Mike Maharrey: I am Mike Maharrey. I am a financial analyst and journalist for Money Metals, and I'm here today with Jp Cortez, the executive director of the Sound Money Defense League. How are you doing, Jp?
Jp Cortez: Hey, Mike. I'm doing well. Thank you so much for having me on.
Maharrey: Well, you're welcome. I'm excited to talk to you about this because you guys just released the Sound Money Index for 2024 and very cool stuff there. But before we get into that, I would like for you to kind of give the audience a simple explanation. What do we even mean by sound money?
Cortez: Yeah, it's a great question. So what we mean here, we're talking about money that is subject to market forces and retains its purchasing power.
So this would be in the tradition of a Hayek or a Mises or a Rothbard. The US Constitution obviously explicitly declares gold and silver money. Article I, Section 10 says, "No state shall make anything but gold and silver coin a tender in the payment of debts."
So along with it being literally written into our firmware, our American software Code, it also presents two unique value propositions: The first reason why sound money is important is because it protects capital and it creates stability. Individuals and civilizations can thrive when sound money is instituted because uncertainty is reduced.
The rich world that we live in today did not happen by accident. This was several generations working extremely hard and accumulating wealth and then diverting or spreading that wealth through different infrastructure, through different things that we need to live a prosperous society the way we do today.
The second thing is that sound money acts as a bulwark against big government. This is a protection, a guardrail that handcuffs. It places golden shackles on a government that would otherwise spend recklessly.
Maharrey: Yeah, absolutely. I think it's a great explanation and it's kind of sad because we've evolved to the point today where the Federal Reserve basically has a monopoly on money. Gold and silver became money over history through market forces. The people chose gold and silver to be money for a number of reasons.
Cortez: Mike, that's such an important point right there. Money is not brought by edict or by Congressional Declaration. No executive order can make something that isn't money, and we're seeing that play out in the market today.
Maharrey: So now we have the Fed and it essentially operates as a monopoly on money, and we've seen the results of it. I mean, the inflation, price inflation, that we've suffered through over the last couple of years. It's a direct effect of the reckless money printing that is possible because we have a fiat currency that's totally controlled by the government.
What we're seeing now is, we're starting to see some things going on at the state level to encourage sound money, and to at least reestablish that competition for currency, and maybe at some point undermine the Fed's monopoly.
That's kind of what the Sound Money Index is about and you just released the new edition. And can you just kind of explain what it is? I know it involves the states and the way they handle money in their legal structure, but what is the Sound Money Index tell us?
Cortez: It tells us a lot of things. The Sound Money Index is a yearly scorecard that we put out every year. The Sound Money Defense League, in conjunction with Money Metals Exchange, releases this report card every year that ranks all 50 states. This year, we have 14 different criteria to determine which state provided the best pro- sound money state or the most anti- sound money state based on the legislation that they've passed or haven't passed so far.
In this year's criteria, we're ranking these states using a number of different factors, including: the sales tax on precious metals and income tax, the state's general average tax rates, whether or not the state imposes a gross revenue tax, if the state has reaffirmed gold and silver as money, or if the state has, for example, invested state funds in reserve funds or pension funds in physical gold and silver held within the state, to name a few.
This is a very robust and very full-fledged index that covers a lot of topics. This year, the top has shifted. The top five states on this year's index are Wyoming, South Dakota, Alaska, New Hampshire, and Arkansas.
While the bottom five states, Vermont, New Jersey, Maine, Minnesota, and California are states that have failed to, in many cases introduce legislation like this, and definitely failed to pass it.
Maharrey: Yeah, it's interesting. Looking at the rankings and you mentioned those top states, what are they doing? What can you do to, if you're in a state and you want your state to be among those top, what are the things that Wyoming, South Dakota, Alaska, New Hampshire, Arkansas, what are they doing right?
Cortez: Well, they're passing legislation to remove the biggest issue that keeps us from using gold and silver as money: that's the taxes. The friction into and out of the US dollar and into out of gold and silver is what keeps us from using gold and silver as money.
In Arkansas's case, these are states that have reaffirmed gold and silver as money and offered contractual protections so that contracts denominated in gold and silver must be paid in gold and silver, not a substitute like the US Federal Reserve note.
So these are states that have proactively reduced taxes, removed taxes removed frictions, removed onerous regulations, and other barriers to people using gold and silver as money.
Maharrey: And I guess that's politics, right? You have to do the fight. But I think it's interesting because really what you're talking about, if I'm understanding correctly, you can correct me if I'm wrong, but as states do this, as they lower taxes and elevate sound money in effect, they're opening up the market, right?
But I think it's important to note that really it's important these laws can be passed, but they don't really mean anything unless people take action. We need human action to take advantage of the environment in these states and kind of push the issue forward and actually utilize sound money. That's where the real, the kind of rubber meets the road, don't you think?
