A House panel approved a bill that allows gold and silver coins to be legal tender in the state. A similar bill was vetoed by governor in 2013.

NICK UT / THE ASSOCIATED PRESS 2008

PHOENIX — Calling it a "constitutionally protected right,'' a House panel voted Wednesday to allow — but not require — the state and businesses here to accept gold and silver coins as legal tender.

Rep. Mark Finchem, R-Oro Valley, said the problem with a system based solely on federal reserve notes is that it is subject to inflation. Put simply, the buying power of each dollar decreases over time.

He said HB 2173 protects against that.

"When we have a fiat currency that is continually bouncing up and down relative to the price of oil and other market conditions, we are at risk,'' he said.

But the real purpose of the law appears to be to protect those who invest in the coins from taxes.

Right now gold and silver is treated like any other commodity or stock. If someone buys something at $500 and sells it at $1,500, they have a capital gain of $1,000 which is taxable.

There is nothing Arizona can do about the Internal Revenue Code. But SB 2173 would spell out that the buying and selling of such coins is not an investment under Arizona law and therefore not subject to state capital gains taxes.

That factor concerned Rep. Bruce Wheeler, D-Tucson, who pointed out that no one knows what the state might lose in tax revenues. But the measure was approved on a 5-2 vote by the House Committee on Federalism and States' Rights.

A similar measure was approved by the Legislature in 2013 only to be vetoed by Gov. Jan Brewer who expressed similar concerns. That leaves Utah as the only state with such a law.

Follow Howard Fischer on Twitter at @azcapmedia.