The Case for Repeal of Federal Taxation on Gold

The Coinage Act of 1792 established the dollar defined at a fixed weight of gold (and silver until 1900).  This was the case in the U.S. from 1792 until 1973.  The U.S. was on a gold standard during this period.  The fledgling U.S. followed the example of Great Britain who de facto established their gold standard in 1698.  By the late 19th century every country that mattered was on a gold standard or had their currency linked with a gold standard country.  This was the Classical gold standard period from 1870-1914.  There was essentially a unified global currency based upon the monetary stability of gold.  Trade flowed freely.  This was an era of rapid advancement in industrialization, growth, and standards of living and is still the blueprint in form for return to global growth based upon monetary stability.

In reality nothing has changed in regards to the success of the Classical gold standard era.  Gold’s monetary stability remains the same.  What made Great Britain, the U.S., and the Classical gold standard era paragons of growth and progress are still possible today. 

Gold is money.  It has been for thousands of years.  Its properties are exclusively monetary.  FDR ended the right for citizens to own gold and confiscated privately held gold with Executive Order 6102.  This required citizens to turn in their gold to the government by May 1, 1933 at a value of $20.67/oz.  The Gold Reserve Act of 1934 devalued the dollar’s fixed link with gold to $35.00/oz on January 30, 1934.  Mandatory gold confiscation combined with devaluation to $35.00/oz cheated citizens out of 59 percent of their savings denominated in gold.

Gerald Ford made gold ownership by U.S. citizens legal again with Public Law 93-374—Aug. 14, 1974.  Gold is now taxed at the federal level as a “collectible”, if held for more than a year, at 28 percent.  States have been rescinding their taxation on gold.  Currently at least 31 states have passed legislation repealing some kind of bullion coin tax, with more states joining the movement every year.

Texas is leading the U.S. in a return to sound money with the creation of the Texas Bullion Depository.  TBD not only safeguards citizen’s right to own gold without fear of federal intrusion, it more importantly acts as a bank for transactions denominated in gold.  It sets up gold as a parallel currency to protect the savings and earnings of citizens from Federal Reserve mismanagement through dollar devaluation.  Since 1971 when Nixon terminated the Bretton Woods international monetary system, the dollar has lost 97 percent of its value.

TBD can only succeed as a transaction bank if Congress repeals federal taxation of gold.  Imagine if you had to calculate a capital gains tax for every dollar transaction.  Federal capital gains taxation of gold prevents citizens from effectively using gold as money. 

Switzerland has historically been the preeminent country known for preserving the value of their currency.  During the dollar devaluation and global inflation of the 70s, capital flowed to Switzerland for protection in Swiss francs.  Little Switzerland established itself as a global financial center.  Capital will always flow to areas with currency stability and low taxes.  With Texas’ independent spirit and first mover status, TBD has positioned Texas to become an international financial center.  With a repeal of federal taxation, gold will return to its U.S. founding role as a reliable, safe, currency.  Global capital will flow to the TBD as a safe haven against global fiat currency devaluation.  Austin, as home of the TBD, will develop into a global financial capital.

The Sound Money Promotion Act in the Senate of 2011, and the Free Competition in Currency Act of 2011 in the House proposed legislation “to repeal the legal tender laws, to prohibit taxation on certain coins and bullion, and to repeal superfluous sections related to coinage”.  These bills died, but the promise of the TBD combined with voter demand will incentivize Congress to reintroduce and enact a similar bill.  Workers demand sound currency to protect their earnings and savings.  The U.S. awaits the next Jack Kemp in Congress willing to attach their name and legacy to the return of sound money. 

See Giovanni Capriglione and the Texas Bullion Depository.

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