Legislature(2023 - 2024)ADAMS 519

05/02/2023 01:30 PM House FINANCE

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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."                                                                                                          
1:37:01 PM                                                                                                                    
REPRESENTATIVE KEVIN MCCABE, SPONSOR, provided a brief                                                                          
recap of the legislation. He read from a prepared                                                                               
     The  purpose   of  HB  3  was   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.  The  legislation  would  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. The  bill took                                                                    
     the first  step in  protecting specie from  the borough                                                                    
     city  use  or exchange  tax.  He  added that  12  other                                                                    
     states adopted laws to accept  gold and silver coins as                                                                    
     legal tender.  As of 2022,  42 states had  removed some                                                                    
     or  all taxes  from the  purchase of  gold and  silver.                                                                    
     The  bill  would  preserve, protect,  and  promote  the                                                                    
     state and  its economic  security, safety,  health, and                                                                    
     welfare of  the people of  this state; and  protect the                                                                    
     state  and   its  citizens   in  the   acquisition  and                                                                    
     possession of  gold and silver  and their use  as legal                                                                    
     tender in the payment of debt.                                                                                             
1:38:54 PM                                                                                                                    
Co-Chair Foster asked for a review of the sectional                                                                             
BUDDY WHITT, CHIEF OF STAFF, REPRESENTATIVE KEVIN MCCABE,                                                                       
reviewed the sectional analysis (copy on file):                                                                                 
     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.                                                                                       
Mr.  Whitt  noted  Section 5  regarding  the  House  Finance                                                                    
Committee  making  the  determination  regarding  additional                                                                    
forms of  legal tender and  informed the committee  that the                                                                    
sponsor was agreeable to amending the provision.                                                                                
Representative Galvin  shared that  she had taken  some time                                                                    
to  read   up  on   the  constitution.  She   pondered  what                                                                    
implementation  of HB  3 would  look like.  She wondered  if                                                                    
passage of  the bill would  send a message to  Alaskans that                                                                    
they could pull  their gold bars out of storage  and pay for                                                                    
debt  in that  way. Representative  McCabe responded  in the                                                                    
negative. The tender would have to  be in the form of a coin                                                                    
with a  stamp stating its purity  and value in ounces.  If a                                                                    
merchant accepted  the specie, the merchant  and buyer would                                                                    
come  to an  agreement  on the  value of  the  coin and  the                                                                    
merchant would provide  change in whatever method  of his or                                                                    
her  choosing  (specie  or  money).  He  stressed  that  the                                                                    
transaction  was  purely  voluntary.  Representative  Galvin                                                                    
asked for verification that the  exchange between an Alaskan                                                                    
and   any  vendor   was  voluntary.   Representative  McCabe                                                                    
responded  in the  affirmative. Representative  Galvin cited                                                                    
page 2, line 21 of the bill as follows:                                                                                         
      The House Finance Committee shall study the                                                                               
     possibility of establishing additional forms of legal                                                                      
     tender for the payment of debts                                                                                            
Representative Galvin did  not know it was  within the scope                                                                    
of  the  Finance Committee  and  questioned  how that  would                                                                    
work.  Representative  McCabe  replied  that  Representative                                                                    
Hannan  had  brought the  issue  up  the previous  year.  He                                                                    
recently spoke with Co-Chair  Foster's office about changing                                                                    
the committee to the Legislative  Budget and Audit Committee                                                                    
(LBA). He  explained that the  provision left the  door open                                                                    
for the legislature to further consider the issue.                                                                              
1:45:03 PM                                                                                                                    
In  response  to  a   question  by,  Representative  Galvin,                                                                    
Representative McCabe answered that  the transaction was not                                                                    
on paper,  it was actually  a gold coin called   specie.  It                                                                    
