AUSTIN, Texas (May 21, 2019) – Yesterday, the Texas Senate gave final approval to a pair of bills that that would exempt precious metals stored in the Texas Bullion Depository from certain taxes. Final enactment 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. The resolution places 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,” on the November ballot. Ad valorem taxes are levied on personal property.
On April 30, the House passed HJR95 by a 140-5 vote. On Monday, the Senate passed the measure. At the time of this report, the vote total was not available. With Senate approval, the proposed amendment will now go before the voters in November.
House Bill 2859 (HB2859) is the enabling legislation for the amendment. Under the proposed law, “Precious metals are exempt from taxation if they are held in a commercial depository in this state.” If signed by Gov. Greg Abbott, the law will go into effect upon approval of the constitutional amendment.
The House passed HB2859 earlier this month by a 137-6 vote. On Monday, the Senate approved the measure, sending it to Gov. Abbott’s desk for his consideration.
Final passage of the constitutional amendment along with the governor’s signature on HB2859 would represent another step forward in facilitating sound money in Texas.
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.”
Texas voters will consider the constitutional amendment in November, Gov. Abbott will have 20 days from the date the legislature adjourns (scheduled for May 27) to sign or veto HB2859. If he doesn’t act, it will become law without his signature.
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