Jp Cortez: Ranking States on Sound Money
Jp Cortez from the Sound Money Defense League discusses the importance of sound money and the efforts to promote its use. Jp ranks the various states, highlighting bipartisan support for honest money, and the battles to eliminate taxes on gold and silver. Where does your state fall?
Follow Jp on Twitter @JpCortez27
Connect with Keith Weiner and Monetary Metals on Twitter: @RealKeithWeiner @Monetary_Metals
Additional Resources
The Case for Gold Yield in Investment Portfolios
Podcast Chapters
[00:00:00]: Introduction to the importance of sound money
[00:00:56]: Introduction to the Sound Money Defense League and its mission
[00:02:07]: The history of the gold standard and its demise
[00:04:27]: Overview of the Sound Money Index and its criteria
[00:07:32]: The burdensome regulations on precious metals dealers
[00:09:02]: The impact of taxes and regulations on bid-ask spreads
[00:12:17]: Update on states removing sales tax on sound money purchases
[00:15:48]: Gold’s increasing popularity in countries experiencing inflation
[00:20:19]: Progress and setbacks in passing sound money bills in various states
[00:22:48]: Political gamesmanship in Maine to prevent Republican win
[00:27:46]: Misunderstanding the value of gold
[00:29:34]: Taxing gold vs. exchanging currency
[00:32:03]: The battle against capital gains tax
[00:36:47]: States focusing on removing taxes on gold
[00:38:10]: The potential for federal legislation
[00:44:36]: The Ineffectiveness of Constitutional and Moral Arguments
[00:49:51]: Top 10 States for Sound Money Policies
[00:53:47]: Bottom 10 states on the Sound Money Index
[00:54:36]: How to advocate for sound money legislation
[00:58:33]: Gold, silver, or Bitcoin
[01:00:02]: Support the Sound Money Defense League
[01:01:04]: Monetary Metals
Transcript:
Benjamin Nadelstein:
Welcome back to the Gold Exchange podcast. My name is Benjamin Vern Nadelstein. I am joined, as always, with founder and CEO of Monetary Metals, Keith Weiner. I’m joined by our special guest for the day, Policy Director at the Sound Money Defense League, JP Cortez. Jp, how are you doing?
Jp Cortez:
Hey, Ben. I’m doing great. Thank you all for having me on.
Benjamin Nadelstein:
Absolutely. If you haven’t seen our first episode with Jp, I highly recommend watching it. That’ll give you a quick brief overview of what they are doing over there at the Sound Money Defense League. But Jp, give us a quick brief overview for someone who doesn’t know you or what you guys are doing over there.
Jp Cortez:
Yeah, sure thing. The Sound Money Defense League is a non-partisan sound money advocacy group. We believe that the gold standard didn’t fail, it was killed. The reason that gold and silver aren’t used as money today is largely because of all of the impediments and the frictions surrounding its use. With that in mind, we go state to state advocating for policies to ease the use, to remove these disincentives. That can be the removal of tax on the purchase or on the sale, the use of the metal. In some cases now, it’s states themselves deciding to bolster state reserves or pension funds with physical gold held within the state. Different topics, different things like that. So we go state to state and on the federal level as well advocating for policies to remonetize constitutional sound money that is gold and silver.
Keith Weiner:
It’s interesting you say that, Jp. I just tweeted it. I don’t know if it was yesterday or the day before and I said the gold standard didn’t fail. Liberty doesn’t fail. It was killed by government that was… I don’t know if I get into this in my tweet, but the government was ready to march of everybody off to war in the Eve of 1914. And of course, that was a progressive area where people thought they could vote themselves lots of free goodies. And the gold standard got in the way of that a little bit. So actually it was working, but they regarded that not as a feature, but as a bug and still like, oh, well, let’s just end it. And they created the Fed and the rest of history.
Jp Cortez:
I actually, yeah, along those same lines, I spoke at a Mises Circle event that took place in Banner Elk, North Carolina on Friday of this past week. And And one of our sponsors of one of our bills is there. We’re working on some legislation in North Carolina that I’m sure we’ll discuss here a little later. But while I was speaking, I was speaking on sound money, and I forgot he was in the room and went on about how politicians don’t like gold because gold is honest money, right? And politicians are dishonest people. They don’t like money that keeps them in check. These are shackles, essentially, for a politician. So understandably, they wouldn’t like that.
Keith Weiner:
How inconvenient, how terribly inconvenient.
Jp Cortez:
Yeah, showing financial restraint or any fiscal responsibility at all. They’ve shown time and time again, this isn’t something that they practice. This isn’t something that they can be trusted with.
Benjamin Nadelstein:
So JP, I want to jump in here. On the sound money index that you guys produce every single year, you actually rank every single one of the states. I highly recommend people downloading the PDF, taking a look at the sound money index, seeing where your state is. But I wanted to start, first of all, what are some of the things that you use to rank the different states? Obviously, it’s not just your opinion. You’re using some objective measures that you guys can come up with. Can you go through what those measures are so people know what you guys are looking at and saying, Hey, this state is a sound money state, or is not as friendly with their sound money policies?
Jp Cortez:
Yeah, absolutely. This year in the 2023 Sound Money Index, there are 13 criteria that we use to determine which state has the most pro and most anti sound money policy or sound money environment in the country. In 2024, the addition that will be released towards the end of this year, there will actually be a 14th category that we’ve introduced that we’ve added to the scoring guide. But in the 2023 guide, a large portion of what we’re grading these states on is going to be based on their taxes. So whether or not the state charges a sales tax on purchases of gold, silver, platinum, palladian coins, bars and rounds. What the state sales tax rate is relative to the national average, whether the state charges an income tax, a state income tax on the sale, if the seller enjoys a gain, does the state charge an income tax? And relative to the national average, what rate are they charging that at? Those take up a large portion of the allotted points. And that’s because we believe that the taxes are the biggest impediment to gold and silver’s use as money. But additionally, there are also categories on whether or not the state has reaffirmed gold and silver as a legal tender or as money, whether or not the state invests any of its pension funds or reserve funds in gold and silver, whether the state has invested in any gold bonds, whether the state has established an in state depository.
