Legislature(2023 - 2024)GRUENBERG 120
02/02/2023 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB3 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 3 | TELECONFERENCED | |
HB 3-GOLD AND SILVER SPECIE AS LEGAL TENDER
3:01:22 PM
CHAIR SHAW announced that the only order of business would be
HOUSE BILL NO. 3, "An Act relating to specie as legal tender in
the state; and relating to borough and city sales and use taxes
on specie."
3:02:12 PM
REPRESENTATIVE KEVIN MCCABE, Alaska State Legislature, prime
sponsor, introduced HB 3. He paraphrased the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
The purpose of HB 3 is to recognize Alaska's
constitutional duty, power and right under Section 10,
Article I, of the United States Constitution, and the
Tenth Amendment of the United States Constitution to
make gold and silver legal tender in the payment of
debt.
HB 3 will secure the rights of citizens of this state
under the Ninth and Tenth Amendments of the United
States Constitution to tender gold and silver in the
payment of a debt should the merchant or payee agree
to accept it.
This bill will bring Alaska into full compliance with
the United States Constitution with the policies,
practices, and procedures of this State with respect
to the use of gold, silver, and specie as legal tender
in the payment of debt.
In these unprecedented times, this bill will preserve,
protect, and promote the state and its economic
security, safety, health, and welfare of the people of
this state; and protect this state and its citizens in
the acquisition and possession of gold and silver and
their use as legal tender in the payment of debt.
3:05:16 PM
JULIE MORRIS, Staff, Representative Kevin McCabe, Alaska State
Legislature, on behalf of Representative McCabe, prime sponsor
of HB 3, presented the sectional analysis [included in the
committee packet], which read as follows [original punctuation
provided]:
Section 1 amends A.S. 29.45.650(a) to include a new
subsection (l) outlined under Section 2 below.
Section 2 amends AS 29.45.650 to add a new subsection
to protect "specie" from a borough sales or use tax on
the sale or exchange of specie.
Section 3 amends AS 29.45.700(a) to include a new
subsection (h) outlined under Section 4 below.
Section 4 amends AS 29.45.700 to add a new subsection
to protect "specie" from a city sales or use tax on
the sale or exchange of specie.
Section 5 amends AS 44.12 to add Article 5. Legal
Tender which defines "legal tender" in the state to
include gold and silver tender including "specie."
This section also states that person is not required
to accept gold or silver specie as tender and defines
"specie" and "legal tender."
Section 5 is further amended by adding a new section
to read: "The House Finance committee shall study the
possibility of establishing additional forms of legal
tender for the payment of debts, including public
charges, taxes, and other money owed to the state. If
the committee determines that additional forms of
tender are practical and beneficial, the committee
shall prepare legislation establishing an additional
form of legal tender for introduction."
Section 6. Section 4, ch. 100, SLA 2002, as repealed
and reenacted by sec. 9, ch. 117, SLA 2003 and sec. 2,
ch 30, SLA 2005 is repealed, reenacted, and amended to
read as outlined in Section 1 above.
CHAIR SHAW invited questions from committee members.
3:08:29 PM
REPRESENTATIVE ALLARD referenced the zero fiscal note for HB 3.
She asked how much it would cost to produce [goldbacks].
REPRESENTATIVE MCCABE deferred the question to the invited
testifiers and directed Representative Allard to
www.goldback.com for a more detailed explanation of how the
state could make an investment in producing goldbacks. He
suggested that the Alaska State Council on the Arts could design
the face of an "Alaska goldback," should the state produce them
in the future. He reported that Nevada, Utah, New Hampshire,
and Wyoming had all undertaken the printing of goldbacks from
their state treasuries. He offered to follow up on the cost of
production.
REPRESENTATIVE ALLARD asked whether it were possible to pay for
groceries with goldbacks in Wyoming.
REPRESENTATIVE MCCABE said if the bill were enacted, a person
could use a Wyoming goldback to pay any Alaska merchant that
accepted gold or silver specie as tender.
REPRESENTATIVE ALLARD clarified her question. She sought to
confirm that in Wyoming, residents could pay for groceries using
goldbacks.
