Some States initiate proposal on reducing taxes on precious metals

Residents of Georgia, Kentucky, Wisconsin, and Kansas may soon experience reduced taxes on precious metals if newly introduced pro-metal legislation becomes law in 2024.

In the past month, all four states have introduced or reintroduced bills aiming to exempt precious metals from either state sales tax (in Kentucky and Wisconsin) or state income tax (in Georgia and Kansas).

In Kentucky, legislators are set to vote on House Bill 101 and Senate Bill 105 during the current legislative session. If approved, these bills would eliminate the state sales tax on gold, silver, platinum, and palladium bullion starting in August of this year. Wisconsin's Assembly Bill 29 and Senate Bill 33 propose similar provisions while also abolishing sales tax on copper bullion purchases.

Advocates of these bills highlight that gold and silver are among the few asset classes subject to sales taxes, unlike more common investments like stocks and bonds. The Sound Money Defense League recently emphasized this point, stating, "Sales taxes are typically applied to final consumer goods, and precious metals are inherently held for resale, not 'consumption,' making the imposition of sales taxes on precious metals illogical from the start."

Kansas and Georgia, having previously eliminated sales taxes on bullion, are now taking the next step to facilitate the use of sound money. House Bill 895 in Georgia and House Bill 2405 and Senate Bill 303 in Kansas propose lifting state capital gains taxes on precious metals, leaving only the federal capital gains tax on income earned from holding gold or silver.

Kansas' bills explicitly reaffirm that gold and silver are legal tender in the state and ensure that physical metal can be used voluntarily as currency, establishing a relatively free market in money.

Many argue that income tax on precious metals constitutes a second tax on top of inflation. This implicit inflation tax affects everyone's cash holdings, regardless of their investment in precious metals. Depending on their location, individuals earning nominal capital gains on gold and silver may face a second, explicit tax liability, even if their gain is minimal.

These states, by considering these bills, join a growing list of jurisdictions in the United States offering some form of tax relief for precious metals. Last month, Missouri and Oklahoma filed bills to exempt precious metals from state income tax. Oklahoma and Florida went further, considering bills to establish bullion depositories in each state, promoting sound monetary policy at the state level.

As more states take measures to protect their citizens from wealth-eroding monetary policies by the Federal Reserve, the recent surge in high inflation serves as a reminder of the crucial role of money in advanced economies. When the value of money is eroded by inflationary spending and escalating public debt, ordinary people bear the brunt of the consequences. Fortunately, as state laws reduce the costs of investing in precious metals, holding physical gold and silver increasingly serves as a hedge against this hidden tax. Enactment of the bills in Kansas, Kentucky, Georgia, and Wisconsin would signal that state lawmakers are committed to providing their citizens with a more secure financial future.