Jp Cortez:
Most recently, we’ve added the precious metals dealer harassment category. This is a category that examines a state’s policies on dealers. Many times people go to sell their precious metals. They go to a local dealer or a pawn shop and in many states, there are very onerous regulations that are placed on these dealers. So for example, if you were to come into my pawn shop, I believe in Arizona. I’ll use that as an example. If you were to come into my bullion shop and want to sell me a Silver Eagle, I would buy from you and I would have to take down your name, any information, your phone number, your email address. I would have to take down physical descriptors, your height, your weight, any notable tattoos, any facial features, anything like this. Then I would have to take all of that information and then upload it to a police database where by law, by statute, dealers are required to upload this information to a police database, and then it’s used for God knows what. So on top of there being a very serious security risk and constantly having to give information to police departments by statute, it’s also a regulatory burden.
Jp Cortez:
These are businesses that are generally very small. They don’t have a giant staff to be fielding what essentially amounts to regulatory requests. And so it’s very onerous on precious metals dealers. Ultimately, that harms precious metals investors as well. Those are some of the categories that we’ve had in 2023. In 2024, we’re going to introduce a category that will examine a state’s policies on commercial activity tax. So in the case of Oregon, Ohio, and a couple of other states, precious metals dealers are charged a CAT tax is what they’re called. And this is a tax that the state levies on a business for the privilege of doing business in their state. The issue is that in many cases, many businesses operate with a larger margin than precious metals dealers do. If you know anything about the precious metals business, it’s a very low margin business. There’s a lot of hedging involved. There are a lot of costs involved. So this is a very low margin business. And so to apply a cat tax on precious metals dealers, it’s a discriminatory high tax. It’s a tax that that industry is not built for. And the cat tax statewide is a one size fits all approach that doesn’t really work for precious metals dealers.
Jp Cortez:
The reason we’re adding that is because we’ve had some movement. There’s a state that is in the process, I suppose, of passing legislation on this issue. So we’re adding that to next year’s index as well.
Benjamin Nadelstein:
So, Keith, I want to send it your way for a second. I know you talk a lot about bid ask spreads and what those spreads signify. And I want to talk about what Jp mentioned, which is these thin margins, especially for precious metals companies. And every time you add a tax or regulation or a restriction or some type of friction, what does that do to spreads? And what do those spreads mean for people like me and you?
Keith Weiner:
So the thing that makes gold money, if you go back to Menger and his definition, is it’s the most marketable commodity, which means it has the tightest bit as spread. If you were to buy a particular commodity and then immediately sell it without the market even moving, you lose the spread. So if you’re buying gold at 1978 and selling it at 1974, you’ve lost four dollars or something like that. When there’s a tax applied to the dealer, the dealer is just going to have to… I mean, they can’t survive without passing that through somehow. They’re going to have to widen the spread. And so they’re taking away some of gold’s monetary utility in doing that and discouraging people. I’m not sure that’s necessarily the intention, but the net effect is they’re going to have to discourage people from buying gold because the old saying in investors, if I can’t get out, I don’t want to get in. So it’s discriminatory. It’s adding unnecessary friction. That’s what I call useless ingredient, where the person who’s buying that gold coin has no idea what onerous regulations that the bullion dealer is up against, whether it be labor law, whether it be random miscellaneous fire inspections, whether it be green stuff coming to check their installation and saying you have to redo your building, whatever it is, or a cat tax, consumer has no idea.
Keith Weiner:
They’re just going to say, Man, that’s a rip off. And yeah, it is a rip off. It’s just not that the dealer isn’t the bad guy. The bad guy is in the state capital concocting all this stuff. So yeah, I agree with everything Jp said, 1,000 %.
Benjamin Nadelstein:
So Jp, when it comes to removing these regulations, these frictions, these restrictions, you noted that, quote, 42 states fully, or at least partially exempt the purchase of gold and silver coins and bullion from sales tax. So that’s great. And then you said, Of those states, five do not maintain a sales tax on any items whatsoever. That is Alaska, Delaware, Montana, New Hampshire, and Oregon. So let’s take those 42 states. Most people would say, That’s a huge win. 42 out of 50 states. I’m not that good at math, but that’s almost a passing grade there. And so who are those eight state holdouts? What is it about their states that they say, no, those taxes are here to stay. And do you see that there’s any marginal movement on some of those eight states?
Jp Cortez:
So I’m actually glad to say that the number has grown since the publication of the 2023 Sound Money Index. Most recently, Mississippi became the 43rd state in the country to end the sales tax on the purchase of Sound Money. Yeah, go Mississippi as a multi year project. The Sound Money Defense League in coordination with Money Metals Exchange and local advocates in state. We’ve been in contact with the legislature for five years now, probably working to get hearings and working to get this passed. And finally, it happened. So thankfully 43… Congratulations. Sorry?
Keith Weiner:
Congratulations hank you.
