The Constitutional Tender movement gained steam at the end of March when Utah became the first state to enact a legal tender act into law.
Numerous states have introduced similar legislation based on a belief that the weakening of the Federal Reserve System will devalue the U.S. dollar and that developing alternative currencies — primarily based on silver and gold — will protect state residents.
Action in Utah
In Utah, Gov. Gary Herbert signed House Bill 317 — the “Utah Legal Tender Act” — into law on March 25. The bill recognizes gold and silver coins issued by the federal government as legal tender in Utah and exempts the exchange of coins from some state taxes.
While Utah’s new law does not compel a person to tender or accept gold and silver coins, it provides that the exchange of gold and silver coins as a substitute for the U.S. dollar does not create any individual income or sales tax liability.
The bill also requires the state’s Revenue and Taxation Interim Committee to study the possibility of establishing an alternative form of legal tender and to prepare recommended legislation for Utah’s 2012 General Session.
The Utah bill’s accompanying fiscal note projects a loss of Educational Fund revenue of $250,000 in Fiscal Year 2012 and $550,000 in 2013 depending on the amount of capital gains claimed by persons exchanging gold or silver coins.
Defeat in Montana
In Montana, House Bill 513 was defeated on March 29 on a vote of 48 to 52. It would have required the state to back transactions of state business with gold and silver coins.
An earlier version of the bill would have required Montana’s board of investments to invest at least 10 percent of the Teachers’ Retirement System’s assets in gold and silver coins, but that language was cut from the bill that went to vote.
The fiscal analysis accompanying Montana’s bill projected losses to the state of $590,120 in fiscal year 2012 and a loss of $586,220 in 2013 due to costs incurred with managing the transactions. This estimate did not include the exchange risk inherent in a precious metal currency exchange and the conversion cost of moving gold and silver into dollars.
Bob Wagner, the Montana representative who introduced the bill, wrote in a March 7 rebuttal to the fiscal note, stating: “A federal reserve note is not a dollar as defined by law. Legal tender and lawful money are not the same.”
He cited the U.S. Constitution’s language that “No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts,” in Article 1, Section 10.
Movement in North Carolina
In North Carolina — the state where the criminal trial was held finding Bernard von NotHaus guilty of counterfeiting money by issuing Liberty Dollars — Rep. Glen Bradley introduced House Bill 301 on March 10, which would allow the state to issue its own legal tender money backed by silver and gold.
Rep. Bradley’s bill would establish a legislative commission to study a plan for an alternative state currency, noting, “In conducting its study the Committee shall consider recommendations for legislation, with respect to the need, means, and schedule for establishing such an alternative currency.”
The bill has been referred to the House Committee on Rules, Calendar, and Operations of the House. ■