PHOENIX - State lawmakers are on the verge of declaring privately minted gold and silver coins to be legal tender in Arizona.
Such legislation was approved by the state House on Monday, and a version already was approved by the Senate. That means only a final Senate vote is necessary before the measure goes to the governor.
The legislation would spell out that "legal tender" in Arizona consists not only of what Congress authorizes but also gold and silver coins issued by the federal government.
The real heart of the measure says any coin or bullion having gold or silver - even those made by private mints - is also legal tender if approved by a court.
Sen. Chester Crandell, R-Heber, acknowledged Monday that this legislation, by itself, will not mean Arizonans will suddenly start paying for their groceries and utility bills in gold and silver coins. In fact, the measure spells out that no one can force anyone else to either pay a bill in these coins or to accept them as payment.
But he said it sets the stage for a time when people will want to use these coins rather than the paper currency being issued by the Federal Reserve, money that some people believe could become worthless due to hyperinflation. Crandell said there is no confidence in the dollar as the Federal Reserve continues to print more money.
The U.S. Constitution precludes states from minting their own money. This measure seeks to get around that by having Arizona recognize not only federally minted coins by also those produced by private mints.
Nothing now precludes individuals from using gold to pay their bills. In essence, it becomes a form of bartering: You give me so much gold or silver and I will give you a product you want.
But Crandell said the problem with that is the federal government considers gold a commodity.
That includes the gold and silver coins the U.S. Mint has been producing for more than 20 years, largely aimed at investors. They can be traded at the current market value of the metal.
Any increase in value, however, makes them subject to federal capital-gains taxes.
Declaring gold "legal tender," Crandell said, eliminates that tax liability - at least at the state level. There is no guarantee that the federal government would scrap its belief that gold remains a commodity and subject it to capital gains tax.
Crandell said working out those kinks will come next year. He said his goal this time was to get the discussion started.
He said if Gov. Jan Brewer signs the legislation, he will come back with further modifications. In fact, the legislation itself says it cannot take effect until mid-2014 to give lawmakers more time to figure out how to make it work.
Democrats have been opposed to the measure, at least in part because they question how it would work. They argued during committee hearings that merchants lack the kind of scales and assaying equipment necessary to determine the value of the metals.
Sen. Steve Farley, D-Tucson, in poking fun at the concept, tried to have the measure amended to say if Arizona is going to have gold and silver recognized as legal tender, it also should allow other commodities including citrus, meat and even sunbeams. That effort was beaten back by Republicans.
Supporters said it does not have to be that complicated. They envision a system where individuals who have invested in gold and silver can stash their holdings at a clearinghouse and then be issued what amounts to a debit card to make purchases backed by holdings.
The idea is not entirely new. Utah passed similar legislation two years ago.
Governments in the United States and elsewhere abandoned having money formally backed by gold during World War I as they printed cash to finance the war. None of this would mark a return to the gold standard, which was formally abandoned in 1971 by President Richard Nixon.