Indiana, like about a dozen other states in the last couple years, is considering a bill (S.B. 99) to make U.S.-minted gold and silver coin legal tender. The main practical effect of this is to abolish taxes on the exchange of these coins and encourage their use as currency.
In its fiscal impact report on this bill, the Indiana Legislative Services Agency tried to project the revenue loss from S.B. 99 that would come when sales and capital gains taxes on the coins are eliminated. “Tried” is a generous description. To get a projection for lost capital gains revenue, the agency took the tax category that the coins fall under (“other assets”) and multiplied its percentage of IRS net capital gains by Hoosiers’ capital gains reported. That came out to $137 million in income excluded for a $4.4 million annual tax loss. This logic assumes that everything in the “other assets” category of $137 million in income is U.S.-minted gold and silver coin when the category includes “collectibles, bad debts and copyrights.”
How is this realistic?
It’s not, and the report refers to this as the “maximum revenue loss.” But that qualifier is buried in the middle of the document and goes unnoted in the headline box that proclaims a $4.4 million revenue loss at the top of the page. Unless legislators read the whole thing, and most don’t have time to do so, this misconception will be interpreted as fact. To put this in perspective, before Utah passed nearly the exact same bill two years ago its legislative analyst office estimated a maximum potential loss of $550,000 in capital gains revenue.
We have a feeling that’s much closer to the truth than $4.4 million.
Rich Danker is a Guest Contributor. He is also the Director of Economics at American Principles Project.
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