FRANKFORT, Ky. (Feb. 17, 2016) – A bill introduced in the Kentucky House would “legalize the Constitution” by defining gold, platinum and silver coins as legal tender and encouraging their use as currency.
Rep. Thomas Kerr (R-Taylor Mill) introduced House Bill 405 (HB405) on Feb. 12. The legislation defines gold, silver, or platinum coins minted and issued by the United States as legal tender. The legislation further stipulates that the exchange of such coins does not constitute a “sale” under state law, freeing all transactions involving gold, silver and platinum coins from state sales tax. Finally, under the proposed law, Kentuckians could exclude “any gain or loss from the sale or exchange of specie legal tender, as defined in Section 1 of this Act, unless the sale or exchange is a part of the taxpayer’s trade or business.” In other words, individuals buying gold or silver, or utilizing gold and silver in a transaction, would no longer be subject to state income taxes on the exchange.
HB405 is written to test the use of gold, silver and platinum coins as legal tender. It would remain in effect until Jan. 1 2020. At that point, the legislature would have to reevaluate to continue.
Passage of HB405 into law would mark an important 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 this legislation would allow Kentucky residents to secure the purchasing power of their money.
“This isn’t going to end the fed’s monetary monopoly overnight, but it sets the foundation and opens the door for more market activity by the people,” Tenth Amendment Center executive director Michael Boldin said. “This is an important part of the overall strategy, and activists in Kentucky should call their state representatives to vote YES on both bills.”
Currently, all debts and taxes in Kentucky 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 bills take 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 is what will get us there.
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