(Trenton, NJ, USA - January 15, 2022) - Legislators from New Jersey are trying to restore sound money in the Garden State.
Originally introduced in 2021 by Asm. Dancer (12-R) and Sen. Doherty (23-R) but carrying over to 2022, these house and senate bills would end the practice of taxing the purchase of the monetary metals. Under current law, New Jersey citizens are discouraged from insuring their savings against the devaluation of the dollar because they are penalized with taxation for doing so. Passage of this measure would remove disincentives to holding gold and silver for this purpose. These bills are important for a few reasons:
New Jersey does not tax the purchase of any other investment. New Jersey does not tax the purchase of stocks, bonds, ETFs, currencies, and other financial instruments. Gold and silver are held as forms of savings and investment. Taxing precious metals is unfair to certain savers and investors.
Studies have shown that taxing precious metals is an inefficient form of revenue collection. The results of one study involving Michigan show that any sales tax proceeds a state collects on precious metals are likely surpassed by the state revenue lost from conventions, businesses, and economic activity that are driven out of the state.
The harm is exacerbated when you consider that all of New Jersey’s neighboring states (Delaware, New York, Pennsylvania) have already stopped taxing gold and silver. Even nearby Maryland, Connecticut, Massachusetts, and Rhode Island, have enacted their own sales tax exemptions for precious metals.
In total, 42 states have reduced or eliminated sales tax on the monetary metals.
Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers will take their business to any neighboring state (all of which have eliminated or reduced sales tax on precious metals), thereby undermining New Jersey jobs. Levying sales tax on precious metals harms in-state businesses who will lose business to out-of-state precious metals dealers. Investors can easily avoid paying $130 in sales taxes, for example, on a $1,950 purchase of a one-ounce gold bar.
Levying sales taxes on precious metals is inappropriate. Sales taxes are typically levied on final consumer goods. Computers, shirts, and shoes carry sales taxes because the consumer is "consuming" the good. Precious metals are inherently held for resale, not "consumption," making the application of sales taxes on precious metals inappropriate.
Taxing precious metals is harmful to citizens attempting to protect their assets. Purchasers of precious metals aren't fat-cat investors. Most who buy precious metals do so in small increments as a way of saving money. Precious metals investors are purchasing precious metals as a way to preserve their wealth against the damages of inflation. Inflation harms the poorest among us, including pensioners, New Jerseyians on fixed incomes, wage earners, savers, and more.
The Sound Money Defense League strongly supports and is actively working with lawmakers in Virginia to ensure passage of this important measure. Kentucky, Mississippi, Hawaii, and Alabama are just a few of the other states fighting their own sound money battles in 2022.
Jp Cortez is the Executive Director for the Sound Money Defense League, a non-partisan, national public policy group working to restore sound money at the state and federal level, and lead author of the Sound Money Index.
