Howard Fischer reported last week, Arizona panel OKs gold, silver as legal tender:
Calling it a “constitutionally protected right,” a House panel voted Wednesday to allow — but not require — the state and businesses here to accept gold and silver coins as legal tender.
Rep. Mark Finchem, R-Oro Valley, said the problem with a system based solely on federal reserve notes is that it is subject to inflation. Put simply, the buying power of each dollar decreases over time.
He said HB 2173 (.pdf) protects against that.
“When we have a fiat currency that is continually bouncing up and down relative to the price of oil and other market conditions, we are at risk,” he said.
But the real purpose of the law appears to be to protect those who invest in the coins from taxes.
Right now gold and silver is treated like any other commodity or stock. If someone buys something at $500 and sells it at $1,500, they have a capital gain of $1,000 which is taxable.
There is nothing Arizona can do about the Internal Revenue Code. But SB 2173 would spell out that the buying and selling of such coins is not an investment under Arizona law and therefore not subject to state capital gains taxes.
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A similar measure was approved by the Legislature in 2013 only to be vetoed by Gov. Jan Brewer who expressed similar concerns. That leaves Utah as the only state with such a law.
Note: According to the legislature’s web site, HB 2173 was approved by the full House by a vote of 34-23 (3 not voting) on February 18, 2015, and was transmitted to the Senate. It was approved by the Senate Financial Institutions Committee by a 4-2 vote on February 19, 2015, and was approved by the rules Committee and Caucuses on March 4.
I posted back in early February about the House Federalism and States’ Rights committee vote, not last Wednesday as Fischer says in his report.
HB 2173 (.pdf) has become an annual bill on behalf of the Old Glory Mint, this time sponsored by Rep. Mark Finchem (R-Oro Valley), to make gold, silver and platinum legal tender in Arizona.
In previous years, this bill was carried by the late Sen. Chester Crandell on behalf of the Old Glory Mint, a Utah-based company that makes gold and silver coins. Last session’s SB 1096 (.pdf) purported to allow the state of Arizona to mint its own coinage because the U.S. dollar is “fiat money” and worthless.
I explained when this bill was being considered in 2013 and 2014 that this bill is unconstitutional:
Article I, Section 10 of the U.S. Constitution explicitly forbids the states from issuing “bills of credit” (paper or “fiat” money) or making anything but gold and silver coin legal “tender.” There is no corresponding explicit prohibition against the federal government, nor any explicit authorization. Article I, Section 8 of the Constitution specifically gives Congress power to “borrow money” and also power to “coin money and regulate the value” of both U.S. and foreign coins. The federal government first issued paper money in 1861 in order to fund the Civil War by an act of Congress, the Legal Tender Act of 1862. The Legal Tender Cases, Knox v. Lee and Parker v. Davis (1871), and Juilliard v. Greenman (1884), upheld the constitutionality of the Act.
The Response from Teabaggers will be, “Oh yeah? Utah and Oklahoma recognize gold, silver and platinum as legal tender.” Those laws just have not yet been fully adjudicated in court. It does not make your point.
Fun Fact: Old Glory Mint was in receivership in 2012, accused of running a Ponzi scheme. Proponent of gold as legal tender in Utah accused of Ponzi scheme: “Utah citizens are the proud owners of gold and silver commemorative coins from a company now in receivership, its owner charged with running a $100 million Ponzi scheme.” Do we really want to go down this road?