TALLAHASSEE, Fla. (Dec. 13, 2023) – Bills filed in the Florida House and Senate would would make gold and silver legal tender in the state, which would increase currency competition, and set the stage for the people there to undermine the Federal Reserve’s monopoly on money.
Rep. Doug Bankson and Rep. Chip LaMarca filed House Bill 697 (H697) on Dex. 4. Sen. Ana Rodriguez filed a companion, Senate Bill 750 (S750), on Dec. 6. The legislation would treat “specie legal tender” as money in the state.
SPECIE LEGAL TENDER
Specie legal tender is defined as, “Specie coin issued by the Federal Government at any time; and any other specie designated by the Chief Financial Officer as legal tender pursuant to the monetary authority not prohibited in s. 10, Art. I of the United States Constitution.”
Under the proposed law, “Specie legal tender may be recognized to pay private debts, taxes, and fees levied by the state or local government or any subdivision thereof.”
By allowing the the CFO to designate additional specie to be used as legal tender, Florida could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coins. More importantly, the people of the state of Florida 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.
Under the proposed law, specie is defined as “bullion fabricated into products of uniform shape, size, design, content, weight, and purity which are suitable for or customarily used as currency, as a medium of exchange, or as the medium for purchase, sale, storage, transfer, or delivery of precious metals in retail or wholesale transactions.”
The legislation would also facilitate online and other forms of electronic payments by gold and silver. Electronic currency is defined as “a representation of actual gold and silver, specie, and bullion held in a depository account, which may be transferred by electronic instruction.”
Practically speaking, these provisions would allow Floridians to use gold or silver in both physical and electronic form as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same footing as Federal Reserve notes.
Passage into law would make Florida the fifth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Wyoming, Oklahoma, and Arkansas have since joined.
The effect has been most dramatic in Utah where the legal tender law opened the door for the development of a gold and silver market in the state. With some legal hurdles cleared away by the state, the United Precious Metal Association (UPMA) in partnership with Alpine Gold Exchange set up the state’s first “gold bank.” The Utah Specie Legal Tender Act has also led to the creation of Goldbacks, a local, voluntary medium of exchange. Goldbacks are notes made from fractions of an ounce of physical gold. The company created a process that turns pure gold into a spendable physical form for small transactions.
TAX REFORMS
Passage of H697/S750 would also eliminate all state and local taxes on the sale of gold and silver with the following provisions.
- Bullion may not be characterized as personal property for taxation or regulatory purposes.
- The purchase or sale of any type or form of bullion does not give rise to any tax liability.
- The exchange of one type or form of legal tender for another type or form of legal tender does not give rise to any tax liability.
Under current law, Florida levies a sales tax on the sale of gold and silver if the total transaction is less than $500. Eliminating all sales taxes would take another 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 a sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Virginia 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 of an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.
BULLION DEPOSITORY
Provisions in H697/S750 would establish a state-run bullion depository.
A depository account holder would be able to purchase, sell, deposit, or withdraw bullion. It would include “electronic systems” for the purchase and sale of bullion for depository account holders who cannot or choose not to travel to the physical location.
The bill includes provisions for the creation of an electronic currency backed by gold or silver and made available to the public. This would open the door for people to use precious metals stored in the depository in everyday transactions.
In a nutshell, through the depository, Floridians would eventually be able to deposit gold or silver and pay other people through electronic means or checks. Private individuals and entities would be able to purchase goods and services using assets in the vault in the same way they use cash today. Doing so has the potential to open the market to sound money in day-to-day transactions.
The bill is based on a similar law that was passed in Texas and signed into law by Gov. Abbott in 2015. The Texas depository received its first deposits in the summer of 2018.
By making gold and silver available for regular, daily transactions by the general public, a depository has the potential for a wide-reaching effect. Professor William Greene is an expert on constitutional tender and said in a paper for the Mises Institute that 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.”
Gresham’s Law holds that “bad money drives out good.” For example, when the U.S. government replaced silver quarters and dimes with coins made primarily of less valuable copper, the cheap coins drove the silver out of circulation. People hoarded the more valuable silver coins and spent the less valuable copper money. So, how do you reverse Gresham?
The key is to make it easier to use gold and silver in everyday transactions. The reason bad money drives out good is that governments put up barriers to using sound money in day-to-day life. That makes it more costly to spend gold and silver and incentivizes hoarding. When you remove barriers, you level the playing field and allow gold and silver to compete head-to-head with Federal Reserve notes. On an even playing field, gold and silver beat fiat money every time.
WHAT’S NEXT
H697 and S750 will be officially introduced when the Florida legislature convenes on Jan. 9. The bills must receive committee assignments. a hearing and pass their respective committees by a majority vote before moving forward in the legislative session.
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