Legislature(2023 - 2024)GRUENBERG 120

02/02/2023 03:00 PM House STATE AFFAIRS

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Audio Topic
03:00:41 PM Start
03:01:22 PM HB3
03:50:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
         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                                                                    
     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                                                               
     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                                                               
REPRESENTATIVE ALLARD  asked whether it  was 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 Alaskan  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                                                               
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                                                               
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                                                               
REPRESENTATIVE MCCABE estimated that  the revenue would be "nil."                                                               
He shared  his understanding  that it was  a difficult  metric to                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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