It was recently announced that the U.S. states of Tennessee and Mississippi would remove sales taxes on silver and gold. While it didn’t get a lot of attention from the mainstream press, there are a number of reasons why these measures are significant.

Benefits of Eliminating Precious Metals Taxes

When sales taxes are placed on silver and gold, it will raise the investment cost. Removing such taxes therefore gets rid of a barrier that normally would prevent investors from adding precious metals to their investment portfolio. Additionally, the growing usage of digital payment systems makes it easier to utilize precious metals for daily purchases, which can be accomplished through companies such as Gold Money.

However, many jurisdictions levy taxes on bullion, which increases the transaction cost. The passage of bills which lower or completely remove sales taxes is an important step towards undermining the Federal Reserve; a central bank which many in the U.S. see as being too powerful because of its ability to set and influences interest rates.

States and jurisdictions which levy taxes on precious metals purchases are essentially saying that those metals don’t qualify as money. To use an example, imagine going into a store and asking the clerk to break a $20 bill, and they tell you that to do so they must charge you a $5 tax. That doesn’t make sense, because all you’re doing is exchanging one type of money for another, but the taxes on silver and gold essentially amount to the same thing.

Implications Of The New Laws

The decision of Mississippi and Tennessee to get rid of silver and gold sales taxes means that these metals are now being treated as specie or money, rather than commodities. This is great news for precious metals investors, because it is a small yet significant step towards using the metals in the form of legal tender while eliminating the monopoly of the Fed. Former Congressman Ron Paul has also fought to get rid of taxes for capital gains on gold and silver.

An ideal nation is one where different currencies are able to compete. Early in American history, the U.S. dollar was either backed by gold and silver or these metals were traded directly for goods and services. Starting in 1913, the Federal Reserve was established and since that time it has maintained almost complete control over the issue of credit. By 1971 President Richard Nixon completely removed the dollar’s gold backing, which essentially gives the Federal Reserve and U.S. government the ability to print as much money as it wants. The purpose of backing currency with gold and silver is to limit the ability of the government to overspend. The idea is that, if the government spends too much money, people will recognize and begin exchanging their dollars for gold, which is exactly what happened during the late 60s and early 1970s. The Vietnam War was raging and its high cost prompted individuals and nations to begin exchanging their dollars for gold, which caused Nixon to respond.