Jp Cortez:
Yeah, thank you. It’s good to get these done. So Mississippi is the 43rd, but fortunately, of the seven now that remain, five of them have introduced legislation to end this tax. Two of those are still alive in the year, this 2023 legislative year. That is Wisconsin and New Jersey. New Jersey, a heavily Democrat controlled state. Just just passed a sales tax exemption out of their assembly unanimously, 74 to nothing. That bill passed and is now onto the Senate, where that will hopefully be considered here in the next few weeks when they come back from summer session or rather from summer break. And then in Wisconsin as well, we’re hoping to have some hearings in the fall on ending this exemption or rather on ending this tax. So of these seven states that remain, they are Maine, New Mexico… Oh, man, I should have had this pulled up. Do you have the index?
Benjamin Nadelstein:
I do.
Jp Cortez:
Let’s see. I do. Let’s see. Maine, New Mexico, Hawaii, Wisconsin, Kentucky, New Jersey, and Vermont. Of those states that remain, Hawaii has introduced legislation. Wisconsin, Kentucky, Maine, New Jersey, and Vermont have all introduced legislation to end this tax. So we’re hopeful. And it’s also interesting to note that these issues, these fights that are going on are not divided necessarily on political lines. So like I mentioned in New Jersey’s case, that is a heavily Democrat controlled legislature that just passed unanimously. In Hawaii’s case, also a very blue state politically that has passed out of a full chamber and out of several committees. On the other hand, Kentucky is known as a prominently red state, and that’s a state that we’ve had trouble. This year, we fortunately got it through one chamber, but that is a red state. And Mississippi as well, before prior to this year, a very red state that it took us several years to get this done. So it doesn’t necessarily fall along party lines. This isn’t really a partisan issue in the face of record high inflation and bank runs and failures, this isn’t an issue that’s political necessarily. A lot of people are naturally waking up to the importance and the understanding that something is going on with America’s funny money.
Keith Weiner:
I would say it only takes a little bit of inflation, and I say that facetiously, a little bit to get people to start thinking about gold. I just visited Istanbul, Turkey recently, and this is not an official statistic, but somebody there told me that every last person in that country, if they had any money at all, would have at least 10 grams of gold, and the average person would have more. And of course, their Lira is totally in freefall. It makes the US dollar look like hard money by comparison. And everybody, you go to the Grand Bizarre in Istanbul, and more and more of the stalls are gold dealers of various kinds. There’s few and fewer spice merchants, few and fewer places selling Turkish delight, carpets, textiles, and more gold dealers. So they are absolutely in the gold craze because the only way to hold on to anything with that currency, you can’t hold that currency. You got to buy gold. And boy, do they do that.
Jp Cortez:
I spent a little time in Asia over the last couple of weeks, and I was jarred. I noticed that same thing that seemingly on the streets of Japan and on the streets of Thailand, you have more storefronts. You have bullion dealers that are surviving as brick and mortar storefronts seemingly all over. It’s certainly more in the US than if you’re walking through a city, you’re going to see way fewer bullion dealers, gold dealers than I did in Asia. I was surprised by that.
Keith Weiner:
And I keep saying this, but I think Americans are the culture that understand gold the least. And you go to a place like Southeast Asia, you go to the Middle East and everybody gets gold. I mean, it’s just like, of course, it’s obvious to them. You talk to the average American, hey, gold is a Barbara’s relic, whatever. Who cares? That was stupid. Gold standard failed, tax it, whatever. I was going to make a comment about that, it’s not partisan. I was heavily involved in trying to get the bill in Arizona passed, and it was vetoed three times by two different Republican governors, even though it passed passed on strict party lines in Arizona. So all the Republicans voting Aye, all the Democrats voting No, it’s obviously heavily Republican state, so that would pass. And then twice, Doug Ducey vetoed it, and once Jan Brewer vetoed it. And I saw some really funny things. The chair of the… I don’t remember this was the House or the Senate committee that was hearing it, was a Republican, of course. And without naming any names because that’s not the point. She was president for the whole discussion. And then as soon as the secretary went to call Roe prior to the vote, she literally grabbed her laptop, grabbed her little binder with almost like papers flying and falling out of her binder, ran out the back door.
Keith Weiner:
So she was not present for roll call. And obviously, she didn’t want to be seen as voting against it. So I guess there’s that. But she couldn’t vote for it. She must have been beholden to some interest group that would have, I don’t know what, stopped donating to her campaign or something if she voted for it. So she had to run out of the room and not be seen to be voting at all. Very bizarre politics of all this.
Jp Cortez:
Yes, absolutely. The incentive structure is strange. Actually, this year we had a particularly galling example of political maneuvering in a way that’s uncommon. We, for the most part, don’t really see things like what happened in Augusta, Maine. But this year in Maine, Senator Brakey, who is a limited government, small government guy, he’s very good on these issues, introduced several sound money bills. One of them was the bill to introduce or rather to eliminate the state sales tax on sound money. I went up there personally. In Maine, there is a joint committee. Just a singular joint committee. The Joint Committee on Taxation had members of representatives and Senators on it. I flew up to Augusta to testify before the committee. If I remember right, Keith, I believe you were at least involved in discussions to maybe participate as well.
Keith Weiner:
Yeah, I testified by video on that one.
Jp Cortez:
Yeah. And so we got the bill out of the… It’s a Democrat controlled committee. Both the committee and chair people voted. These are both Democrats, both of them voted yes on our bill. So the bill comes out of the committee. We get to the Senate because Senator Brake is a Senator. So it went to the Senate first. We passed out of the Senate, 17 to 15. So this is huge in Maine. After years of trying, we’ve never even so much as made it out of committee. In this case now, we’ve made it out of committee. We’ve passed out of the Senate. We’re onto the House. In the the house, there are three votes. In the first vote, we won. We got the votes needed. We had a favorable vote. The second vote happened and we won again. We got the votes again. That vote was on a Thursday, I believe. The bill that evening after the vote was a Democrat representative put a hold, that’s a procedural status on the bill and held it over the weekend and then voted again and then for a vote again to be cast the following legislative day, which I believe was Monday or Tuesday.
