Arizona nears supporting gold & silver as legal tender

[shiny!]

The Arizona Libertarian party has been hard at work. A bill recognizing gold and silver specie (coins, bars and rounds) as Constitutional legal tender is now on the governer's desk. Under the bill, gold and silver cannot be taxed when purchased with Federal Reserve notes, and no capital gains tax can be levied on gold or silver when sold for Federal Reserve notes. Numismatic coins and coins used in jewelry are excluded from the definition of specie. Similar bills failed twice before but with these revisions it might get the governer's signature this time.

http://blog.tenthamendmentcenter.com...tional-tender/

[Milton Kuo]

Re: Arizona nears supporting gold & silver as legal tender

The Arizona Libertarian party has been hard at work. A bill recognizing gold and silver specie (coins, bars and rounds) as Constitutional legal tender is now on the governer's desk. Under the bill, gold and silver cannot be taxed when purchased with Federal Reserve notes, and no capital gains tax can be levied on gold or silver when sold for Federal Reserve notes. Numismatic coins and coins used in jewelry are excluded from the definition of specie. Similar bills failed twice before but with these revisions it might get the governer's signature this time.

http://blog.tenthamendmentcenter.com...tional-tender/

Unless these laws are passed by the U.S. federal government, they're meaningless and Arizona is just wasting its time and money.

1. The U.S. Mint's gold and silver American eagle coins are already legal tender. The problem, however, is that they have legal tender values of $50 for the gold eagle and $1 for the silver eagle. How are the Libertarians going to price their gold and silver coins and how big are those coins going to be? What kind of seigniorage will be built into the Libertarians' coins? With the fluctuating price of gold and silver, I don't see how these coins would be all that useful as circulating currency, which I'm assuming is the purpose of making them legal tender.
2. Many states do not tax purchases of gold and silver bullion. As for capital gains taxes on the sale of gold or silver, the problem isn't with state income taxes, which top out at about 10%, but with federal income taxes which are at the collectibles rate of 28%.

[shiny!]

Re: Arizona nears supporting gold & silver as legal tender

Unless these laws are passed by the U.S. federal government, they're meaningless and Arizona is just wasting its time and money.

1. The U.S. Mint's gold and silver American eagle coins are already legal tender. The problem, however, is that they have legal tender values of $50 for the gold eagle and $1 for the silver eagle. How are the Libertarians going to price their gold and silver coins and how big are those coins going to be? What kind of seigniorage will be built into the Libertarians' coins? With the fluctuating price of gold and silver, I don't see how these coins would be all that useful as circulating currency, which I'm assuming is the purpose of making them legal tender.
2. Many states do not tax purchases of gold and silver bullion. As for capital gains taxes on the sale of gold or silver, the problem isn't with state income taxes, which top out at about 10%, but with federal income taxes which are at the collectibles rate of 28%.

I think you're misunderstanding the bill. "“Specie” means gold or silver coin, bar or round."

Passage of SB1141 would allow Arizonans to deduct the amount of any net capital gain included in federal adjusted gross income derived from the exchange of one kind of legal tender for another kind of legal tender or specie from their state income tax, In other words, individuals buying gold or silver, or utilizing gold and silver in a transaction, would no longer be subject to state taxes on the exchange...

The way this is worded, I don't believe it means that the state of Arizona will be minting its own coins, but will allow gold and silver in coin, bar or generic round forms to be used for financial transactions, same as paper money.

Edit: Several states like AZ don't tax PM purchases, but do tax capital gains at the time of sale. I believe in AZ it's 3% or thereabouts. This bill would eliminate that state tax. If enough states eliminate their capital gains taxes on PM sales, the pressure would then be on the federal government to do the same.

[Milton Kuo]

Re: Arizona nears supporting gold & silver as legal tender

I think you're misunderstanding the bill. "“Specie” means gold or silver coin, bar or round."

No, I understood what they meant by specie. I was locked into the mindset that transacting in specie would mean there should be standardized sizes/weights. It's quite a bit more difficult to transact with a lump of gold, cobbled together from melting a bunch of 24K gold jewelry, than it is to use tenth, quarter, half, and full troy ounce coins.

The way this is worded, I don't believe it means that the state of Arizona will be minting its own coins, but will allow gold and silver in coin, bar or generic round forms to be used for financial transactions, same as paper money.

So maybe they're going to allow private mints? I am reminded of the von NotHaus fellow who was minting Liberty Dollars. To the best of my knowledge, he was not engaging in money laundering, a Ponzi scheme, or any other fraudulent activity. He was just minting coins out of silver, copper, and I think he had gold coins, too, that had a certain face value (the silver coin was one dollar) and his mint was making money on seigniorage.

Last I heard, the FBI raided his mint, seized all of the gold and silver, and von NotHaus is either in prison or has been indicted on a felony charge and is at risk of going to prison.

I seem to recall reading that one of the reasons might have been him calling his dollars "coins" instead of "rounds." Evidently, "coins" has special meaning in that it indicates money issued by a sovereign nation.

Edit: Several states like AZ don't tax PM purchases, but do tax capital gains at the time of sale. I believe in AZ it's 3% or thereabouts. This bill would eliminate that state tax. If enough states eliminate their capital gains taxes on PM sales, the pressure would then be on the federal government to do the same.

I would love for all capital gains to be eliminated for silver and gold (wholly fair since silver and gold, historically, were honest money in the U.S.); while capital gains on other assets got an inflation discount. However, the government and the Federal Reserve are having too grand a party to give up that source of free money.

Maybe Arizona will influence the federal government to not tax gains from fine precious metals. I don't have high hopes, though. This is entirely different from what I see as the federal government eventually making marijuana legal. Legalizing marijuana increases revenue for the government in the form of new taxes and reduced criminality. How is not stealing 28% of people's inflation compensation going to help government?

[shiny!]

Re: Arizona nears supporting gold & silver as legal tender

As it stands now, if a person wishes to buy, say, a car with gold or silver, in order to be legal they first have to sell their PM for cash, pay capital gains on any profits they made as measured in Federal Reserve Notes, and then use the FRNs to buy the car.

During inflation, one receives more devalued FRNs for their PM, which looks like "profit" and is taxed as such. And because it's gold or silver, "profits" are taxed at a higher "art collectibles" rate. If it's legal to purchase items with PMs directly, then during periods of inflation PMs will become the preferred money. There are plenty of privately minted generic rounds and bars ready to circulate, if allowed.

People like Jim Rickards (who is trying to talk up his book) keep saying there's eventually going to be a global monetary reset with at least a partial peg to gold. At that point the US Gov't may well ask people to sell their gold to the government. If that ever happens, I think they'd have to sweeten the pot for the sellers by eliminating capital gains taxes on the sale. But what do I know? I'm pretty clueless.

[shiny!]

Vetoed

Gov. Ducey vetoed the bill. Again. *sigh*

[LorenS]

Re: Vetoed

Gov. Ducey vetoed the bill. Again. *sigh*

I'm not surprised.

In Colorado our esteemed governor arranged for a merger between the Department of Wildlife and the Parks and Recreation Department. It was supposed to "save the taxpayers money". Not more than a couple of years into the new organization we have several additional "fees" to buy a hunting license and the refund policy is worse as well.

I can't imagine our governor would allow any change in the law that reduced state revenue.