SALT LAKE CITY -- A local lawmaker behind the initiative to make gold and silver coins legal tender in Utah said he is not trying to move the state back to a gold standard.
Rep. Brad Galvez, R-West Haven, insists he's just trying to be prepared to have another monetary mechanism in place should the Federal Reserve continue what he called an "unsustainable standard."
Galvez sponsored two bills this past session dealing with the implications of using precious metals as legal tender. HB 157, which allows the state to potentially recoup any sales tax lost in a retail transaction using gold or silver coins, was approved in the last week of the session. He also sponsored a resolution calling for support of a monetary system that features gold and silver coins as what it terms "sound, circulating money." That bill was not voted on in the Senate before the session ended.
"We need to create an alternate currency. This is a backup system," Galvez said.
He pointed out that Federal Reserve Chairman Ben Bernanke has publicly spoken on the reality that the Fed cannot continue to print paper money at its current rate.
Galvez suggested his legislation is putting a new kind of "preparedness" in place.
The Weber County lawmaker was chief sponsor of legislation last year that recognized the coins as legal tender, making Utah only the second state to have that distinction, behind Colorado.
He insists the move to recognize gold and silver as legal tender enhances Utah's reputation as a safe haven for capital and commerce, while also highlighting the state's sovereign role in providing necessary checks and balances on the regulation of the national monetary system by Congress. He insists the move is already paying off for Utah.
"Billions of dollars have already flowed into the state as a result of the passage of the Utah Legal Tender Act last year," Galvez said.
His bill this session, HB 157, deals with the sales tax implications of using gold or silver coins in a transaction. It came after courts ruled that a coin is worth only the designated face value, not the value it has as a precious metal. The bill also addresses pawn shop transactions.
Galvez illustrates the issue by the following example: If a person purchased a $35,000 automobile and paid for it using 1,000 silver eagle coins worth $35 per ounce, the courts have ruled the state could only collect sales tax on the $1,000 face value of the coins, not the true value, the $35,000 worth of metals used in the transaction.
Sen. John Valentine, R-Orem, said the bill actually adds technical correction to Utah's currency law approved last session. He said 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. He anticipates the day may come 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.
Galvez said a company is coming to the Beehive State that can handle all kinds of currency, from the euro to the peso to the silver eagle. He said momentum is building to use precious metals as legal tender. He noted three other states are looking at legislation involving possible recognition of the new legal tender.
The complexity of using precious metals as legal tender is not easily understood, even by some of Galvez's colleagues in the House.
Rep. Stephen Handy, R-Layton, supported his colleague's currency bills this past session, but admitted in open testimony on the floor that he wasn't completely converted to the concept.
"When I am converted to this, I'll agree to be baptized in gold, by immersion of course."