was  not  a gold  certificate;  the  specie was  stamped  by                                                                    
weight  based   on  a  troy  ounce.   Representative  Galvin                                                                    
questioned whether  whatever was  exchanged or  agreed upon,                                                                    
may be worth something else the  next day because gold was a                                                                    
commodity. She understood there  were things like inflation,                                                                    
but it was not exactly the  same with specie, there was some                                                                    
risk. She asked what the sponsor  would say if gold was used                                                                    
one day, and  its value tanked the next day.  There might be                                                                    
merchants  that fault  the state  for legalizing  the tender                                                                    
and putting them at risk.                                                                                                       
1:46:58 PM                                                                                                                    
Representative  McCabe  related  a  historical  story  about                                                                    
using  a  gold  eagle  worth  $20 as  currency. He  reported                                                                    
that today a  gold eagle was worth $2,200  and believed that                                                                    
gold had  tracked with  the rest  of commodities,  but money                                                                    
had not  because of inflation.  He thought that gold  held a                                                                    
higher  value and  was  not subject  to  inflation like  the                                                                    
Representative Hannan observed that  the bill protected gold                                                                    
and  silver specie.  She wondered  what the  differentiation                                                                    
was  from just  using a  gold nugget.  Representative McCabe                                                                    
responded that the  gold had to be coined as  money in order                                                                    
to be recognized  by the bill. He ascertained  that what she                                                                    
had  described was  bartering.  Representative Hannan  asked                                                                    
who was  backing the currency.  She remarked that  the state                                                                    
was not  backing the specie. She  asked if it was  a private                                                                    
currency  exchanged between  two people.  She was  trying to                                                                    
determine how it  was a currency versus  a private agreement                                                                    
between  two  people  over a  valued  asset.  Representative                                                                    
McCabe answered  that it  needed no  backing because  it was                                                                    
gold.  He  furthered  that each  certificate  had  a  serial                                                                    
number and believed that it  was safer than dollars in terms                                                                    
of counterfeiting.                                                                                                              
1:51:22 PM                                                                                                                    
Representative Cronk  asked if  the sponsor had  reached out                                                                    
to communities  about sales tax loss.  Representative McCabe                                                                    
answered  in the  affirmative. He  had  discussed the  issue                                                                    
with the Alaska Municipal League  (AML) who thought it could                                                                    
cost communities $5  million in taxes. He deduced  that a $5                                                                    
million  loss at  the lowest  tax  rate of  3 percent  would                                                                    
equate to selling $167 million  in specie per year. He noted                                                                    
another statement by AML that  calculated a loss of $3000 in                                                                    
tax revenue  in Wasilla.  He spoke  to the  municipality who                                                                    
informed Representative McCabe that  there was only one gold                                                                    
and  silver buyer  licensed in  Wasilla  who only  purchased                                                                    
gold  but did  not sell  it.  He indicated  that Juneau  had                                                                    
informed  him  that they  tracked  sales  tax by  vendor  in                                                                    
broader categories  and did  not know  what impact  the bill                                                                    
would have. He  shared data from Arkansas  with a population                                                                    
of over  3 million with a  tax rate between 6.5  percent and                                                                    
11.5 percent.  Arkansas had lost  $255,000 in sales  tax due                                                                    
to its bill  legalizing specie. The state  of Tennessee lost                                                                    
$117,000  and Maine  had  lost $27,000  in  sales taxes.  He                                                                    
believed the benefit of the bill outweighed the losses.                                                                         
Co-Chair  Foster  asked why  stores  could  not continue  to                                                                    
charge  sales  tax  and  keep   track,  similar  to  regular                                                                    
currency. Representative  McCabe answered  that if  a person                                                                    
used specie to buy something,  the sales tax on the purchase                                                                    
would still apply.  However, there would be no  sales tax on                                                                    
the  transaction when  exchanging a  gold specie  for money.                                                                    
The one exception would be  on collectible coins or dollars,                                                                    
