With Gov. Gary Herbert’s signature on March 25, the state of Utah became the first in recent times to officially accept gold and silver coins as legal tender at their true value, prompting praise from sound-money advocates warning about the future of the Federal Reserve System and its fiat money.
The "Utah Legal Tender Act," as the new law is known, “recognizes gold and silver coins that are issued by the federal government as legal tender in the state and exempts the exchange of the coins from certain types of state tax liability,” according to the bill. The law does not force anyone to accept or pay in precious metals, but rather provides the option for those who wish to do so voluntarily. In essence, the bill legalizes currency competition in Utah by removing punitive state taxes on individuals and businesses trading in precious-metal coins. Among the taxes that federally minted gold and silver coins are now exempt from are state sales and capital gains. Federal taxes, however, still apply — despite the U.S. Constitution’s clear language stating that no state shall make anything except gold or silver a tender in payment of debts.
On top of the state-tax exemptions, the law also orders the revenue and taxation committee to study the possibility of adopting another form of legal tender for the state. After the study is completed the committee is instructed to offer recommendations and prepare legislation for the 2012 legislative session.
The state House of Representatives originally approved the bill 47 to 26 on March 4. “This is a step in preparedness; a step in security that allows us to be able to help hold up our economy as the dollar continues to shrink,” the legislation’s chief House sponsor, Republican Rep. Brad Galvez, told the Salt Lake Tribune at the time.
Rep. Ken Ivory, also a sponsor of the legislation, explained to the Tribune that the measure is “a way for us to preserve for the citizens of Utah … the purchasing power of the money they hold.” He cited as evidence the ever-increasing purchasing power of 1960s half-dollar silver coins even as the Federal Reserve’s paper currency continues to lose value.