Cortez: Oh, yeah, I am in total agreement with you, and we see it every day. It's so heartening to see innovations in money.
There are smart people that are devoting time and money to figuring out how to fix America's broken money. On the gold side, we have fractional gold unlike we've ever seen before. We've got bills with gold inlaid in them. Some of the innovation happening on the gold and silver side as well as on the crypto side is really heartening.
These pieces of legislation, you're right, we're not talking about creating money here, necessarily, but what we are talking about is removing the barriers and removing all of the disincentives standing in the way of smart people continuing to move forward and create innovation within money.
Maharrey: Yeah, yeah, that's fantastic, a great way of putting it. So looking at this year's report and kind of comparing it to 2023, I noticed that there's a couple of states, you mentioned this that really
moved up in the rankings. Look at Arkansas, they went from, looks like number 30 in 2022, now they're number five, and then we have Mississippi and they jumped from 43rd, so almost at the bottom all the way up to 16th.
What did specifically Arkansas and Mississippi do to make that big run up the states? And if you're in one of those bottom states, what can you encourage your state legislatures to do?
Cortez: Yeah, these are two case studies of states that have worked the process over years and through incredible grassroots, through immense grassroots pressure we have applied on the legislature, that is how policy gets passed.
So in Arkansas's case, this is a state that for many years we'd been in there trying to remove a sales tax at first, and in 2021, we finally removed the sales tax on precious metals in Arkansas on purchases.
This year a bigger bill, a more widespread and far-reaching bill was introduced, and then passed, using the momentum that we gained in 2021. This year a bill was passed to remove all tax liability on gold and silver. The state has removed all of the taxes that exist on the metals, and has preempted any future taxes that may be imposed in the future.
It's also a bill that reaffirmed gold and silver as legal tender, the value in that is the specific performance for contracts denominated in gold and silver.
In Mississippi's case, this is another case where for seven years we've been working that legislature trying to get hearings. This year, after several meetings with the legislatures and sponsors and caucuses and different members of the legislature, we finally got this bill passed to remove the sales tax.
So these are two states that have been case studies on how important the grassroots pressure is. Legislators hearing from the people in the state makes all the difference in the world. And so that's been a key part to our strategy, an invaluable part to the strategy.
Maharrey: Absolutely. You make a really good strategic point too. Thomas Jefferson once said that the ground of liberty is to be gained by inches. And we saw this play out in Arkansas and Mississippi where it started with a relatively small step forward and just getting rid of the sales tax, and then that foundation was set and then the grassroots was able to build on that and pass a more far-reaching bill in 2023.
So I think a lot of times people that are in political activism, they want to do everything at once. And I mean obviously I'd love to do everything at once too, but from a strategic standpoint,
sometimes you have to take those small steps and then build on them as Jefferson said. So what are some other states that made improvements in the most recent legislative session?
Cortez: Arkansas and Mississippi are going to be the primary ones, the ones that moved the most, but that wasn't it as far as sound money legislative victories in 2023.
In Florida, I'm happy to say we passed HB 737. This is a bill that removes some of the restrictions on dealers. In many states, there are laws that say that dealers are not allowed to transact in cash, or that if someone comes and sells you an item, you have to write down and keep track of all sorts of personal information of the person who sold you this item.
And it's not just that, at the end of the day, you have to upload all of this information into a police database and who knows what they're doing with it.
Maharrey: Exactly.
Cortez: In Tennessee, we passed a bill this year, or two bills, Senate Bill 519 and House Bill 1479. These are bills, just like we were saying, where a state that has slowly worked its way along the process and last year, we finally passed a sales tax exemption.
These states have balance sheets full of risky ETFs and mutual funds and bonds and all sorts of third world debt, and many of them don't own a single ounce of gold to their name. So this was a very big deal happening in Tennessee, and other states are starting to introduce and pass legislation like this, seeing the success that we've had in Tennessee.
Maharrey: That's fantastic. I really like that approach from Tennessee as well. That's what we generally tell individual investors, that you want a diversified portfolio, and I think most good financial advisors would agree holding at least some precious metals in your portfolio is good. It's a hedge. So why shouldn't states do the same thing? Why should they face the risk of depreciating dollar assets?
So we're getting into the 2024 legislative session here real soon. Most state legislatures convene in January and their sessions tend to run through spring. So I guess you're about to get really, really busy, but there are some state assemblies that work year round, and I just saw that there is some significant progress in New Jersey. Can you tell us what's going on over there?
Cortez: New Jersey is not exactly known as a state that regularly repeals taxes. Both chambers are democratically controlled and there's a democratic governor.
New Jersey is one of only seven states in the country that still taxes precious metals. We have worked to introduce legislation to end this tax over a couple of years. Unfortunately, we never received the hearing until this summer where we finally received a hearing in the assembly.
It passed out of the Assembly committee unanimously, and then it was heard by the Assembly and voted again, unanimously, 74-to-0 in favor of ending the sales tax. Last week before the Senate Budget and Appropriations Committee, we were scheduled for another hearing.
