Earlier this year, four states took steps toward strengthening sound money by lifting or reducing taxes faced by holders of physical gold and silver. Only a few months later, three other states have actually implemented new sound money policies, and by doing so, they have improved their citizens’ economic standing.
Nebraska is the first of a recent string of sound money victories at the state level. At the end of April, Nebraska adopted Bill LB 1317 with two sound money provisions. First, Nebraskans’ capital gains on precious metals will no longer be included in their income for purposes of the Nebraska state income tax. Second, the law deals a symbolic blow to central bankers by amending Section 77-106 of the Nebraska Revised Statutes to read the following:
“The term money includes all kinds of coin and all kinds of paper, issued by or under authority of the United States, circulating as money. Money does not include central bank digital currency.”
By excluding CBDCs from the state definition of money, Nebraska has erected a bulwark against further interference in money by the Fed and federal government.
Alabama quickly followed Nebraska in similarly reducing the taxes associated with holding bullion. SB 297, sponsored by Alabama Senator Tim Melson, was enacted on May 20th with its main provision being, “to exclude net capital gains derived from the exchange of precious metal bullion from state income taxes.”
Finally, on May 28th, Louisiana Governor Jeff Landry signed SB 232 into law. Taking effect in August, the law makes explicit Louisiana’s commitment to allowing the use of bullion in trade within the state’s bounds. The law, which is commendable in that it is both simple and single-purposed, lays out and reaffirms two crucial elements of sound money:
“Any gold or silver coin, specie, or bullion issued by any state or the United States government as legal tender shall be recognized as legal tender in the state of Louisiana. … No person shall be required to offer or accept any recognized legal tender as described in Subsection A of this Section for the payment of debts, deposit, or any other purpose, nor shall any person incur any liability for refusing to offer or accept such legal tender, except as specifically provided for by contract.”
First, the law recognizes that gold and silver are money. The fact that such a statement needs to be made and affirmed in law reveals the startling lack of economic education today. Precious metals have long been used as a universal medium of exchange, and Louisiana does well to affirm their continued monetary use.
Second, the law recognizes, perhaps implicitly, that the best money arises out of voluntary exchange. Just as it’s wrong to deny the monetary nature of gold and silver, it’s wrong to require their use. In fact, the very reason gold and silver came to be considered money was because ordinary people found it advantageous to freely trade the metals rather than bartering with other goods. In today’s economy, which is ravaged by inflation, it’s not surprising that ordinary people may want to start holding and possibly even transacting in precious metals.
The legislatures and governors of Nebraska, Alabama, and Louisiana are doing what states ought to do when national policymakers march steadily toward monetary disaster. By making precious metals easier and cheaper to use and acquire, these laws equip their citizens to better handle inflation, the federal debt crisis, and the increasingly likely decline and fall of the dollar.
