AZ Bill making gold legal tender sent to Gov. Brewer

By CRISTINA SILVA
Associated Press

PHOENIX (AP) - A bill allowing people to use gold and silver as legal tender is heading to Gov. Jan Brewer's desk.

The GOP-led Senate gave final approval to the bill that could make Arizona the second state in the nation to recognize gold and silver as legal tender. If signed into law by Brewer, the measure would take effect in 2014.

The state Department of Revenue opposed the measure and it passed in the House only after an amendment was added to exempt the department from having to accept gold or silver as tax payments.

The Senate had previously passed Senate Bill 1439, but it was sent back for final approval after the House amendment passed.

The measure reflects a growing distrust of government-backed money amid the declining value of the dollar.

Send a message encouraging Gov. Brewer at http://www.azgovernor.gov/Contact.asp to sign this bill into law and help restore sound money in Arizona -- and America!

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Sound Money Promotion Act Re-Introduced

Earlier this month, Sen. Mike Lee of Utah introduced S. 768: Sound Money Promotion Act. This legislation seeks to treat gold and silver coins used as legal tender in the same manner as United States currency for taxation purposes.

Under current law, legal tender gold and silver coins are considered to be collectibles for taxation purposes. As such, any gain derived from the sale or exchange of such coins is typically subject to capital gains tax at a rate of 28%. Notably, this is almost double the long term capital gains tax rate of 15% which applies to most other assets such as stocks, bonds, and real estate.

The bill seeks to amend the Internal Revenue Code such that gold and silver coins declared legal tender by the Federal Government or any Sate government would not be subject to taxation.

The Federal Government issued legal tender gold coins for circulation before 1933 and legal tender silver coins for circulation before 1964. In more recent times, legal tender gold and silver bullion coins, such as American Gold and Silver Eagles, have been issued. A multitude of numismatic and commemorative gold and silver coins have also been issued with legal tender face values.

At the state level, Utah and Arizona have both approved measures to make gold and silver legal tender in their respective states. More than a dozen other states have introduced or considered similar measures.

In the 112th Congress, Sen. Jim DeMint of South Carolina had introduced the Sound Money Promotion Act on June 28, 2011. The bill died in committee.

The current bill S. 768 was introduced on April 18, 2013 and has been referred to the Senate Finance committee. The two co-sponsors of the bill are Sen. Ted Cruz of Texas and Sen. Rand Paul of Kentucky.

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Arizona gold bill moving forward

PHOENIX -- A bill that would make gold and silver legal tender in Arizona has passed both the Arizona Senate and the Arizona House of Representatives.

"All this bill does right now is put into place the language to recognize gold and silver coin as legal tender," said Sen. Chester Crandell, the Heber Republican who authored the bill.

The state Department of Revenue has refused to back the bill, but the Arizona House passed an amendment to the bill ensuring that the Department of Revenue would not have to accept gold and silver as payment. Crandell must approve the amendment before it goes to both houses for a final reading then to Gov. Jan Brewer for signing.

Crandell said the bill would remove the commodities tax currently in place for gold and silver.

"This gives a lot of opportunity for those who would like to use an alternative method of payment," Crandell said.

The current bill only has language in place to add gold and silver as legal forms of currency. It does not include instructions for how merchants would accept payment, though Crandell said it would not necessarily mean that customers would have to lug around gold coins.

"I don’t think we need to go back into the dark ages and everybody has to take their gold coins to the store," Crandell said.

Instead, he said he envisions a system where private companies hold the gold and silver and issue credit or debit cards for people to use.

Arizona Democratic Sen. Steve Farley opposed the bill.

"I’ve looked at some of the charts of the value of gold and silver over time and they are anything but stable," Farley said. "In the 19th century when we had private mints we had counterfeiting problems, depressions, bank runs, and people buying up all the gold coins and cornering the market."

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Perry, Some Lawmakers Want State's Gold Back in Texas

Call it the Rick Perry gold rush: The governor wants to bring the state’s gold reserves back from a New York vault to Texas.

And he may have legislative support to do it. Freshman Rep. Giovanni Capriglione, R-Southlake, is carrying a bill that would establish the Texas Bullion Depository, a secure state-based bank to house $1 billion worth of gold bars owned by the University of Texas Investment Management Company, or UTIMCO, and currently stored by the Federal Reserve.

The idea isn’t entirely new. Some Republican members worked on a gold bill last session that was never filed. And gold-standard-backing Ron Paul, the former Texas congressman, has raised repeated concerns about the safety of states' gold supplies.