which were taxed when purchased.                                                                                                
1:56:49 PM                                                                                                                    
Representative Tomaszewski  asked what  the value of  1 troy                                                                    
ounce  would be.  Representative McCabe  stated the  biggest                                                                    
coin he had seen was  valued at $50 and weighed one-fiftieth                                                                    
of a troy ounce.                                                                                                                
Co-Chair Foster moved to the fiscal note discussion.                                                                            
PAM  LEARY,  DIRECTOR,   TREASURY  DIVISION,  DEPARTMENT  OF                                                                    
REVENUE  (via teleconference),  relayed that  the department                                                                    
did  not have  a fiscal  note. She  did not  have additional                                                                    
comments on the bill.                                                                                                           
Representative  Galvin  referenced  Representative  McCabe's                                                                    
statement that  another department  might study  other forms                                                                    
of  tender  instead  of the  House  Finance  Committee.  She                                                                    
assumed the Department of Revenue  (DOR) was not part of the                                                                    
bill, but if that were the  case, she asked if it would take                                                                    
some  resources  to  carry  out  the  study.  Representative                                                                    
McCabe answered  that they  had decided  a better  entity to                                                                    
address  the  issue was  the  Legislative  Budget and  Audit                                                                    
Committee.  Representative  Galvin  asked  for  verification                                                                    
LB&A  would  implement the  bill  and  determine the  costs.                                                                    
Representative McCabe answered in the affirmative.                                                                              
Representative Hannan  asked how  the department  felt about                                                                    
the bill.                                                                                                                       
2:00:23 PM                                                                                                                    
Ms. Leary  answered that the  department was neutral  on the                                                                    
current  version  of  the  bill.  She  had  testified  in  a                                                                    
previous  committee  [House   State  Affairs  Committee]  on                                                                    
Section 5  that authorized a  study that included  the state                                                                    
accepting  payment  in gold  or  another  legal tender.  She                                                                    
informed  the committee  that  the state  did  not have  any                                                                    
expertise  in  precious  metal   within  the  treasury.  She                                                                    
discovered that there were not  many if any states accepting                                                                    
specie as  a payment  for taxes. She  indicated that  if the                                                                    
state  accepted gold,  it would  be difficult  to value  the                                                                    
gold and  the state  would bear the  risk of  the valuation.                                                                    
She understood  that there were  ways of  establishing usage                                                                    
outside  of  the treasury,  but  it  was not  something  the                                                                    
department could currently handle.                                                                                              
2:01:54 PM                                                                                                                    
ROBERT PEARSON,  STATE/FEDERAL PROGRAMS  MANAGER, DEPARTMENT                                                                    
OF  COMMUNITY  AND  REGIONAL AFFAIRS  (via  teleconference),                                                                    
spoke to the Department  of Commerce, Community and Economic                                                                    
Development's  zero fiscal  note FN2  (CED). The  bill would                                                                    
not  impact  the  Department   of  Commerce,  Community  and                                                                    
Economic Developments (DCCED) operations.                                                                                       
2:03:21 PM                                                                                                                    
Co-Chair Foster OPENED public testimony.                                                                                        
2:04:07 PM                                                                                                                    
GEORGE HIGHTOWER, SELF,  WASILLA (via teleconference), spoke                                                                    
in support of  the bill. He shared that he  was 66 years old                                                                    
and recalled  when people carried  gold and silver  coins in                                                                    
everyones  pockets.  He referenced  Article 1 and  Article 2                                                                    
of  the  United States  (US)  Constitution  naming gold  and                                                                    
silver as legal  tender in the payment of  debt. He recalled                                                                    
as a child  in the early 60s paying for  goods and receiving                                                                    
change in silver quarters and  dimes and half dollars coined                                                                    
by  the US  Mint. He  offered  that today  the same  quarter                                                                    
coined by the U.S. Mint  would purchase more than one gallon                                                                    