REPRESENTATIVE MCCABE answered, "sure." He remarked, "If you
buy a gold coin for 500 bucks and now it's worth 1,500 bucks
when you spend that gold coin, you're responsible for [those]
1,000 dollars' worth of taxes, because - you bought it as an
investment. It would be the same with these until we change the
law." He compared the goldback to a five-dollar bill
("greenback"), in terms of not paying taxes on the value of the
bill.
3:11:00 PM
REPRESENTATIVE C. JOHNSON asked whether there was an inter-state
compact that allowed for the use of tender printed by another
state. He asked the bill sponsor to clarify the legal
mechanisms that made this possible.
REPRESENTATIVE MCCABE shared his understanding that, according
to the U.S. Constitution, a state could not print its own money
unless it was gold or silver.
3:11:40 PM
REPRESENTATIVE STORY inquired about the financial impact to
municipalities.
REPRESENTATIVE MCCABE estimated that the revenue would be "nil."
He shared his understanding that it was a difficult metric to
track.
REPRESENTATIVE STORY asked whether municipalities could provide
an impact analysis.
REPRESENTATIVE MCCABE said he was unsure how they would collect
that data. He offered to follow up with the requested
information.
3:13:17 PM
REPRESENTATIVE ARMSTRONG inquired about the intent of the study
to be conducted by the House Finance Committee outlined in
Section 5 of the bill. She asked whether the goal of the study
was to analyze forms of legal tender additional to gold and
silver.
REPRESENTATIVE MCCABE answered no. He clarified that "specie"
was an aggregate of gold coins, silver coins, and goldbacks. He
indicated that the study would focus on goldbacks.
3:13:58 PM
REPRESENTATIVE ALLARD asked whether it would be mandatory for
merchants to accept goldbacks if the bill were to pass.
REPRESENTATIVE MCCABE answered no. He pointed out that the bill
specifically provided that a merchant would not be required to
accept them.
REPRESENTATIVE ARMSTRONG asked whether counterfeiting was a
concern and whether research had been conducted on that topic.
REPRESENTATIVE MCCABE confirmed that research had been conducted
on counterfeiting. He shared his understanding that it was
difficult to counterfeit [a goldback].
CHAIR SHAW commenced invited testimony.
3:16:04 PM
JP CORTEZ, Policy Director, Sound Money Defense, expressed his
support for HB 3. He declared that the measure would ensure
that gold and silver coins, as well as bouillons, would not be
subject to taxes, levied by localities, municipalities, and
boroughs. He explained that sales tax on these items would
discourage Alaskan citizens from owning gold and silver and
saving their wealth. He pointed out that per Article 1, Section
10 of the U.S. Constitution, gold and silver was considered
money. He highlighted additional considerations against the
taxation of gold and silver as a specie, pointing out that real
estate, bonds, and stocks were assets held for resale and
therefore, not subject to sales tax. For that reason, he argued
that gold and silver should not be taxed either. Furthermore,
he posited that taxing gold and silver would harm local
businesses. Lastly, he stated that gold and silver was not an
asset "held by fat cats," indicating that it was typically
invested in by small-time savers or collectors. He added that
low-income households were disproportionally harmed by
inflation. He reported that in 2023, the trend was to remove
taxes on precious medals. He detailed legislative milestones in
other states, specifically Wyoming, pertaining to the reduction
or elimination of tax on gold and silver. As a point of
comparison, he reported that in 2022, Tennessee passed a full
sales tax exemption on all gold, silver, and platinum within the
state, which was accompanied by a fiscal note of $350,000.
3:20:28 PM
REPRESENTATIVE C. JOHNSON sought to confirm that there would be
zero impact on communities, as they would still collect a sales
tax in the form of gold and silver.
MR. CORTEZ clarified that the tax would be determined by the
price of gold and the size of the gain. He confirmed that the
asset would not be wholly exempt from taxation, as it would
still be taxed on the back end.
REPRESENTATIVE C. JOHNSON sought to confirm that goods and
services would continue to be taxed; however, the sale of gold
and silver as a legal tender would not be taxed.
MR. CORTEZ answered yes, the sales tax on gold and silver would
not apply if the proposed legislation were to pass; however, the
tax on the use - the capital gains tax would still apply.
3:22:19 PM
REPRESENTATIVE CARPENTER asked whether the definition of
"specie" included raw gold and silver, such as a gold nugget.