I was actually on the ground. I went and testified in favor of the bill in Trenton last week, and I'm happy to say that before the committee, we received another unanimous vote, 13-0 in favor of this measure. So we're moving along the process now.
This would be a huge win. This is a state that is completely surrounded by states that have ended the sales tax on precious metals. So they're losing industry and tax dollars. People are leaving the
state to buy precious metals. People are leaving the state to open precious metals businesses.
It also gives people another opportunity, or another avenue, to save their wealth. In New Jersey's case, stocks, bonds, ETFs, mutual funds, real estate, none of these assets are levied a sales tax
when you purchase them. That's because there's a capital gains tax on the backend because they're assets held for resale. Gold and silver are the same.
In an environment where home ownership is becoming ever increasingly out of reach and people are running out of options where they can save their money and be confident that the value of their dollar will hold, removing sales tax from the purchase of precious metals would be a huge win for New Jersey savers and investors. And it's looking like that's going to happen.
Maharrey: Yeah, the thing that really surprised me, as you said, it's a little bit surprising to see something like this moving in New Jersey to start with, but the lopsided votes in favor of repealing this tax are what really surprised me. And as you mentioned, 74-0 in the Assembly, you don't see a lot of unanimous votes for anything in a legislature. So that's really makes me feel optimistic.
You've used this analogy in testimony that you've given before state legislatures, and I love it. If you walked into a bank and you're going to go change a $5 bill for five ones, imagine if they
charged you a tax to do that. In effect, that's what they're doing with taxation on precious metal bullion, which is, in fact, money. It's been money. Gold's been money for 5,000 years, and I think that's a really good point to make.
It's not only bad policy, it's not only pragmatically bad, there's utilitarian reasons. It's just dumb. Don't you think?
Cortez:
Absolutely. You are completely right. Taxing the exchange of $1 for four quarters would be asinine. We would all know that. But for some reason, there are still a couple of states in the union who insist on taxing this exchange.
I think for me, in New Jersey, the progress we've had, and even in other states, for example, in Hawaii several years back, we passed legislation out of several committees before ultimately getting clipped by the end of the legislature. But there are what would be called "blue states" that are introducing legislation that is still actively moving along the process, which tells me that sound money is not a partisan issue.
Everyone is equally, maybe not equally, but everyone is harmed by the devaluation of the dollar, right? This isn't red and blue, this isn't Republican and Democrat. Everyone is harmed by this, it's no longer a partisan issue. I'm happy to say that these days I feel just as confident walking into a deep blue state and trying to get sound money legislation passed as I do in some of the deep red states.
Maharrey: So let's wrap up on this one. As we move into 2024 and we start kicking off state legislatures here in the next few weeks, where do you see some hope for progress in the next session?
Cortez: I'm very excited about 2024. In 2023, this past year, we were in 25 states that introduced 50 different pieces of legislation that do a variety of different things and several of which passed. So I'm very hopeful that all across the country, legislative projects like this are going to be introduced.
Vermont is a target state for us. New Jersey, Maine, of the seven states that still impose sales tax on precious metals purchases, five of them have introduced legislation to end the sales tax.
I am so hopeful for 2024 and I expect another good year of sound money legislation moving forward.
Maharrey: That's exciting. So let people know where can they track your work. Where can they find the Sound Money index and all the stuff that they need to know to get involved in this issue?
Cortez: The Sound Money Defense League, you can go to the check out our website SoundMoneyDefense.org. Money Metals Exchange is actually where the full index is published. So you can find the index at MoneyMetals.com
My name is Jp Cortez, my Twitter is @JpCortez27. I regularly post legislative updates. If there are any upcoming votes or hearings. I am pretty on top of making sure the news gets out.
Also, on the Sound Money Defense League's homepage, there is an email signup list where we ask you to put in your email and your zip code. That way we can segment our list so that if there is something happening in your state, we send out state-specific hearing alerts and key members of the legislature to contact with their contact information.
So if you're interested, if you're in one of these states, please make sure that you're signing up for the email list to make sure you're getting the most up-to-date updates and news alerts on sound money legislation happening in your state.
Maharrey: Outstanding, and I can't emphasize this enough, having done a little bit of legislative policy work myself, don't underestimate the of your phone call or your email to your state representative and your state senator. It's not like calling Congress.
You call Congress, you talk to an intern, you don't know that your congressman ever even got the message, and you get a form email back. State legislatures are very different, and these folks are not used to getting a bunch of phone calls on a specific bill or a specific policy issue.
So if they get 10, 20 phone calls on a piece of legislation, it definitely influences them. So get involved and take that opportunity. You can take five or ten minutes and make a big difference for the progress of sound money here in the United States.
Absolutely appreciate the work you're doing, Jp. Appreciate you taking the time to chat and we'll look forward to hearing from you again as we move into the new year.
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