AUSTIN, Texas (Nov. 5, 2019) – Today, Texas voters passed a state constitutional amendment that exempts precious metals stored in the Texas Bullion Depository from certain taxes. Passage of the amendment takes another step toward the everyday use of gold and silver in financial transactions in the Lone Star State and undermines the Federal Reserve’s monopoly on money.
The passage of Proposition 9 authorizes the Texas legislature to “exempt from ad valorem taxation precious metal held in a precious metal depository located in this state.” Ad valorem taxes are levied on personal property.
Prop 9 passed by a 51.7 percent to 48.3 percent margin.
Passage of the amendment also enacts a bill signed into law during the last legislative session. Rep. Giovanni Capriglione (R-Keller) sponsored both the resolution that put the amendment language on the ballot and the enabling legislation.
Under House Bill 2859 (HB2859), “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. Greg Abbott’s signature back on June 5, the law went into effect upon approval of the constitutional amendment.
Passage of Prop 9 takes 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 will help 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.”