LITTLE ROCK, Ark. (April 6, 2023) – Yesterday, the Arkansas Senate overwhelmingly gave final approval to a bill that would make gold and silver legal tender in the state and would effectively repeal the state capital gains tax on gold and silver. Passage into law would eliminate barriers to using gold and silver in everyday transactions, a foundational step for the people to undermine the Federal Reserve’s monopoly on money.
Rep. Robin Lundstrum (R) and Sen. Jonathan Dismang (R) introduced House Bill 1718 (HB1718) on March 27. The legislation would make “gold and silver specie” legal tender in the state, meaning it would be recognized as a medium of exchange. Practically speaking, this would allow Arkansans to use gold or silver coins as money rather than just as mere investment vehicles.
On April 3, the House passed HB1718 by an 82-8 vote. Last night, the Senate concurred with a vote of 32-0, sending the legislation to Sarah Huckabee Sanders’ desk.
“Specie” is defined as a “coin having gold or silver content; or refined gold or silver bullion that is coined, stamped, or imprinted with its weight and purity and valued primarily based on its metal content and not its form.” Under the proposed law, specie would include coins issued by the U.S. government or “other specie that an Arkansas court rules to be within state authority to make or designate as legal tender.”
By allowing the court to designate additional specie to be used as legal tender, Arkansas could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coin. More importantly, the people of the state of Arkansas would be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their competing currency by Washington D.C.
Arkansas could become the fourth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Wyoming and Oklahoma have since joined.
The effect has been most dramatic in Utah where United Precious Metals Association (UMPA) was established after the passage of the Utah Specie Legal Tender Act and the elimination of all taxes on gold and silver. UPMA offers accounts denominated in U.S.-minted gold and silver dollars. The company was also instrumental in the development of the “Utah Goldback,” described as “the first local, voluntary currency to be made of a spendable, beautiful, physical gold.”
TAXES ON GOLD AND SILVER
Provisions in HB1718 would also effectively repeal the state capital gains tax on gold and silver.
Specie or legal tender shall not be characterized as personal property for taxation or regulatory purposes. The exchange of one type or form of legal tender for another type or form of legal tender shall not give rise to any tax liability.
The purchase, sale, or exchange of any type or form of specie shall not give rise to any tax liability.
The passage of this bill would build on a foundation set in 2021 when Arkansas repealed the sales tax on gold and silver.
Repealing taxes on precious metal bullion takes a step toward treating gold and silver as money instead of commodities. Taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs. As Sound Money Defense League policy director Jp Cortez testified during a committee hearing on a similar bill in Wyoming in 2018, charging taxes on money itself is beyond the pale.
“In effect, states that collect taxes on purchases of precious metals are inherently saying gold and silver are not money at all.”
Imagine if you asked a grocery clerk to break a $5 bill and he charged you a 35-cent tax. Silly, right? After all, you were only exchanging one form of money for another. But that’s essentially what taxing gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Arkansas would treat specie as money instead of a commodity. This represents a small step toward reestablishing gold and silver as legal tender and breaking down the Fed’s monopoly on money.
“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.
BACKGROUND
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.” Currently, all debts and taxes in Kansas are either paid with Federal Reserve Notes (dollars) which were 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.
The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat currency. Without the backing of gold or silver, the central bank can easily create money out of thin air. This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the U.S. government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world.
The passage of HB1718 would remove legal barriers that hinder the use of gold and silver as money in Arkansas.
Making gold and silver legal tender also takes another step in the process of abolishing the Federal Reserve system by attacking it from the bottom up – pulling the rug out from under it by working to make its functions irrelevant at the state and local levels, and setting the stage to undermine the Federal Reserve monopoly by introducing competition into the monetary system.
In a paper presented at the Mises Institute, Constitutional tender expert Professor William Greene 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.
WHAT’S NEXT
Gov. Huckabee will have 20 days, excluding Sundays, to sign or veto HB1718, or the bill will become law without her signature. Supporters of sound money who live in Arkansas should call her office and firmly, but politely urge her to sign HB1718 as law.
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