Jp Cortez:
They voted again, and it turns out Democratic leadership had spent the weekend twisting arms of the Democrats that had voted in favor of the bill and got them to flip. We ended up losing the vote, 72 to 71. Two Democrat voters that originally voted yes a couple of days prior flipped after a weekend of who knows what happened. The vote stayed open for like 10 minutes when they told legislators to cast a vote. They opened the vote. And then I was watching online, but normally these votes, the box opens, everyone cast their vote. Within 10 seconds, the vote is closed. This was 10 minutes of just silence, the vote being opened. Who knows what was happening in that room? Who knows who was being offered or traded or told what? But it was galling. I’ve never seen… Generally, these sound money bills aren’t necessarily super attention grabbing. There isn’t a strong constituency on the other side. But in this case, our sponsor was told, Senator Brake was told, This is not about your bill. This is about power. This is bigger than you. The Democratic leadership wanted to let people know that they had control of their chamber.
Jp Cortez:
And so they weren’t going to give Republicans anything that even resembled a win. So from the get go, I think this went a lot further than democratic leadership and even then we were expecting it to.
Keith Weiner:
I saw, both in Arizona and a couple of other states, where I went in person to testify on behalf of something, that you have a small but fairly vocal group in favor of whatever the gold bill was. You have a sound money contingency, and then there’s a certain branch of the Conservatives that are really into it. And there was no real… Five years in Arizona, every year I showed up. And then once in Texas, and I’m trying to think, I think I was there in Wyoming and another state, there was no opposition.
I mean, if there was anybody testifying against it all, it was like a fiscal note, depending on the bill. And it was like, this requires the state treasurer to accept gold and payment of taxes. And they’re like, We don’t know how to do that. We’d have to get equipment. We’d have to get a vault put in. We’d have to get security measures and hire rings or somebody to take it. It’s going to cost some money. It wasn’t even hard opposition. It was just there’s going to be a cost here. And if you want us to do this, you have to count that into the thing.
Jp Cortez:
Yeah, it was almost like a logistical opposition, not.
Keith Weiner:
Anything else. Yeah. It was like, Okay, if you want us to do this, give us the budget. And you have to accurately count that in a fiscal note. But the politicians who voted against it were very ideological. I had this one crusading guy in Arizona who just was like, If you like the Euro, then you’re going to love gold. And I’m just like, Well, as an economist, I could say gold is nothing like the Euro. It’s like arsenic and cheese. It but he was trying to say that, Well, it’s out of your control and you can’t increase the quantity or something. Then he tried to pin me on, Well, what happens if somebody… Where’s the gold stored? And I said, Well, it’s in a depository. What happens if somebody in the depository goes bad and wants to steal it? And I said, this is a problem that’s been around for hundreds of years and it’s been solved. If you look at Brinks, you look at Loomis, you look at the Delaware Depository, whom we deal with, they haven’t had a loss in living memory. You look at every commercial bank in the country has a vault where there’s a palette of paper cash somewhere because they’re dealing it all day long.
And I figured it out. It’s a combination of time set locks and video cameras and obviously background checks, getting employees bonded and insured. It’s a whole bunch of different things. And they think they solve this problem. This is not an impediment to a gold standard. It’s not even an impediment to putting a commercial vault where you’re just charging people storage fees. And he was just like, it struck me as not particularly smart, but like a fox, like cunning, just looking for that angle, looking for that twist. I got you. And of course, he was picking the wrong guy to try to just joust with on the.
Jp Cortez:
Thing that fight with.
Keith Weiner:
Because he was just thinking about it for the first time because the belt came up on his docket, whereas obviously I’ve been thinking about it and writing about it a long time. But it was just against it. Of course, he voted. There’s nothing I said that persuaded him. He voted no. And even though there was not a single of his constituents who showed up who cared, it was just like, no, I’m not going to allow this.
Jp Cortez:
And I’ve actually had a couple of stories come to mind with legislators that are just too smart by half or just are very confident. I guess the politics and the act of getting elected is an intoxicant that maybe makes you think very highly of yourself or whatever the case may be. So there are several of these that I can think of over the years, legislators. For example, that similar to that, it sounds like that were arguments similar to, if so many things, anything can be can be used as money. Seashells were used as money. Should we stop taxing salt? Should salt be tax free at the grocery store since we used salt as money back in the day? And things just inane, asinine, things like that. Or in Idaho, there was a legislator who during a hearing on a bill that we were working on, this might have been back in 2018, stood up and hadn’t contributed to the debate to this point is my understanding, but stood up and very matter of factly said, I don’t really have an opinion on this bill. I’m just saying that 100 years ago, the price of gold was, I don’t know, $1,200.
And today, the price of gold is $1,800. So you can’t really call it a good, stable value of a store of money when the price fluctuates like this. I don’t have an opinion on the bill. I’m just saying. And then sat back down, so sure of himself, not realizing what he had just said. There’s something about politics that makes you overestimate your powers.
Keith Weiner:
$1,200, 100 years ago. That’s good.
Jp Cortez:
What do you mean? The price of gold is fluctuating. No, you’re not getting it.
Keith Weiner:
Would the Senator from Dunning & Kroeger please sit down?
Jp Cortez:
Yeah, exactly.
