AUSTIN, Texas (May 2, 2019) – Yesterday, the Texas House passed a bill that would take a step toward exempting precious metals stored in the Texas Bullion Depository from certain taxes. Final passage of the amendment proposed by this bill would take another step toward the everyday use of gold and silver in financial transactions in the Lone Star State and undermine the Federal Reserve’s monopoly on money.
Rep. Giovanni Capriglione (R-Keller) introduced House Joint Resolution 95 (HJR95) on March 1. If passed, a state constitutional amendment authorizing the legislature to “exempt from ad valorem taxation precious metal held in a precious metals depository located in this state,” would be placed on the November ballot. Ad valorem taxes are levied on personal property.
On May 1, the House passed HJR95 by a 140-5 vote.
Enabling legislation sponsored by Capriglione is also pending in the House. Under House Bill 2859 (HB2859), “Precious metals are exempt from taxation if they are held in a commercial depository in this state.” The law would go into effect upon approval of the constitutional amendment.
A third bill sponsored by Capriglione (HB3413) would exempt the Texas Bullion Depository from the state franchise tax. These are taxes levied on corporations, LLCs, banks, S corporations, partnerships and other business entities in the state. Under the proposed law, “a taxable entity whose only activity in this state is as a bullion holder is not considered to be doing business in this state” for the purposes of paying the franchise tax or filing related reports. This would effectively exempt the Texas Bullion Depository from this tax. This bill was approved by a House committee last week.
Final passage of the constitutional amendment along with HB2859 and HB3413 would represent another step forward in facilitating sound money in Texas.
Gov. Greg Abbot signed a law creating a state gold bullion and precious metal depository in the summer of 2015. The depository received its first deposits last summer.
Ultimately, 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 of 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 said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it could create a “reverse Gresham’s effect,” drive out bad money, 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 Bullion Depository also creates an avenue toward financial independence. Countries around the world, including China, Russia and Turkey, have been buying gold to limit their dependence on the U.S. dollar. University of Houston political science professor Brandon Rottinghaus said a state depository can serve a similar function for Texas.
“This is another in a long line of ways to make Texas more self-reliant and less tethered to the federal government. The financial impact is small but the political impact is telling, Many conservatives are interested in returning to the gold standard and circumvent the Federal reserve in whatever small way they can.”
WHAT’S NEXT
HJR95 will now move to the Senate further consideration. HB3413 and HB2859 will move to the House floor for a vote.
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