AUSTIN, Texas (May 14, 2017) – On Wednesday, the Texas House unanimously passed a proposed state constitutional amendment that would authorize the legislature to exempt precious metals held in the Texas Bullion Depository from ad valorem taxation. Passage of the amendment would take another step toward the everyday use of gold and silver in financial transactions in the Lone Star State.
Rep. Giovanni Capriglione (R-Keller) introduced House Joint Resolution 113 (HJR113) in March. If passed, a state constitutional amendment authorizing the legislature to “exempt from ad valorem taxation precious metal held in the Texas Bullion Depository,” would be placed on the November ballot.
Passage of the amendment, and subsequent action by the legislature to exempt precious metals in the Texas Bullion Depository from ad valorem taxes would represent another step forward forward in facilitating sound money in Texas.
The House passed HJR113 by a 139-0 vote.
Last week, the Texas House approved a measure that would establish various provisions for the operation and administration of the Texas Bullion Depository. This enabling legislation includes an ad valorem tax exemption. Passage of HJR113 would constitutionalize the legislatures authority to exempt gold in the depository from taxation, an important step in creating a permanent legal framework for operation of the depository.
Gov. Greg Abbot signed a law creating a state gold bullion and precious metal depository in the summer of 2015. Since then, the state has moved forward in establishing the depository. Once operational, private individuals and entities will be able to purchase goods and services, using assets in the vault the same way they use cash today. Exemption from taxation of precious metals stored in the vault will further facilitate the use of stored bullion as money. This would incentivize the use the Texas Bullion Depository. If they then start allowing checks and debit cards to be used in conjunction with the bullion accounts – likely the next step – it would essentially create a specie- and bullion-based bank introducing currency competition with Federal Reserve notes.
Constitutional tender expert Professor William Greene wrote a paper for the Mises Institute arguing that enough states start transacting business in sound money, 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.”
The Texas gold depository creates a mechanism to begin this process, and provides a blueprint for other states to follow.
Passage of HJR113 would take another important step down this road.
HJR113 now moves to the Senate for further consideration.