PHOENIX — Arguing that federal policies have made paper money “virtually worthless,” Arizona lawmakers are moving to allow residents to invest in gold coins and not have to pay state taxes on any profits they make when they sell them.

Legislation awaiting a final House vote would carve an exemption in existing laws that require people to report — and pay taxes — on capital gains. So, if you buy art, jewelry or an antique car for $10,000 and sell if for $12,000, you owe the state tax on that $2,000 profit.

But Rep. Mark Finchem, R-Oro Valley, argues that’s not true if you’re buying U.S. gold coins. He said it’s simply exchanging one form of U.S. currency for another.

“If you were to exchange four quarters for a dollar bill, that’s not a taxable event,” Finchem explained during House debate last week on his HB 2014.

Nor was he dissuaded by Rep. Ken Clark, D-Phoenix, who said people buy gold coins in hopes of making a profit. Further, gold coins are not sold on face value but on the amount of gold in them and how much gold happens to be selling for in dollars.

For example, the U.S. Mint is marketing a “Mercury dime,” a gold version of the 10-cent piece, complete with the words “one dime” on the back. But it takes 2,050 actual dimes to buy the tenth-of-an-ounce coin.

And the $50 American Eagle coin? The Mint was selling that Friday for $1,560 in uncirculated condition, though there were commercial dealers offering it for less than $1,400, albeit not “packaged in a velvet, satin-lined presentation case” and “accompanied by a certificate of authenticity.”

Finchem’s theory of economics and currency, however, is that people buy gold coins not to make money but to keep from losing it in what he says is a flawed federal reserve system where federal reserve notes — the bills we carry in our wallets — actually lose value.

“Let’s say it takes 1,200 of them to buy a U.S. Mint gold coin today, but tomorrow it takes 1,300 of those federal reserve notes,” he explained.

From Finchem’s perspective — and that of House members who gave his measure preliminary approval this past week — selling that coin for $100 more is not a profit.

“You’ve actually experienced a loss,” he said.

“It’s called inflation,” Finchem continued. “The Internal Revenue Service for many, many years has been taxing inflation as though it was a gain.”

All that goes to Finchem’s belief that the American public has been fooled into believing that those greenbacks really are worth something.

“I would hope one day the U.S. Mint would wake up and see that they have essentially turned our paper money into something that’s virtually worthless,” he said. “In fact, since 1910 up to today, a dollar bill went from a dollar in value to less than three cents.”

All that, Finchem said, is linked to the increasing national debt.

“Yes, we still exchange it,” he continued. “But we pretend it actually has some kind of value.”

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Economic theories or not, Clark was not convinced. He suggested already there are ways to protect people against pure inflation.

“You can show inflation being 4 percent,” he said, making any gain above that pure profit. And then there’s the possibility of mischief.

“My fear is this: That some kind of money trader ... comes into the state of Arizona, is able to sell a lot of gold, make a lot more than inflation and not have to report that on their taxes,” he said. “That could cost the state quite a lot of money.”

Clark isn’t the first one to consider such a possibility.

In 2013, then-Gov. Jan Brewer vetoed a similar bill over concerns that its language might exempt the state from collecting income taxes on such transactions.

“This would result in lost revenue to the state, while giving businesses that buy and sell collectible coins or current originally authorized by Congress an unfair advantage,” she wrote at the time.

Similarly, Gov. Doug Ducey, in 2015 and again last year, said he feared the unintended consequences of such a change.