Benjamin Nadelstein:
So Jp, I want to run through a couple more of these items that you have here. And this was a great quote. You said, Imagine if you went to a grocery store clerk and you had a $5 bill and you said, Hey, can you break this up for me? I just need singles. And he said, Sure, but the government charged you a $35 5 % sales tax. Clearly, that would be silly, right? You’re just exchanging one form of currency for another form of currency. But try walking into a precious metals dealer in over a dozen states and exchanging a $20 Federal Reserve note, or maybe $24 at the moment, for an ounce of silver. If you make that exchange, you’ll get hammered with a sales tax. That’s the price that you pay for picking up a piece of true money that was mentioned in the US Constitution. So let’s break that down a little bit. I have my 20 bucks, I go, I don’t really trust the United States Fed. I don’t want to be a creditor to this whole funny money business. I’m going to swap that out for what I consider to be money, which is precious metals, gold and silver.
Why do you get hammered on that, but you don’t get hammered when you exchange a five for five cents?
Jp Cortez:
Yeah, it’s a great question. And that’s the crux of what we present when we speak to these legislators. To start, I think the sales tax on precious metals is appropriate. That sales and use tax in states that have this tax, levy this tax on final consumable goods. When you buy a hamburger, when you buy a T shirt, you are the final consumer of this good. You are using it and so you are charged this tax. Gold and silver. With the gold and silver, that’s not the case at all. You’re holding it like a stock or a bond. It’s an asset held for resale. And no other states, to my knowledge, charge a sales tax on the purchase of assets. So when you go into your Fidelity account, you might have a brokerage fee or trading fee of some sort, but it’s not a state sales tax because it’s held for resale because the state gets their cut at the end when you sell the asset and then they say you had a gain, now you owe me some of that. And that’s where the state gets its cut. But in the case of precious metals, there are states that are choosing to tax the metals just on purchase of the metals.
Additionally, there are also studies that have shown that when you tax precious metals, you’re better off not taxing precious metals because of all of the industry that leaves the state. Conventions won’t come into your state. Dealers have a hard time setting up in states with these precious metals. Reality is this is a very innocuous by state budget standards, what we’re talking about here. In the case of Tennessee, we just passed legislation to end this tax. The fiscal note there was about $300,000. That’s an accounting error, a rounding error in the case of many state budgets. So the idea is that this is a meaningful tax as a question of what it provides to the tax base just simply isn’t the case. And yeah, so we’re taxing constitutional money, and that shouldn’t be the case. That’s beyond the pale. And yeah, so I think for those reasons, it’s inappropriate to tax this to tax the assets, purchase of the assets. And again, that’s what makes them unus as money. Half of the equation of a big part of what makes these metals, what makes them money, unus as money. And that’s why we focus on the tax part of it, largely.
Benjamin Nadelstein:
And Jp, I noticed that you mentioned you’re unable to deduct the capital losses that you incur while holding a depreciating currency, let’s say the dollar, a Peso in other countries. And yet you’re forced to pay income taxes on those nominal gains when you hold a currency like gold or silver. But that’s, like we mentioned, not the fact that gold and silver are going up. It could be the fact that your currency is actually going down. Keith, what do you think about all that?
Keith Weiner:
Yeah, I argue that gold isn’t going anywhere. There’s people standing on the deck of a ship, which is both slowly sinking and tossing in big waves in a storm, saying, Why is the lighthouse going up and down and mostly up? Well, you’ve got the wrong vantage point. It’s gold isn’t going anywhere. It’s the lighthouse. It’s the ship that’s slowly sinking. And by design, right? The proponents of the Fiat dollar system, starting with Milton Friedmann himself, wanted inflation. That’s a feature, not a bug. And I have a question for JP, which is, it sounds like the sales tax battle is almost all over but the shouting. The next battle is the capital gains tax. So how many states right now don’t have any form of capital gains tax when you sell the gold at a higher price? I know Arizona does not. I was very involved in that. I know Utah does not. And I was less involved there, but I know the folks that drafted that legislation and enacted it. How many states don’t? And then obviously, there are states that don’t have an income tax at all, like Texas and Delaware. So I guess in two categories, how many have a state income tax but exempt gold capital gains?
And then how many others don’t have any income tax and therefore, effectively nothing on gold?
Jp Cortez:
So I believe that it is three states that have actually actively passed legislation to end the income tax on gold and silver. Eleven states in total don’t charge income tax on gold and silver. Like you mentioned, you’ve been a prominent part of Arizona, which is a big one. Fortunately, in 2023, again, glad to report good news on this. Arkansas, who in 2021 passed a sales tax exemption. This year, Arkansas Governor Governor Richardson signed a bill into law that reaffirms gold and silver as a legal tender. It also removes all tax liability on the metals, which includes including capital gains tax. So Arkansas has been the most recent state to pass this effort. That was also overwhelmingly passed. This passed, I believe, 82 to 8 in the House and unanimously 32 to nothing in the Senate. And it also interestingly, it included language on specific performance, pardon me, it included language on specific performance, which is the idea that if a contract is written and calls for gold or silver as payment, the dollar is not a reasonable substitute for that. And the court then would be obligated to demand that the contract be paid in what was denominated in.
Keith Weiner:
This is in Arkansas?
Jp Cortez:
Yes. Arkansas has just passed legislation to do this. Wow. Yeah. So gold clause contracts, as you know, were very common back in the day. Gold and silver clause contracts as a very simple way to make long term contracts. And today, more than ever, with the value of the dollar being as volatile as it is, it’s hard to make 30 year plans, for example, or long term plans. And so some people opt to use gold and silver as the denominated unit. And so, yeah, Arkansas recently passed in this bill that was recently signed into law, it also included language on specific performance and on ensuring that a contract that calls for gold and silver is indeed paid in gold and silver. And that’s the capital gains stuff. And it’s not just Arkansas, I’m glad to say. So we’ve introduced legislation on this and have passed out of several committees and Chambers in some cases in Iowa, Kansas, Maine, Mississippi, Missouri, South Carolina, and West Virginia.