MR. CORTEZ emphasized that in order to qualify as "specie" or
"bullion," the gold must be refined in a specific way and
imprinted with its weight and purity on it. He indicated that
gold nuggets would not be included, as they were not refined or
minted.
3:23:09 PM
REPRESENTATIVE ARMSTRONG sought to confirm that the bill was not
proposing the creation of a state mint. Instead, people would
be given the option to purchase Alaska goldbacks from a third-
party website not run by the state. She asked if that was
correct.
REPRESENTATIVE MCCABE answered yes, a third party could decide
to print Alaska goldbacks. He indicated that, [in the future],
it would be optional for Alaska to print state goldbacks.
REPRESENTATIVE ARMSTRONG asked whether the purpose of the study
referenced in Section 5 of the bill was to follow up on this
idea.
REPRESENTATIVE MCCABE confirmed. In response to a previous
question from C. Johnson regarding taxation, he clarified that
sales tax would still apply to purchases made in Juneau, for
example. However, the gold specie used to pay for said purchase
would not itself be taxed.
3:25:07 PM
REPRESENTATIVE STORY asked how the value [of goldbacks] was
determined and identified. Additionally, she asked how Alaska's
institutions would define the weight and purity and assign value
to it.
REPRESENTATIVE MCCABE stated that the weight in value was
printed on them. For example, a $1 [goldback] was 1/1,000 of a
troy ounce of gold, he shared. He explained that the merchant
and buyer would be responsible for coming to an agreement and
setting the rules of each transaction. He provided a
hypothetical scenario of a merchant setting the value of a $1
goldback based on the price of gold. He indicated that the
specie would allow the smaller investor to invest in something
other than dollars, which depreciate each year via inflation.
REPRESENTATIVE STORY asked how financial institutions would
manage coins and determine their value.
MR. CORTEZ conveyed that real-time pricing existed.
3:29:17 PM
REPRESENTATIVE CARPENTER asked whether goldbacks followed the
same process as greenbacks.
REPRESENTATIVE MCCABE said goldbacks didn't need to follow the
same process, because they have intrinsic value in and of
itself; therefore, he opined that a bank wasn't necessary. He
referred to a bank, known as HSBC, in Hong Kong that bought and
sold in gold coins routinely.
3:30:54 PM
REPRESENTATIVE STORY asked how the value of each goldback was
guaranteed.
MR. CORTEZ said authentication methods existed for goldbacks,
coins, and bars; however, he reiterated his understanding that
gold backs were never counterfeited, as their manufacturing
process was intensive and laborious. He described the physical
makeup of goldbacks, which consisted of physical gold inlayed
between two polymers. He highlighted the existence of a cell
phone application that determined the authenticity of gold and
silver tender.
REPRESENTATIVE STORY pointed out that banks backed by the
Federal Reserve System offer more protections. She inquired
about consumer protection in regard to HB 3.
REPRESENTATIVE MCCABE explained how, due to inflation, a 100-
dollar bill that's sitting in a piggy bank would be worth 18
percent less in buying power after one year. Goldbacks would
not depreciate in the same way, he said, because they're
intrinsically based on the value of gold.
REPRESENTATIVE STORY mentioned that the price of gold also
fluctuated.
3:34:29 PM
REPRESENTATIVE WRIGHT questioned whether states that had
ratified similar laws faced issues or "blowback."
REPRESENTATIVE MCCABE shared that, to his knowledge, there had
been no issues in other states.
3:35:25 PM
REPRESENTATIVE C. JOHNSON highlighted the disparity in value
between goldbacks in other states, specifically Utah versus
Nevada. He asked what accounted for the disparity in value.
REPRESENTATIVE MCCABE remarked, "It's no different than if you
buy a krugerrand or a U.S. double eagle. A krugerrand, to
certain people, has more value because it's a krugerrand." He
indicated that although both [a krugerrand and a gold eagle] are
composed of one troy ounce of gold, some people value the design
of one over the other.
MR. CORTEZ, in response to Representative C. Johnson,
highlighted levels of production as another consideration. He
explained that Utah was the first state to establish a legal
tender law in 2011 and "roll out" the goldbacks. He suggested
that the difference in cost could be attributed to the fact that
there were presumably more Utah goldbacks that had been printed
and disseminated.