"If you think gold is a hedge, or a protection, you always want it as close to the individual and the entity as possible," Paul told the Tribune on Thursday. "Texas is better served if it knows exactly where the gold is rather than depending on the security of the Federal Reserve.”

Bringing Texas' gold home has gained more traction this legislative session because of Perry’s vocal support for it. On conservative radio host Glenn Beck’s show  on Tuesday, the governor said Texas was “in the process” — the legislative process, he later clarified — of “bringing gold that belongs to the state of Texas back into the state.” He argued that the state was at least as capable as the Federal Reserve of safeguarding Texas’ “physical gold.”

“If we own it,” Perry said, “I will suggest to you that that’s not someone else’s determination whether we can take possession of it back or not.”

State Rep. Lon Burnam, D-Fort Worth, said he was familiar with Capriglione's bill but was skeptical that it addresses a legitimate problem facing the state.

“We’ve got plenty of real problems that we’re not going to deal with this session," Burnam said. "Let’s deal with them.”

Capriglione said he was at a Tea Party event in Tarrant County earlier this year where Perry spoke about the state’s gold investments as an economic development tool. Since then, he has been working with Perry’s office on the bill. 

“Something on the scorecards of a lot of these businesses in deciding whether they want to come to Texas is stability and gold as being one of those items,” Capriglione said. “I think it’s been in his consciousness for a while in trying to get some sort of depository in the state of Texas.”

He has also spoken with UTIMCO, which owns the 6,643 gold bars currently housed underground in New York City.

“We’re trying to figure out the right amount of gold to have here in Texas,” Capriglione said. “'We don’t want just the certificates. We want our gold. And if you’re the state of Texas, you should be able to get your gold.”

The United States and many other countries stopped pegging their currencies to the gold standard decades ago. Capriglione said the bill is not about putting Texas on its own gold standard. Rather, a depository would give the state a reputation as being more financially secure in the event of a national or international financial crisis.

“For us to have our own gold, a lot of the runs on the bank and those types of things, they happen because people are worried that there’s nothing there to back it up,” Capriglione said. “So I think this cures a problem before it can happen.”

Physically transporting gold that various state entities own from New York City or other banks to Texas would be impractical from a security and logistics standpoint, Capriglione said. He believes it makes more sense to sell the gold Texas has elsewhere and repurchase it within state lines.
He said he doesn't think the measure would be a significant expense, because the gold bars could be safeguarded in a small area, no bigger than 20 square feet.

Capriglione said he is working on revisions to the bill to address some concerns he has heard. He plans to make sure the bill would not cause the state to change its overall asset portfolio to be more heavily invested in gold. Also, to lower the bill’s costs, he expects to change the language to allow some of the administrative costs of building and running the depository to be handled by the private sector.

Such a bill might not divide lawmakers along strictly party lines. State Sen. Rodney Ellis, D-Houston, called the bill "an interesting concept" but said he would want to learn more about it and talk to "colleagues in the financial industry" before weighing in on its merits.

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Trust in Gold, Not Bernanke, as U.S. States Promote Bullion

By Amanda J. Crawford - Apr 8, 2013
Bloomberg.com


Distrust of the Federal Reserve and concern that U.S. dollars may become worthless are fueling a push in more than a dozen states to recognize gold and silver coins as legal tender.

Lawmakers in Arizona are poised to follow Utah, which authorized bullion for currency in 2011. Similar bills are advancing in Kansas, South Carolina and other states.

The measures backed by the limited-government Tea Party movement are mostly symbolic -- you still can’t pay for groceries with gold in Utah. They reflect lingering dollar concerns, amplified by the Fed’s unconventional moves in recent years to stabilize the economy, said Loren Gatch, who teaches politics at the University of Central Oklahoma.

“The legislation is about signaling discontent with monetary policy and about what Ben Bernanke is doing,” said Gatch, who studies alternative currencies at the Edmond, Oklahoma-based school. “There is a fear that the government, or Bernanke in particular and the Federal Reserve, is pursuing a policy that will lead to the collapse of the dollar. That’s what is behind it.”

Bernanke has pushed interest rates to near zero since the 18-month recession that began in December 2007. The Fed said in March it would continue buying $85 billion in securities each month in a program known as quantitative easing that has ballooned its assets beyond $3 trillion and is aimed at keeping long-term borrowing costs low to support economic growth.

Tame Inflation

Consumer prices rose just 1.3 percent in February from a year earlier, according to an inflation measure favored by the Fed. That was below the central bank’s 2 percent target and compares with occasional bouts of more-than 10 percent increases in the 1970s and early 1980s.