So the issue originally was the sales tax issue. But as states continue to remove this tax, states are not stopping there. They’re turning their focus to, Okay, what’s next? What can we do next? And we’re seeing that across the country.
Keith Weiner:
So when I wrote the business plan for the Gold Standard Institute, and we never developed the resources that you have, and and never had the ability to hit 50 states and do the kinds of things that you’re doing. So my hat’s off to you for that. But way back in 2011, I think when I wrote this, I thought that the way the media and the culture works is if you get one state to do something, everyone can dismiss it as, oh, that’s a bunch of crazy people, a bunch of cowboys in Arizona. You get two states to do it, oh, well, that’s a bunch of crazy people in Arizona and a bunch of Mormons in Utah. You get three states to do it, and it’s like one, two, three, many. Suddenly it becomes a story you can’t really ignore anymore. And I thought if you get three or beyond three, it begins to sweep through the states. And then my sense is your hope, and I’d love your comments on this, is that you get enough states that are obviously ending the sales tax. As I said, it sounds like that battle is all but over.
It’s just mopping up. And then you get enough states to start ending. And of course, there’s no federal sales tax, so that’s good. You get enough states to end the income tax on the so called capital gain, which is you bought gold in 1970, you’re selling it now, you don’t have a gain of now 1975 minus 35 is $1,940. You simply avoided the loss in the dollar all during that time. But if enough states are sweeping through with this appeal of the capital gains tax, then at some point it’s appropriate and it would be a winner to put it in the US Congress. And I guess we’re counting our chickens before the hatch right now, but I’m curious as to your vision for that and what you think is realistic.
Jp Cortez:
So in the case of federal legislation that already exists. We know that Ron Paul was a champion in Congress on sound money, but since he retired, Congressman Moody from West Virginia has taken that and taken that cause and run with it. So he has introduced there are a couple of bills that are live on the federal level right now. One of them would be to end capital gains on precious metals on the federal level. And that would be being able to do it in one fell swoop would obviously be quick and efficient. But the reality is that the reason most states charge a capital gain when you sell your precious metals is because most states start with your federal AGI, your federal adjusted gross income, and they just start from there. And if it’s in the federal calculation, then it’s going to be in the state calculation. So hopefully, I mean, if the feds were to do away with this tax, hopefully the states would follow as well. But even without the federal effort necessarily making great headway to this point, states themselves are very much starting to do this. And I think it’s very much a slowly at first and then fast all at once where, like you mentioned, it just takes the one state and then it’s the second state.
And I think the reality, what I’ve learned about being in these political spaces is that politicians many times don’t necessarily want to lead. Politicians don’t want to be the first in X. They don’t want their state to be first in X because that requires risk. That requires trying something new. And that doesn’t necessarily win elections all the time. And so it is much easier to make the case. The case becomes stronger when I can come to a state like, for example, Kentucky and say, Hello, Kentucky, you are surrounded. You have seven border states, I guess Kentucky or Tennessee, there are seven border states here, all of which have already enacted this policy ending this outmoded and regressive tax on the purchase of precious metals. You’re losing out to all of these states that are neighboring. People are leaving the states, businesses are leaving the states, conventions aren’t coming to the state. And so when they hear it like that and they hear, Oh, so we’re completely surrounded by states that have done this. Or they hear now, Oh, there are 43 other states. Wow, we’re really sticking out like a sore thumb here. What are we doing?
I think that resonates a lot with politicians, maybe more, unfortunately, maybe more than maybe some constitutional arguments would, or moral arguments on the practice of taxing life jackets and lifeboats in the case of an emergency, which is essentially what states are doing when they’re taxing the purchase of precious metals in the face of the economic precariousness that we’re in the midst of here in America and worldwide.
Keith Weiner:
I have to say in my years of testifying in Arizona, there were a number of people who stood up to make either the constitutional argument or the moral argument. And unfortunately, I have to say I saw politicians from both sides, both pro the bill and anti the bill, giving that essentially zero traction. It was as if it wasn’t sad. It was just some noise on the wind. The economic argument they paid attention to, some of them. I mean, there were the crusading leftist ideologs that just hated it. But if you could talk about… So I did a little bit of research into the capital gains tax and used some numbers from Texas and then imputed at Arizona’s rates and say, I think you’re looking at a low six figure amount per year that the state would be missing out on if you really build the capital gains tax. This is not a big number. You’re not getting a lot of revenue on this. Obviously, at the physical bullion level, retail people tend to structure their transactions so to be below reporting threshold and they’re not declaring, even though legally they should. Most of them probably aren’t.
And then gold futures are taxed differently. Things like gold ETNs are taxed differently. You’re not really getting a lot anyway. And your point about the sales tax that the dealers can’t do business in your state, if all the states just across the border can have a dealer and then tax free versus it’s going to be whatever, 7 % cheaper there versus here. Look at how much business you’re turning away. I mean, that’s potentially hundreds of millions of dollars in revenues. And for a couple of hundred thousand of tax that you think you’re going to get, which you’re not even getting, you’re just repulsing the business altogether. They get that argument. If you say the Constitution says, it’s like the TV set to static, you don’t even hear it. And then if you said there was one guy who stood up and he had this waggling finger, and it’s like, you people are, what’s the word, derellate in your duty. Your officers sworn to uphold the Constitution and blah, blah, blah, blah. And it was like, I phone came out. People checking their email. Laptops were opened. The legislators were talking to each other doing this.
It was like, complete just like… You could see what they’re thinking, which is, okay, this guy has his constitutional right to five minutes of floor time in this chamber. It doesn’t mean that we have to heat him.
