Georgia Lawmaker Introduces Bill Requiring Taxes to be Paid in Gold and Silver

Bobby Franklin

Perhaps there is a conspiracy to turn the United States back to the gold standard or maybe state legislators are just too hung over from all the Christmas parties and eggnog to think straight. Whatever it is, there seems to be an epidemic of state lawmakers who want to bring back the gold standard.

Yesterday, Foolocracy did a story on Utah where a legislator wants to create a parallel financial system in the state and have gold vaults protected by Utah’s own army.

Now Bobby Franklin, a state Representative from Georgia, has introduced a bill requiring the taxpayers to pay their taxes in gold and silver coins. A Georgia resident would not need to carry bags of gold ingots to pay taxes. Checking accounts and electronic transfers would be linked to special gold and silver accounts.

Franklin wants tax payments to be made in gold and silver because it is a “sound, constitutionally based money.” Yet his bill does not require the state to make payments in gold and silver nor does it explain how the state should handle the billions of dollars in precious metals it will hold.

One of the reasons some support the gold standard is fear that paper money may lead to inflation and ultimately a worthless currency. If people lose faith in the dollar, they may turn to gold or silver and require it for financial transactions.

Individual states are likely to be the last places that will lose faith in the dollar. To require gold and silver payments to the state lacks a significant purpose outside of convincing people in private commerce that it is a legitimate way to conduct financial transactions.

While Franklin’s bill does not require gold and silver for the rest of the economy, it encourages people to use it as a means of commerce.

The real craziness is some of the gold and silver backed accounts that Franklin proposes.

“Pre-1965 silver coins, silver eagles, and gold eagles shall be the exclusive medium which the state shall use to make any payments whatsoever to any person or entity, whether private or governmental. Such coins shall be the exclusive medium which the state shall accept from any person or entity as payment of any obligation to the state including, without limitation, the payment of taxes; provided, however, that such coins and other forms of currency may be used in all other transactions within the state upon mutual consent of the parties of any such transaction.”

Using pre-1965 coins may sound like a good idea because of their widely recognized precious metal content, but most of these coins have a greater value from collectors than their face value in gold or silver.

Why on earth would someone want to pay a tax bill with a currency that is more valuable on the private market?

There might be some good arguments for a gold and silver standard, but for states like Utah and Georgia to embrace it individually is only going to burden their citizens further. It is bad enough to pay taxes. Under Franklin’s concept, taxpayers have to worry about how they pay their taxes.

(This article incorrectly states that the state of Georgia is not required to pay its debts with gold or silver coins. Franklin’s bill clearly states in the first paragraph and other places that the state is under the obligation to pay its bills with gold or silver backed accounts. My mistake, and I have no explanation how I could have made such an obvious error except by the pressure of a time deadline.)

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4 Responses to Georgia Lawmaker Introduces Bill Requiring Taxes to be Paid in Gold and Silver

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  2. Bill Greene says:

    Glenn, you might want to actually read the bill, instead of some blog’s interpretation of it. If you did, you wouldn’t say something like “his bill does not require the state to make payments in gold and silver” – since it clearly and specifically DOES. And you wouldn’t say that the bill doesn’t “explain how the state should handle the billions of dollars in precious metals it will hold” – since it would continue handling all of its money the same way it does now: by using BANKS.

    And finally, you wouldn’t ask why “would someone want to pay a tax bill with a currency that is more valuable on the private market?” The bill clearly states that the value of the coins are NOT based on their face value, but on their METAL CONTENT value. It even uses the U.S. Mint’s conversion table to do it.

    Please, read the bill. Then let’s talk.

  3. Glenn Church says:

    Bill,

    To claim that I have not read the bill even though I linked to it is incorrect. I am not sure what blog you suggested that I read in place of the bill, although I will admit there were a few that I did read while reading the bill too.

    You are absolutely correct that the bill does “require the state to make payments in gold and silver.” I errored in placing that in there and have made the proper notation to correct that mistake.

    You misunderstood my comment that the bill doesn’t “explain how the state should handle the billions in dollars in precious metal it will hold.” I was suggesting the awkward position the state would be placed in if large amounts of payments were made to the state directly with coins. I assume these coins would go to the banks, but someone is going to have to store these monies. Gold and silver coins are a completely different currency than paper money, which is much easier to carry and store. This also assumes that there are enough readily available gold and silver coins to cover something like the $17.9 billion state budget for 2011. That is highly questionable.

    Yes, you are absoutely right that the bill does place the value of coins on the value of the metal and not on the face value of a pre-1965 coin, for example. But that is my point. The face value maybe more valuable than the metal value. Who is going to take a loss by using a collector’s item to pay a tax bill?

    I did not raise this point, but Georgia cannot deny taking payments from the federal government in paper currency. Congress has the sole constitution power to do that and establish its worth. I suppose Georgia could refuse to receive federal payments, but that would be fiscally irresponsible.

    The bill requires forbids Georgia from using federal notes with no gold or silver coin value. “Federal Reserve Accounting Unit Dollars, having no redeeming value in gold or silver coin, shall not be made a tender in payment of debts by the state.”

    So even if Georgia did accept funds from the federal government, it can’t spend them except to buy gold or silver coins. That has a dubious ethical premise. Georgia does not consider federal notes worthy to pay its debts, but they will unload these “valueless” notes to a holder of gold and silver.

    This law sounds like a great one for accountants and justifying bureaucratic jobs by needlessly developing a parallel currency.

  4. Well, in the end the Georgia bill hasn’t gone anywhere, however Utah not only introduced by actually managed to pass a similar bill for their own state. Its gold and silver acceptance criteria is a lot smarter than the Georgia version. As you rightly said in this article, tying metals acceptance to specific minted coins is just going to create arbitrage opportunities and squash acceptance by fixing the price lower in Utah than elsewhere (through collectors).

    The right way to do it would be to accept any gold and silver. Just like a very old dollar might sell for more than its face value and never be used as money, old coins would do the same but wouldn’t impact the parallel trade using commodity gold.

    Storage and trade issues won’t be much of a concern in today’s electronics-dominated environment. Moving electronic gold assets is just as easy as moving electronic dollar assets.

    Where I really disagree with your article is at the very end, where you say these laws are needlessly developing a parallel currency. Despite the problems in the Georgia bill, I think it is a stretch to say these bills in general are needless. Many, including the legislators introducing those bills, believe there clearly is a need to curb reliance on a currency as tampered with as the US dollar.

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