in Tennessee, West Virginia, and Wyoming… with another bill expected soon in Idaho.

Missouri is currently ranked 32nd on the Sound Money Index. If SB 100 becomes law, the Show Me State would rival Wyoming, the state currently at the top of the index with a score of 56 out of 100.

Following the Wyoming Senate’s passage of SF 101 last week, Missouri is the second state to pass sound money legislation out of a full state legislative chamber in 2023.

More than a dozen states have introduced pro-sound money legislation in 2023 so far, including Alaska, Minnesota, Mississippi, Oklahoma, Tennessee, Oregon, West Virginia, Wisconsin, Kentucky, Florida, and more.

Jp Cortez is policy director of the Sound Money Defense League.

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