And total just disrespect to the point of ignoring what the guy said to the point of disrespect. That’s what I saw. And that’s unfortunate because that should be the most compelling argument of all is it’s morally wrong. The implication of Ben’s question earlier about how do you tax giving change of a $5 bill, it’s morally outrageous. It is outright robbery. Most people can’t say that. And if you do say it, most people can’t hear it, which is why we’re in the mess that we’re in.
Jp Cortez:
Yeah. And sorry, I was going to say it. I think over the, I think, eight years now that we’ve been doing this, I’ve sat through many of these hearings, and it is sad. And I’m not necessarily talking about sound money legislation anymore, just a more macro view on the political or the legislative process as it exists in all these states. In many cases, you have… I was in a state recently coming up to the C inny Die, so the last day of their session. And these agendas before some of these committees, they’re hearing 100, 150, 200 bills in a day. And what do you think they’re not spending an hour on each bill, carefully examining the nuances and considering the pros and cons of each bill. That’s the nature of the system that, like I said earlier, incentivizes strange things. It’s not necessarily a system built for the betterment of society or for doing well by your fellow man and woman. The system itself, there’s a lot to be desired. It’s not necessarily a system that’s built to help people, I feel like, many times. And so like you were saying, so many of these bills.
And I guess you can’t expect a politician to be an expert in everything. They can’t possibly know everything. And so some of these bills, yeah, I can understand how after several hours of hearing testimony like this, their eyes might glaze over. I think just top to bottom, the system, it’s not even necessarily the fault of the politician sitting in that chair. It’s just structurally, this doesn’t necessarily work or it doesn’t seem as efficient as it could be.
Keith Weiner:
It’s funny, but I don’t read this stuff. I remember when Nancy Pelosi said you have to pass it to find out what’s in it. What struck me as outrageous, being the CEO of a company, I’m obliged by law to sign certain things on behalf of the company, like our tax returns. And if there’s something in the tax returns that I don’t know about. And the bigger the company gets, of course, the more that the CEO doesn’t know all the details. I mean, you’ve got a team of people doing that. But I have to sign that under penalty of perjury. Politicians, it’s like the exact opposite standard. They can vote for a 3,000 page bill without knowing anything about it. It seems to me that now this would make it even more conservative and even harder to make a reform such as sound money. But it seems to me that they should have to sign something that says I’ve read this bill and I understand all the provisions in it as a necessary precondition to be qualified to even.
Jp Cortez:
Vote on it. To vote on it, yeah.
Keith Weiner:
If I don’t know what all the issues are, I’ve consulted experts in my judgment that I deem sufficient to help me understand it. And then, boy, we’d have a lot less bills and it’d be a lot shorter if that were the case. But anyways, you’re right, the political system is so structurally wrong in so many different areas.
Benjamin Nadelstein:
Jp, I want to give you a chance to shout out the maybe top 10 states that are doing actually well on their sound money policies. No one’s at 100, obviously. Everyone’s got some work to do. But maybe for a second, we’ll talk about the states that are doing well, maybe the top 10, and then maybe we’ll do the bottom 10, the 10 states that are not looking so hot so people know. And then I want to go right at number 26, which is North Carolina, and talk about what they’re doing there, and then maybe some states that people can get involved in, how they can help. But let’s start with the top 10, and I’ll give them to you. So first is Wyoming. Second, South Dakota third, Alaska, fourth, New Hampshire, fifth, Texas, sixth, Utah, seventh, Arizona, eighth is Nevada, number nine, Tennessee, and number 10 is Florida. Those are the top 10 states for sound money. Jp, I’ll give you a minute. What do you think is about those states, those legislators, and how have they done so well in the sound money index?
Jp Cortez:
Yeah. So like I mentioned before, these are all states that have scored well in the index, where the index is primarily weighted towards placing the importance on the taxes. It makes sense to me, states like Wyoming, South Dakota, Texas, these are states in the West that generally have a freedom streak, or at least the appearance of liberty minded legislators there. And in some cases, these are states that their system is built to favor sound money or taxes against sound money. So in New Hampshire’s case, for example, they don’t have a state sales tax at all. So New Hampshire would get full points for not having a sales tax exemption or rather not having a sales tax on the medals. Alaska as well is in in the time I’ve spent there and spoken to legislators there, a very liberty minded state. We’re working on legislation there right now with Representative Kevin McCabe to reaffirm gold and silver as money again. But also this is a state that would eliminate taxes, sales taxes on the local level. So Alaska does not have a state sales tax, but localities, boroughs, cities can still charge their own sales tax.
And so we’re working on legislation now to end that tax on a local level. Excuse me. Texas, Arizona, Texas famously, many years ago established an in state depository, the first one in the country that was privately owned, publicly managed, or rather privately owned. Government monitored, government sanctioned, but privately run. And they also at one point had about a billion dollars worth of gold in their pension fund that I believe investment they have since divested from that gold. And then Tennessee recently has shot up the ranks. They passed their sales tax exemption in last year. We passed that in Tennessee after several years of trying to get that across the finish line. Naturally, they revamped their tax base and they eliminated they’ve been phasing out their capital gains tax for the last several years. And last year, I believe either last year or two years ago, it was completely eliminated. So there’s no capital gains tax on the metals in Tennessee. And then this year they passed legislation. The same cast of legislators that were behind the effort to exempt sales tax a couple of years ago introduced legislation to authorize the state treasureer to invest in physical gold and silver if he or she so chooses.