3:38:01 PM
REPRESENTATIVE MCCABE, in response to a follow up question from
Representative C. Johnson, considered the example of a two-
dollar bill. He explained that if a person acquired a two-
dollar bill for $3, he/she would only be able to use it to
purchase something at face value, $2.
3:38:36 PM
REPRESENTATIVE ALLARD considered a scenario in which Alaska had
the capability to produce state goldbacks and asked whether, in
the future, it would be possible to turn a gold bar into a
goldback.
REPRESENTATIVE MCCABE said eventually, that could be a
possibility. He added that a person could take a gold bar to
Utah or Wyoming right now and turn it into [goldbacks].
3:39:46 PM
REPRESENTATIVE CARPENTER considered a scenario in which an
individual acquired a 1/1,000 troy ounce goldback for $3. He
asked whether the next day, the value of the goldback could be
worth $2.
REPRESENTATIVE MCCABE answered yes.
3:40:20 PM
REPRESENTATIVE ARMSTRONG inquired about the difference in value
between a "one dollar" goldback bill versus a "five dollar"
goldback bill. She asked whether a "one dollar" goldback bill
converted to $1 or whether the merchant would have to look up
the price of gold to determine the value.
REPRESENTATIVE MCCABE clarified that the merchant would need to
look up the price of 1/1,000 of a troy ounce of gold to
determine the value of the goldback bill.
3:41:05 PM
REPRESENTATIVE STORY asked whether goldbacks were collectable.
Additionally, she asked whether the intent was to prevent the
exemption of collectables from taxation.
REPRESENTATIVE MCCABE confirmed that it could be considered a
collectable, similar to a two-dollar bill. He added that [the
value] depended on the commodity of trade.
3:42:26 PM
MR. CORTEZ noted that there was generally a difference between
gold/silver coins, which were priced primarily on their value as
a metal, and other collectables, for which there was a stark
difference in value between their metal content and what someone
might pay for them.
3:43:27 PM
REPRESENTATIVE ALLARD asked why this subject matter was
important to the bill sponsor.
REPRESENTATIVE MCCABE said the idea came from a constituent who
wanted to mitigate the risk of holding dollar bills in a safe or
in a bank. He emphasized that the proposed legislation offered
another way to accumulate or store wealth.
REPRESENTATIVE STORY asked whether the Department of Revenue
(DOR) had taken a position on the bill.
REPRESENTATIVE MCCABE deferred to Pam Leary, DOR.
3:45:13 PM
REPRESENTATIVE STORY inquired about the effect of receiving
payment in gold or silver. She acknowledged that a merchant
would not be required to accept gold or silver specie as tender.
She asked whether Alaska was prepared for this proposal.
3:45:56 PM
PAM LEARY, Director, Treasury Division, DOR, said she understood
the concerns about sales tax on currency. She shared her
understanding that in regard to the use of a specie to purchase
an item, tax would be incurred on the purchased item, as opposed
to on the specie itself. She added that the value would be
decided by the buyer and seller. She referenced the study to be
conducted by the House Finance Committee in Section 5 of HB 3.
She pointed out that the value of goldbacks change; therefore,
the state would bear the risk of the valuation if Alaska were to
accept goldbacks to pay for debts like taxes. She further noted
that the state did not have any material exposure or any focused
investment in precious metals. For that reason, it was not an
area of expertise within the Treasury Division. She concluded
by declining to comment on other states, as she had not yet had
the opportunity to learn about their practices.
3:47:46 PM
The committee took a brief at-ease.
3:48:25 PM
CHAIR SHAW opened public testimony on HB 3. After ascertaining
that no one in the room or online wished to testify, he closed
public testimony. He announced that HB 3 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB3 FiscalNote - DCCED.1.30.23.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB3 Supporting Documents - to 2.1.23.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB3 Current Version - 1.25.23.PDF |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB3 Supporting Documents - to 1.30.23.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB3 Sponsor Statement - 1.25.23.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB3 Sectional Analysis - 1.25.23.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB3 Invited Testimony Roster - HSTA 2023-02-02.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |
| HB 3 Public Testimony - Received as of 02-02-2023.pdf |
HSTA 2/2/2023 3:00:00 PM |
HB 3 |