“If you want to have liberty and limit the size of government, you have to have honest money.” –Ron Paul
UPDATED 5/30/2017: The Arizona Senate passed HB2014 on May 10, 2017, and Governor Doug Ducey signed the bill into law on May 22, 2017.
In a move that has gained widespread attention, the Arizona Senate Finance Committee approved a bill that would make gold and silver coins legal tender. Previously passed by the Arizona House, HB2014 eliminates the state capital gains taxes on gold and silver specie and encourages the use of these precious metals as currency. 1
Viewed as a way for the public to undermine the monopoly the Federal Reserve has over money, the bill provides a number of important definitions, including that of legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.”
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The logic applied in the bill to eliminate any state capital gains is that the transfer between one form of legal tender to another is not subject to taxation. If enacted, the bill would allow Arizona residents to freely trade between their paper currency and precious metals coins without paying state taxes.
State’s Right to Gold and Silver Legal Tender
Testifying at the Arizona state Senate Committee on Finance hearing, former U.S. Representative Ron Paul asserted that the looming currency crisis is a major financial threat and, to protect their citizens, every state should pass similar legislation. Paul argued that educating the public is a vital step, and efforts have already succeeded in getting similar bills considered in Texas, Maine, Idaho, and Alabama.
States have always had the right to issue legal tender in the form of gold and silver coins. Article I, Section 10 of the United States Constitution indicates, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”
While the Federal Reserve issues paper notes and the U.S. Treasury provides coinage, this state right has largely been ignored. The long-term implications of a major move to states issuing their own gold and silver legal tender could be transformative. According to Constitutional expert and professor William Greene, there could be a reversal of Gresham’s Law, where “good money (gold and silver coins) will drive out bad money (Federal Reserve notes).”
The Problem with Paper Money
Steve Hunt, Senior Advisor at Scottsdale Bullion & Coin, notes, “This is an interesting result after electing a president that mentioned returning to a gold standard over a dozen times during his campaign.” Economists,’ legislators,’ and the public’s desire to return to the gold standard is driven by growing concerns over economic problems caused by the global use of paper money.
Since leaving the gold standard and moving to paper currency in the last century, governments around the world have created overwhelming levels of debt and ongoing, unsustainable deficit spending. While most government economists are cynical about a gold-backed currency, troubling market realities are swaying support for a return to the gold standard.
Many believe China is planning to introduce a gold-backed yuan, and that move could severely threaten the U.S. dollar and other paper currencies.
HB2014 still needs the approval of the full Arizona Senate and Governor Doug Ducey to become law. If it does pass, Arizona could become the leader of a national monetary revolution.