And that legislation was passed and approved by the governor this year. Additionally, they’ve also introduced legislation that did not pass, but legislation to accept a payment of taxes to have the state allow the payment of taxes in physical gold and silver was an effort that they’ve introduced and we’re working to get passed as well in Tennessee. And so I think that as far as the top 10, those are the ones that are showing the most promise. I actually got an email just a few hours ago from a legislator in New Hampshire that s interested in introducing some sound money legislation. New Hampshire, the free state, and a very liberty minded state, not a state that we’ve worked in to this point. So hopefully we’ll get some legislation in New Hampshire this upcoming year as well.
Benjamin Nadelstein:
Jp, I’m going to read you the bottom 10. We don’t need to go through every single one, but maybe if you’re living in one of these bottom 10 states, you can reach out the Sound Money Defense League. I’ll have Jp tell you where to find them.
So here’s the bottom 10. We’ve got nothing number 1 at the bottom will be Vermont’s number 50, number 49 New Jersey, number 48, main, 47, Minnesota, 46 California, 45 Kentucky, 44 Wisconsin, 43, Mississippi, 42 Hawaii, 41 New Mexico, and rounding out the top 10 worst is 40 at Connecticut. So if you’re living in one of these states and you’re going, Wow, I’m in the bottom of the sound money index, how can people work to get their legislators and their houses and their committees to pass sound money legislation?
Jp Cortez:
The biggest thing is to contact your legislators. That’s the truth of it. These legislative project successes that we’ve had would absolutely not have been possible without the efforts from people in the state, because ultimately that’s what politicians react to. That’s who they care to hear from. So contacting your legislator, writing an email, or sending an email, or making a phone call are truly very effectual ways at the state level that you can enact policies in your community. Like you mentioned, these are 10 states that are worst on this issue. I’m happy to say of these 10, 1, 2, 3, 4, 5, 6, 7, 7 of the 10, seven of them, we’ve introduced legislation to end the sales tax, income tax, or potentially both. So there’s promise even among these bottom states. And that’s, I think, the promise to take away from all of it. That even states with political leanings that typically you would think wouldn’t be amendable to sound money policy ideas, or even what you might call blue states, or even states that more liberal policies, or whatever it is. This issue is transcending political affiliation and political party and all of this.
Legislators, people in the state themselves, elected officials, unelected officials are seeing more and more that the purchasing power of America’s money is dying. And while that’s largely a federal issue that stems from the Fed and the federal government, there are still things that states can do. They don’t necessarily have to sit there idly by while this happens. And states are waking up and taking action to that end more and more. And so hopefully 2024, it’ll be the case that that is the case again.
Benjamin Nadelstein:
Jp, number 26, right in the middle, North Carolina. Can you give us a quick update on what’s happening there?
Jp Cortez:
Yeah. So in North Carolina, we’re working with representative Brodie, who’s the chief sponsor on this bill. And so this was originally a two part bill. The first section of the bill would be to conduct the study a study for the state of North Carolina to consider the pros and cons of establishing its own in state bullion depository for precious metals and for specifically listed Bitcoin. So that’s the one specifically listed in the bill. That’s the first section of the bill. The second section would have been, I believe it was $2 billion, a $2 billion appropriation in physical gold. North Carolina has some idle funds that amount to several billion dollars. So it was a very hopeful hack that was taken with that $2 billion dollar number. Ultimately, the bill has gotten shaped through committees and the appropriation has since been removed from the bill. But we recently passed a bill through the North Carolina House that would prompt the state to conduct this bullion and Bitcoin depository study. And so we’re working with the Blockchain Association and other crypto groups in the state as well as in state precious metals advocates. And that again passed the house, hopefully here in August when they return from summer break, we’ll have some more movement.
Jp Cortez:
We’ll have a hearing before a Senate committee and hopefully have some good news to report before the end of 2023.
Benjamin Nadelstein:
Jp, final question for you here. What is the question that I should be asking all other guests of the Gold Exchange podcast for when they come on?
Jp Cortez:
I was recently asked about The question was if you had $10,000 to invest. This is how an interview, I was on a podcast and they closed with, if you had $10,000 to invest today that you could invest in gold, silver, or Bitcoin, where would you put that money? How would you split it up? I thought about it for a little bit. I asked the follow up, does it have to be one of these three? Can I invest them in something else? But he held me to those three. I think I ended up saying gold or rather silver. In the next two years, you have to hold the investment for two years, and then there you can cash out. I think I said silver and the majority of it in silver and some of it in Bitcoin. And he said that in all of the people answering the questions, you’ve got the zealots either way. You’ve got people that are 100 % Bitcoiners that think that gold and silver aren’t old. That’s an old man’s money. And then you’ve got the people in precious metals that crypto is a scam. Bitcoin doesn’t make any sense.
But yeah, so it was interesting to consider and fall somewhere in the middle of all of that.
Benjamin Nadelstein:
Jp, where can people find more of your work and how to support the Sound Money Defense League?
Jp Cortez:
So you can find us at the soundmoneydefense.Org You can find the Sound Money Index at moneymetals.Com-sound-money-index. You can find me on Twitter. My Twitter is JpCortez27. If you’re in any of these states that Ben mentioned, especially the ones down at the bottom, and you’re listening, I’d strongly encourage you to join our mailing list. We send out legislative alerts when there are upcoming votes or upcoming hearings, events of importance. We keep our mailing list a breast of all of the latest developments. So if you’re in any of these states, if you want to get involved in any of these battles, please feel free to reach out to me personally and to make sure that you’re added to the mailing list.
Benjamin Nadelstein:
Jp, I want to thank you and Sound Money Defense League so much. We’re looking forward to more wins in 2023 and onto 2024. Thank you. Nice, guys.
Jp Cortez:
Thanks, guys.
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