There’s no telling how many people in Utah may decide to use gold and silver as legal tender, but there’s no doubt the message Utah lawmakers have sent the U.S. Federal Reserve, Treasury Department, Congress, and White House: We’re fed up with excessive money printing and erosion of the value of the dollar.
Utah citizens in May received state government approval to begin using as legal tender gold or silver coins issued by the U.S. government. Nationally, such coins may be used as collector items or as investments, but federal law does not require individuals to accept them as money.
“The law declares our right as a state to do this,” said Senate Majority Leader Scott Jenkins (R-Plain City), who worked with State Rep. Brad Galvez (R-West Haven) to pass the measure. “It’s a message bill; there’s no question about it. It’s a slap in the face of the federal government. They’ve turned on the printing presses. All that does is drive down the value of the dollar.”
‘No Thing but Gold, Silver’
Jenkins cites Article I, Section 10 of the U.S. Constitution, which states: “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts,” and says the state “is playing off of that.”
Legal tender cannot be taxed. Currently under federal law, a person who sells gold or silver coins must account for any capital gain. The Utah Sound Money Act provides a credit against the state capital gains tax liability for coins used as money. It also instructs a legislative committee to study the possibility of creating an alternative legal tender system in the state.
Jeffrey Bell of the American Principles Project advocates a return to the gold standard for U.S. currency and assisted with the drafting of the bill. Bell was an issues adviser to Ronald Reagan in his 1976 and 1980 presidential campaigns.
He said the Utah tax credit does not cover the cost of the possible capital gains tax liability to the federal government. One task of the Utah legislative committee created by the bill is to obtain a federal government ruling that gold and silver coins are not an investment if used as currency.
Alternatively, said Bell, “certain members of Congress could be interested in passing legislation to define that clearly.”
Grassroots Understanding
Bell said people at the grassroots are coming to understand the connection between money backed by nothing, price inflation, and long-term erosion of the value of the dollar.
“There’s some but not much dissent in Washington. At the grassroots, there is a lot of anger,” Bell said. “The Fed has no checks and balances, and Congress is semi-conscious that as long as the Fed prints dollars, they don’t need to cut spending much. If we had a gold-backed dollar, they couldn’t borrow a trillion dollars a year. When they hear this talk, they start to get nervous.”
Alpine, Utah attorney Larry Hilton drafted the bill. He said once he started researching money “a few things became apparent. During the first 125 years or so of our existence, the dollar pretty much kept its purchasing power. There’d be wars and the dollar would be hurt, but the wars would end and the dollar would rebound.
“As we’ve moved away from precious metal backing, purchasing power has had a precipitous decline. When silver was put out of circulation in 1964, you could buy an ounce of silver for $1.29. That was set by law. Now it’s been up to nearly $50.”
In 1971 President Richard Nixon ended the last vestige of gold backing for the dollar, and the price of gold has risen, from $35 then to more than $1,500 an ounce today. Hilton said he was pondering the problem and read Article 1, Section 10 of the Constitution.
‘Concurrent Monetary Authority’
“It struck me as significant that states could declare gold and silver to be legal tender,” Hilton said. “States and the federal government have concurrent monetary authority, and states haven’t exercised it much.”
Bell said lawmakers in nearly one dozen other states have introduced bills similar to Utah’s.
Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Finance, Insurance & Real Estate News.
