Like many other commodities, gold has long been used as a hedge against currency devaluation, particularly against the gradual inflation that is symptomatic of today’s monetary system. A new law passing in Arizona is creating more benefits for gold investment by removing taxation of precious metals — including gold — at the state level.
Capital Gains Exemption for Precious Metals
The new law is making gold, platinum and other precious metal investments exempt from capital gains taxes in Arizona. Capital gains taxes are assessed on the profits of precious metal investments, which means exempting such investments automatically increases the potential profits associated with each precious metal transaction.
The law has passed both the state legislative bodies and is expected to be signed into effect by Governor Doug Ducey.
The legislation was aided by Ron Paul, who noted that the law would create a constitutionally authorized competition for the tender currently in use in the state — the US dollar. It would also allow citizens of the state to use gold and silver as a legal currency, so they could exchange goods and services without having to use a traditional dollar.
Using gold or silver as a currency is backed by the constitution, which states in Article I, Section 10 that no state can “make anything but gold and silver coin a tender in payment of debts.” While intended as a limit on the power of states to create money with no intrinsic value, it also means gold and silver can be minted within a state to create coinage.
Other States Likely to Follow Arizona Example
States potentially looking to follow Arizona include Texas, Idaho, Maine and Kansas. Utah and Oklahoma have already created similar bills to exempt precious metals, and Kansas has introduced a bill that exempts gold and silver bullion from capital gains taxes.
Not all of this is purely altruistic. Tennessee and Texas already have measures to establish precious metal depositories, and Utah is considering something similar. This would allow gold and silver bullion to be owned by the state in various investment funds, including pensions, so the states might also profit from these exemptions. Yet, the wording of the law does benefit the everyday gold buyer, making gold a potentially more profitable investment within the state.
Another Reason to Invest in Gold
Although laws are being passed at the state level, the IRS still considers gold coins and bullion to be capital assets unless you’re a dealer, in which case they count as business income. Investors may still owe capital gains taxes at the federal level, though careful management of a Gold IRA can afford you numerous tax benefits in addition to the advantages associated with a stable investment.
The news from Arizona — and signals from other states that they’ll follow suit — is great news for gold investors. Savings at the state tax level is another reason to push retirement funds and other investments toward Gold IRAs, as higher total profits can occur.