JUNEAU, Alaska (April 24, 2024) – Yesterday, an Alaska Senate committee passed a bill to make gold and silver legal tender in the state and repeal all taxes on them. The bill previously passed the House and will now move forward in the legislative process.
Rep. Kevin McCabe (R) introduced House Bill 3 (HB3) in 2023 and it carried over to the 2024 legislative session. The proposed law would make gold and silver specie legal tender in the state, recognizing it as a medium of exchange for the payment of debts. In effect, gold and silver specie would be treated as money, rather than a mere investment vehicle, putting it on par with Federal Reserve notes in Alaska.
HB3 would also exempt the exchange of specie from a sales or use tax. Alaska does not have a state income or sales tax, but local jurisdictions can levy sales taxes. Specie is defined as gold or silver valued primarily based on its metal content and in the form of a coin or bullion that is stamped or imprinted with its weight and purity.
On April 23, the Senate State Affairs Committee passed HB3 with some amendments clarifying the definition of specie legal tender. Under the proposed law, specie legal tender would be defined as specie issued by
(1) the federal government at any time if the federal government considers the specie legal tender.
(2) a foreign government at any time if the U.S. government recognizes the government as “legitimate” and isn’t designated as a “foreign adversary.”
(3) the state government if a court of competent jurisdiction, by final and unappealable order, ruled the specie to be within state authority to designate as legal tender.
By allowing the court to designate additional specie to be used as legal tender, Alaska 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 Alaska 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.
The passage of HB3 would eliminate a significant barrier to using gold and silver in everyday transactions, a foundational step for people to undermine the Federal Reserve’s monopoly on money.
KNOCKING DOWN BARRIERS
Alaska could become the fifth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Arkansas, Wyoming, and Oklahoma have since joined. Practically speaking, this would allow Alaskans to use gold or silver coins as money rather than just as mere investment vehicles.
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’s legal tender law, 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.
Eliminating taxes on specie would take another step by removing a barrier to using gold and silver as money.
Repealing taxes on gold and silver also takes the first 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.
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 the sale 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 taxes on gold and silver bullion do. By removing the taxes on the exchange of gold and silver, Alaska would treat specie as money instead of a commodity. This represents a 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.
The impact of enacting this legislation will go beyond mere tax policy. During an event after his Senate committee testimony, Paul pointed out that it’s really about the size and scope of government.
“If you’re for less government, you want sound money. The people who want big government, they don’t want sound money. They want to deceive you and commit fraud. They want to print the money. They want a monopoly. They want to get you conditioned, as our schools have conditioned us, to the point where deficits don’t matter.”
BACKGROUND
The provisions in HB3 would treat gold and silver more like money instead of commodities. They would also lower barriers to using gold and silver in transactions, and they would help undermine the Federal Reserve’s monopoly on money.
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 Alaska are either paid with Federal Reserve Notes (dollars) 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 enactment of HB3 would allow Alaskans to pay state obligations with gold and silver.
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.
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
HB3 previously passed the full house, and now will move to the Senate Finance Committee. There it must get a hearing and pass by a majority vote before moving forward to the full Senate.
