AUSTIN, Texas (June 10, 2019) – Last week, Texas Gov. Greg Abbott signed a bill into law that would exempt precious metals stored in the Texas Bullion Depository from certain taxes pending passage of a proposed constitutional amendment. If voters approve the amendment, it will 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) sponsored House Bill 2859 (HB2859). This law serves as the enabling legislation for a state constitutional amendment that will be on the ballot in November. Under the law, “Precious metals are exempt from taxation if they are held in a commercial depository in this state.”
The House passed HB2859 by a 137-6 vote. The Senate passed the measure 27-4. With Gov. Abbott’s signature on June 5, the law will go into effect upon approval of the constitutional amendment.
Giovanni also sponsored House Joint Resolution 95 (HJR95). The resolution placed 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.
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.
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.”
