Last week in Arizona, Governor Ducey signed into law HB 2014, which removes state-level taxation of gold and silver coins, and moves the state further toward treating gold and silver as simply another form of legal tender. By removing taxation, the legislation facilitates the more widespread purchasing and selling of gold and silver both an a hedge against inflation and as a medium of exchange.
In March, Ron Paul testified at the Arizona legislature in favor of the bill, and noted he considers the legislation as part of an effort to create more room for "competing currencies" against the dollar.
The HB 2014 easily passed through floor votes of both the House and Senate, although it remained unclear whether or not the bill would be signed into law. Governor Doug Ducey had previously vetoed similar legislation, likely motivated by tax revenue concerns.
Indeed, the previous governor, Jan Brewer had also vetoed the legislation on the grounds of "lost revenue" to the state. According to the Arizona Capitol Times:
In 2013, Republican Jan Brewer also used her veto stamp.
“This would result in lost revenue to the state, while giving businesses that buy and sell collectible coins or currency originally authorized by Congress an unfair advantage,” she wrote at the time.
As a politician, Brewer naturally considers "lost revenue" to be a bad thing. Taxpayers may disagree. But there is no doubt that those who deal in gold and silver will now have an advantage over a legal regime in which gold and silver transactions are taxed. How this is "unfair," however, is unclear.
Arizona is at least the second state to end taxation on gold and silver capital gains, with Utah having passed the Legal Tender Act in 2011.
Texas has also taken significant action in this direction. In 2015, Texas governor Greg Abbott signed into law new legislation creating the Texas Bullion Depository which is supposed to facilitate the widespread use of gold and silver as a medium of exchange within the state. The legislation envisions a new type of banking based on gold and silver stored in the depository. Officials in Texas are currently planning the facility.
This legislation moves all these states further in the direction of what political scientist Bill Greene calls "Constitutional tender" as explained in Greene's paper titled "Ending the Federal Reserve from the Bottom Up: Re-Introducing Competitive Currency by State Adherence to Article I, Section 10."
Greene explains:
The Constitutional Tender Act is a proposed State law, first introduced in 2009 as HB 430 in the Georgia House of Representatives,16 which re‐applies the U.S. Constitution’s negative mandate in Article I, Section 10, that “No State shall … make anything but gold and silver Coin a Tender in Payment of Debts.” Under this Act, the State would be required to only use gold and silver coins (or their equivalents, such as checks or electronic transfers) for payments of any debt owed by or to the State (e.g., taxes, fees, contract payments, etc.). All contracts, tax bills, etc. would be required to be denominated in legal tender gold and silver U.S. coins, including Gold Eagles, Silver Eagles, and pre‐1965 90% silver coins. All State‐chartered banks, as well as any other bank that is a depository for State funds, would be required to offer accounts denominated in those types of gold and silver coins, and to keep such accounts segregated from other types of accounts such as Federal Reserve Notes.
Upon going into effect, the Constitutional Tender Act would introduce currency competition with Federal Reserve Notes, by outlawing their use in transactions with the State. Ordinary citizens of the State, being required to pay their State taxes in gold and silver coins, would find it necessary to open bank accounts in those denominations. Businesses operating within the State, being required to pay their State sales taxes and license fees in gold and silver coins, would need to do the same; and in order to acquire such coins, they would begin to offer their goods and services in “dual currency” denominations, where customers could choose to pay in Federal Reserve Notes (which would still be necessary to pay Federal fees and taxes) or gold and silver coins (including checks and debit cards based on bank accounts denominated in such coins). Customers, having found the need to open such accounts in order to deal with the State, would be able to engage in commerce using those accounts.
Although recent victories in Arizona, Utah, and Texas are progress in this regard, supporters of similar measures still face significant obstacles in other states. Similar legislation was introduced this year in Idaho, but the legislature adjourned without approving the measure.
