New Jersey Advances Bill to Exempt Gold, Silver from State Taxes

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In a significant development for precious metal investors and advocates of monetary reform, the New Jersey House and Senate recently passed a bill that proposes to exempt gold and silver bullion from state sales and use taxes. This legislation, if enacted, could not only alleviate tax burdens on investors but also serve as a fundamental step towards challenging the Federal Reserve's monopoly on money.

The Legislation: Assembly Bill 5294

Introduced by Rep. Louis Greenwald on March 16, 2024, Assembly Bill 5294 (A5294) aims to exempt the sale of investment metal bullion and investment coins from state sales and use tax. This would include bars and coins made of precious metals such as gold, silver, platinum, and palladium. The bill's definition of investment metal bullion stresses its value based on content rather than form. Similarly, an investment coin is defined broadly, covering numismatic coins made from various metals, including both precious and non-precious types.

On January 8, 2024, the Senate passed A5294 by a voice vote, with the Assembly concurring with the Senate amendments later that day. The bill now awaits consideration by Governor Phil Murphy.

The Rationale Behind the Legislation

This move by New Jersey is part of a broader trend across the United States, with 43 states having already eliminated sales taxes on gold and silver bullion. The rationale is to treat these metals more as currencies rather than commodities. Taxing precious metals is akin to taxing money itself, which is conceptually and practically problematic. For instance, if you were taxed for breaking a $5 bill into smaller denominations, it would seem unreasonable. The same principle applies to transactions involving gold and silver bullion.

Former U.S. Rep. Ron Paul has been a vocal supporter of such initiatives, arguing that sound money is crucial for a smaller government footprint and that paper currency is inherently fraudulent due to its lack of intrinsic value.

The Broader Implications

The enactment of this legislation would extend beyond mere tax policy. It represents a small but crucial step towards reintroducing gold and silver as legal tender and diminishing the Federal Reserve's control over the monetary system. The Utah Specie Legal Tender Act, for instance, has already paved the way for innovations like Goldbacks – physical gold notes used for small transactions. This development in Utah demonstrates the potential transformative impact of such legislative changes.

Constitutional and Economic Considerations

The U.S. Constitution explicitly mentions gold and silver coins as legal tender. The current reliance on Federal Reserve Notes and non-precious metal coins deviates from this standard. The Federal Reserve, by having the power to create money without gold or silver backing, essentially devalues purchasing power over time and enables extensive federal borrowing and spending. The passage of A5294 could be a step towards rectifying this deviation.

Potential Outcomes and Nullifying the Fed

Should multiple states begin to use gold and silver instead of Federal Reserve Notes, a “reverse Gresham’s Law” effect could ensue. This economic principle suggests that good money (gold and silver) could eventually displace bad money (Federal Reserve notes). The ultimate goal is to render Federal Reserve notes less relevant, thereby nullifying the Fed's influence on a state-by-state basis.

Next Steps

Governor Murphy now has 45 days from the date A5294 is transmitted to his office to sign or veto the bill. If no action is taken, the bill will automatically become law. This decision will be closely watched by those advocating for monetary reform and a return to sound money principles.