In the heated political climate of today, a bill introduced in the Minnesota state legislature to expand the use of tax-free gold and silver won’t generate hot-button responses for talk shows and blogs. But Minnesota House Bill 1810 (MF 1810) is one part of a very quiet movement that supporters will hope will fundamentally alter the very nature of commerce in the United States.
Minnesota is currently one of 35 states that exempts bullion coins from sales taxes. MF 1810 would expand that to include all gold and silver. The proposed legislation effectively changes gold and silver from commodities into money.
How does this work in practice? Under current law, if you want to get change at a convenience store and offer gold coins, the store is obligated to charge sales tax. If MF 1810 becomes law that same exchange can take place tax-free. Gold and silver are no longer considered products, like anything else on the shelf, but money.
The implications go well beyond an administrative note for cashiers to be aware of. Gold and silver are not under the control of the Federal Reserve System, which regulates the flow of American money. The Fed currently has an effective monopoly on money.
But if gold and silver start to be commonly used as a medium of exchange, that sets up rival currencies. Supporters of tax-free gold believe that if more people are able to choose between the presumably more stable gold and silver, as compared to the inflationary paper money of the Fed, it will create a very gradual currency revolution.
And the revolution might not stop at currency. Under federal law, gold is currently taxed as a capital gain, at 28 percent. The drastically differing way in which the central government and large numbers of state governments treat gold sets up a political clash between Washington D.C. and state capitols, one that could get extremely interesting if gold develops into a popular form of currency.
All of this requires a lot of projection into the future, but one thing is certain—MF 1810 and similar proposals around the country are a lot more impactful than current mainstream political debate would have you believe.
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