Utah House Passes Bill Recognizing Gold, Silver as Legal Tender
People have misunderstood the Utah law. It does not mint any coins, and only declared federally-minted US eagles “legal tender”. It was done for tax purposes. Utah has a state capital gains tax, and gains from gold and silver are taxable. Utah had previously removed legal tender from the capital gains, following a number of states after lobbying by coin collectors. As a collector, that’s appreciated! Paying taxes makes it difficult to upgrade your collection, when your goal is to just buy better coins. US tax law recognizes a “trade-up” exception for coins, but many states don’t.
Anyway, in Utah, US bullion coins remained on the taxable list. Utah moved them into the officially “legal tender” status, so they will no longer be taxed. Note that non-legal tender gold will still be taxed, so now makes US gold eagles far preferable to, say, Krugerrands.
Most news stories have been misreporting this news. No one expects people to start spending gold eagles, since their face value is currently 1/30th of their metal content value.
Utah took its first step Friday toward bringing back the gold standard when the state House passed a bill that would recognize gold and silver coins issued by the federal government as legal currency.
The House voted 47-26 in favor of the legislation that would also exempt the sale of gold from the state capital gains tax and calls for a committee to study alternative currencies for the state.
The legislation now heads to the state Senate, where a vote is expected next week.
Under the bill, the coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.
If the bill passes, Utah would become the first of 13 states that have proposed similar measures. The others states are Colorado, Georgia, Montana, Missouri, Indiana, Iowa, New Hampshire, Oklahoma, South Carolina, Tennessee, Vermont and Washington.
Backers of Utah’s bill say they want to send a message to the rest of the country.
“People sense that in the era of quantitative easing and zero interest rates, something has gone haywire with our monetary policy,” said Jeffrey Bell, policy director for the Washington-based American Principles in Action, which helped shape the bill.
“If one state recognizes gold as a valid currency, I think it would embolden people not just in other states but in Washington,” he said.
The U.S. used the gold standard from 1873 until 1933, when President Franklin D. Roosevelt outlawed the private ownership of gold amid the Great Depression. President Richard Nixon abandoned the gold standard altogether when he announced in 1971 that the U.S. would no longer convert dollars to gold at a fixed value.
Critics of the gold standard say it limits countries’ control over its monetary policy and leaves them vulnerable to financial shocks, such as the Great Depression. But supporters argue that the current financial system’s dependence on the Federal Reserve exposes the value of U.S. money to the risk of runaway inflation.