PHOENIX, Ariz. (May 23, 2017) – Yesterday, Arizona Gov. Doug Ducey signed a bill into law that eliminates states capital gains taxes on gold and silver specie, encouraging its use as currency. Once in effect, the new law will help undermine the Federal Reserve’s monopoly on money.
Rep. Mark Finchem (R-Tucson) introduced House Bill 2014 (HB2014) earlier this year. The legislation eliminates state capital gains taxes on income “derived from the exchange of one kind of legal tender for another kind of legal tender.” The bill defines 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.” “Specie” means coins having precious metal content.
In effect, passage into law will “legalize the Constitution” by treating gold and silver specie as money.
The Senate approved HB2014 by a 16-14 vote. The bill previously passed the House by a 35-24 vote. Similar bills passed the legislature in 2013, 2015, and 2016, but were all vetoed by Gov.’s Jan Brewer and Doug Ducey.
However, additional grassroots support coalesced around the bill this year.
RON PAUL IN SUPPORT
“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support of HB2014 in the Senate Finance Committee earlier this year. “Paper is not money, it’s fraud,” he continued.
The bill’s impact goes beyond mere tax policy. During an event after his Senate committee testimony, Paul pointed out that it’s really about the size and scope of government.
“If you’re for less government, you want sound money. The people who want big government, they don’t want sound money. They want to deceive you and commit fraud. They want to print the money. They want a monopoly. They want to get you conditioned, as our schools have conditioned us, to the point where deficits don’t matter.”
AN IMPORTANT STEP FORWARD
Passage of HB2014 will remove the amount of any net capital gain derived from the exchange of one kind of legal tender for another kind of legal tender or specie (gold and silver coins) from their gross income on their state income tax. In other words, individuals buying gold or silver bullion, or utilizing gold and silver in a transaction, would no longer be subject to state taxes on the exchange.
“What the IRS has figured out at the federal level is to target inflation as a gain. They call it capital gains,” Finchem said during a committee hearing. He noted that the bill would help Arizona residents “protect their conversion of one kind of currency for another.”
Passage into law marks an important first step towards currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by HB2014 will help allow Arizona residents to secure the purchasing power of their money.
Ron Paul said he considered the Arizona bill to be “very important” because it would also serve as an educational effort for other states. In fact, similar legislation is also under consideration in a number of other states.
“The responsibility is on the states to follow the constitution,” Paul said.
Currently, all debts and taxes in Arizona must be paid with either Federal Reserve Notes (dollars), authorized as legal tender by Congress, or with coins issued by the U.S. Treasury — very few of which have gold or silver in them.
But the United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”
The Arizona law takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly or the Federal Reserve by introducing competition into the monetary system.
Professor William Greene is an expert on constitutional tender and said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.
“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state by state level can get us there.
With the governor’s signature, HB2014 goes into effect on Aug. 9, 2017.