Bets that inflation would pick up because of economic- stimulus measures helped fuel a 78 percent jump in gold since December 2008. The dollar’s rise to less than 1 percent below a one-year high set in July and monthly increases of about 2 percent or less in the U.S. consumer price index have curbed demand for bullion. Since reaching a record $1,923.70 an ounce in 2011, gold prices have fallen and are near a bear market.

Gold futures for June delivery fell 1.2 percent last week, to $1,575.90 an ounce on the Comex in New York, after touching $1,539.40 April 4, a 10-month low for a most-active contract.

Texas Depository

In Texas, lawmakers are considering a measure supported by Republican Governor Rick Perry to establish the Texas Bullion Depository to store gold bars valued at about $1 billion and held in a New York bank warehouse. The gold is owned by the University of Texas Investment Management Co., or Utimco, which took delivery of 6,643 bars of the precious metal in 2011 amid concern that demand for it would overwhelm supply.

The proposed facility would also accept deposits from the public, and would provide a basis for a payments system in the state in the event of a “systemic dislocation in a national and international financial system,” according to the measure.

Should Texas take such a step, it would offer sovereign backing for deposits and make buying and storing gold easier, said Jim Rickards, senior managing director at Tangent Capital Partners LLC in New York and author of “Currency Wars: The Making of the Next Global Crisis.” He said the coin measures, while impractical, have symbolic value.

“We are seeing a distinct movement back to a world where gold is considered money,” Rickards said.

Inflation Protection

The measures give “people the option of using money that won’t lose any purchasing power to inflation,” said Rich Danker, economics director at the American Principles Project. The Washington-based public-policy group supports the steps as well as a return to the gold standard, which pegged the dollar’s value to bullion. President Richard Nixon formally ended the convertibility of U.S. currency to the precious metal in 1971.

“People in these states find the idea of having the option to use hard currencies appealing over these policies they have no control over,” Danker said.

The U.S. Constitution bars states from coining money and also forbids them from making anything except gold and silver coin tender for paying debts. Advocates say that opens the door for the states to allow bullion as legal tender. The measure being considered in South Carolina would recognize foreign or domestic minted coins as legal tender.

Utah’s law applies only to U.S.-minted coins, while other states are less clear on whether privately produced coins qualify. Arizona leaves the door open for private coins if they are declared legal by a non-appealable court order.

Tax Breaks

In Utah and some other states, the measures also eliminate state capital gains or other taxes on the coins.

Critics say the state measures are unwieldy. In Arizona, Senator Steve Farley, a Democrat, unsuccessfully offered an amendment that would have recognized as legal tender other state commodities, such as citrus fruit, as well as sunbeams. The amendment was intended to reflect the absurdity of the bill, said the 50-year-old lawmaker from Tucson.

“It is simply grandstanding to get people afraid that somehow President Obama’s agenda is going to drive us into hyperinflation and economic collapse,” Farley said. “We have enough real problems to deal with. I don’t see undercutting our entire financial structure as a priority.”

In Utah, officials haven’t yet figured out how to accept gold and silver for tax payments -- though some residents have asked to pay that way -- or integrate the precious metals into commerce, state Treasurer Richard Ellis said. Lawmakers have established a task-force to study implementing the law and to examine how the state can accept gold and silver, with their fluctuating values, for payment, Ellis said. He’s not optimistic that it will work, he said.

Regulatory Barriers

“People point to Utah and say we are leading the way, but nothing much has happened because regulatory hurdles have gotten in the way,” said Ellis, a Republican. If gold and silver is being used in the state as legal tender, it is probably only in transactions between individuals, he said.

The Utah Precious Metals Association, established after passage of the 2011 law to advocate for the use of gold and silver coins, has about two dozen members enrolled in a two month-old bill-pay service in which their accounts are held in gold, said Lawrence Hilton, the group’s chairman. Hilton envisions a future with an alternative monetary system based on precious metals in which merchants accept silver coin while gold mostly backs electronic transfers.

Gold Producers

The Arizona measure, sponsored by Republicans, won preliminary approval in the House of Representatives April 4 after passing the Senate on a party line vote Feb. 28. Gold is mined in both Arizona and Utah, while Nevada is the largest U.S. producer, according to National Mining Association figures.

The bill’s sponsor, Senator Chester Crandell, 66 of Heber, said he is convinced the move is the “logical thing for the state of Arizona to do.”

“I think you look at some of the things that are happening and the amount of money printed by the Federal Reserve and who has control of that money, and I think anybody would be concerned,” Crandell said. “Gold and silver have been around a long time and people are secure with it and we should give them an opportunity to use it.”

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