Earlier this month, Sen. Mike Lee of Utah introduced S. 768: Sound Money Promotion Act. This legislation seeks to treat gold and silver coins used as legal tender in the same manner as United States currency for taxation purposes.
Under current law, legal tender gold and silver coins are considered to be collectibles for taxation purposes. As such, any gain derived from the sale or exchange of such coins is typically subject to capital gains tax at a rate of 28%. Notably, this is almost double the long term capital gains tax rate of 15% which applies to most other assets such as stocks, bonds, and real estate.
The bill seeks to amend the Internal Revenue Code such that gold and silver coins declared legal tender by the Federal Government or any Sate government would not be subject to taxation.
The Federal Government issued legal tender gold coins for circulation before 1933 and legal tender silver coins for circulation before 1964. In more recent times, legal tender gold and silver bullion coins, such as American Gold and Silver Eagles, have been issued. A multitude of numismatic and commemorative gold and silver coins have also been issued with legal tender face values.
At the state level, Utah and Arizona have both approved measures to make gold and silver legal tender in their respective states. More than a dozen other states have introduced or considered similar measures.
In the 112th Congress, Sen. Jim DeMint of South Carolina had introduced the Sound Money Promotion Act on June 28, 2011. The bill died in committee.
The current bill S. 768 was introduced on April 18, 2013 and has been referred to the Senate Finance committee. The two co-sponsors of the bill are Sen. Ted Cruz of Texas and Sen. Rand Paul of Kentucky.