SALT LAKE CITY -- A local lawmaker's bill to allow gold and silver coins to be used as legal tender in Utah is gaining momentum.
The Senate voted 24-4 on Wednesday to adopt HB 317, sponsored by Rep. Brad Galvez, R-West Haven, to allow the precious metals to be used in retail transactions.
Galvez says the measure is a step toward an inflation-proof alternative to paper currency.
If signed into law, the measure would make Utah the second state in the U.S., after Colorado, to recognize the coins as legal tender.
The value of the coins is determined by the value of the precious metal at the time of use, not just the face value of the coin.
The bill also makes transactions to purchase coins exempt from the state's capital gains tax but does not shield those exchanges from federal taxes.
The bill has a provision that allows a person to reject the use of the precious metals in any given transaction.
Sen. John Valentine, R-Orem, said the bill actually adds technical correction to Utah's currency law approved last session.
The bill is futuristic in nature, he said.
When people use credit cards in foreign countries, the transaction triggers the purchase of U.S. dollars to cover the transaction in the currency of the country.
Valentine anticipates the day when people with gold bullion and coins will be able to use a card, using the current value of those coins as legal currency, for any transaction.
Senate Minority Leader Ross Romero, D-Salt Lake City, worried using gold as a bartered instrument would potentially result in the loss of sales tax from a transaction.
He called the bill an artificial incentive to invest in precious metals.
Jeffrey Bell, policy director for American Principles in Action, said the bill could change the national debate on monetary policy. In a committee meeting earlier this year, he called the move a symbolic act.
The bill's fiscal note predicts a loss in tax revenue of more than $280,000 this year and $800,000 in 2013, but Galvez said that is based on the assumption that the sale of silver and gold coins accounts for 0.5 percent of capital gains tax revenue.