of gas today  because the silver quarter would  now be worth                                                                    
$5.00. He  believed that  proved the  stability of  using of                                                                    
silver and  gold as the  foundation of the  monetary system.                                                                    
He thought  that it  spoke to the  question of  taxation and                                                                    
inflation.  The value  of silver  and gold  had kept  up and                                                                    
surpassed inflation  over time. He  spoke to the  effects of                                                                    
inflation on  the dollar.  He believed  that money  was lost                                                                    
through  inflation  by  not utilizing  gold  and  silver  as                                                                    
money.  He  believed  that  the  bill  was   reestablishing                                                                     
something that  was already proven  to be a   sound  system.                                                                    
He  added  that  other  nations were  also  moving  back  to                                                                    
accepting gold and silver as money.                                                                                             
2:11:38 PM                                                                                                                    
Co-Chair Foster CLOSED public testimony.                                                                                        
Representative  Hannan  stated  that  the  Alaska  Municipal                                                                    
League  had answered  some questions  that were  included in                                                                    
the  bill packet  (copy on  file). She  asked about  capital                                                                    
gains  taxes and  noted that  AML stated  species was  still                                                                    
subject to capital gains taxes.  She asked for the sponsor's                                                                    
thoughts  on the  topic.  She asked  about  the problem  the                                                                    
sponsor   was   aiming   to    solve   through   the   bill.                                                                    
Representative  McCabe  responded  in  the  affirmative  and                                                                    
stated that specie  was still subject to  capital gains tax,                                                                    
and  it  was  a  federal   requirement.  He  shared  that  a                                                                    
constituent brought the  idea of the bill to  him who wanted                                                                    
to store gold  specie instead of saving  cash. He discovered                                                                    
that  it was  possible  to  pay taxes  in  Texas with  gold.                                                                    
Representative Hannan  stated it was her  understanding that                                                                    
four states had gold specie:  Utah, Nevada, Wyoming, and New                                                                    
Hampshire. She wondered why Alaska  needed its own specie if                                                                    
others  existed.  Representative  McCabe answered  that  the                                                                    
state did  not need  to produce its  own specie  since other                                                                    
states   specie  would be  valid.  He  thought it  would  be                                                                    
amazing if  Alaska produced  its own  with images  of Denali                                                                    
and other  Alaskan symbols.  He added  that specie  could be                                                                    
currently purchased but it could  not be used in cities that                                                                    
had sales tax unless tax was paid on the specie.                                                                                
2:17:07 PM                                                                                                                    
Representative Stapp  thanked the  sponsor for  bringing the                                                                    
bill  forward. He  favored the  state to  producing its  own                                                                    
Co-Chair Foster  asked the  Department of  Administration to                                                                    
review its fiscal note.                                                                                                         
HANS ZIGMEND,  DIRECTOR, DIVISION OF FINANCE,  DEPARTMENT OF                                                                    
ADMINISTRATION    (via    teleconference),   reviewed    the                                                                    
department's zero  fiscal note.  He voiced that  there would                                                                    
be minimal impact  on the Division of Finance  and the State                                                                    
of Alaska's accounting system, which could be absorbed with                                                                     
existing resources.                                                                                                             
Co-Chair Foster set an amendment deadline of Friday, May 5                                                                      
at 5:00 p.m.                                                                                                                    
Representative McCabe appreciated the committee hearing the                                                                     
HB 3 was HEARD and HELD in committee for further                                                                                
2:19:46 PM                                                                                                                    
AT EASE                                                                                                                         
2:26:23 PM                                                                                                                    

Document Name Date/Time Subjects
HB 83 NEW FN LAW 042823.pdf HFIN 5/2/2023 1:30:00 PM
HB 83
HB3 - Municipal Impact Statement 050123.pdf HFIN 5/2/2023 1:30:00 PM
HB 3
HB 83 Public Testimony Rec'd by 050223.pdf HFIN 5/2/2023 1:30:00 PM
HB 83
HB 83 Public Testimony Rec'd by 050223 Pkt. 2.pdf HFIN 5/2/2023 1:30:00 PM
HB 83
HJR2 HB38 Response OpCap Split graph. 050323pdf.pdf HFIN 5/2/2023 1:30:00 PM
HB 38
HB 83 Public Testimony Rec'd by 050923.pdf HFIN 5/2/2023 1:30:00 PM
HB 83
HB 83 Public Testimony Rec'd by 050923 Pkt 2.pdf HFIN 5/2/2023 1:30:00 PM
HB 83
HB 83 Public Testimony 09-13-23 .pdf HFIN 5/2/2023 1:30:00 PM
HB 83