TOPEKA — Republican Sen. Michael Murphy sold the Kansas legislature on exempting investors in gold and silver from the state’s capital gains tax, heeding an insightful metaphor about monetary policy woven into “The Wonderful Wizard of Oz.”
Murphy, who represents the Sylvia area near Hutchinson, fought for the past three years as a member of the House and now the Senate to pass a bill declaring gold and silver coins, or bullion, legal tender in Kansas. Under House Bill 2515, forwarded to Governor Laura Kelly, future transactions with the two precious metals will not be subject to state income tax or be eligible for sales or property tax assessments.
Comments by skeptical legislators about rewarding investors with tax breaks prompted Murphy to turn to L. Frank Baum’s story of a young Kansan who is swept away by a storm in the Land of Oz. Accompanied by a dog named Toto, she travels down the yellow brick road with the Scarecrow, the Tin Man and the Cowardly Lion. To children, this book was a story about bonds with home, the value of friendship and discovering inner strength.
“A lot of people don’t think about it, but that was written about monetary policy,” Murphy said.
He said that pulling back the curtain revealed the drama of economic conflict in the United States in the 1890s. He said the yellow brick road represents the path taken with the national gold standard. Dorothy’s slippers—silver in the book, but ruby in the movie—represent the free-silver movement. To further the idea, the Emerald City may stand for Washington, DC, and the authorities’ preference for paper money facilities. The Scarecrow represented the debt-ridden farmers, while the Tin Man carried the torch for the working class.
Sen. Mike Thompson, a Shawnee Republican, didn’t pay attention to the novel, but he joined Murphy in extolling the bill’s merits during Friday night’s debate at the Capitol.
Thompson argued that the Federal Reserve, acting as the central bank of the United States, had spent decades tanking the economy in ways that undermined the value of the dollar. Allowing gold and silver to serve as legal tender in Kansas would enable investors to create a hedge against inflation, he said.
“It gives Kansans an opportunity to … hold silver, hold gold — something of value,” Thompson said.
If the governor signs the bill, Kansas will become the sixth state to open its doors to players in the gold and silver market. The bill does not require Kansas businesses or individuals to accept gold or silver coins or bars as payment unless otherwise required by contract or law.
The legislation was endorsed during House and Senate committee hearings by the Freeman Global Investment Council, the Kansas Campaign for Liberty, the National Security Investment Consultants Institute, State Shield and the Transactional Gold Project.
“We don’t know the unintended consequences,” said Senate Minority Leader Dina Sykes, D-Lenexa. “We don’t understand the implications of what we’re voting for.”
In the House, Democrats’ reaction to the precious metals legislation paralleled that of their Senate brethren.
“Flat out, these gold and silver coins are speculative investment assets,” Rep. said Rui Xu, D-Westwood. “No one is using it to buy groceries or pay their utility bills. This bill clearly says that stores or banks or government agencies don’t have to accept it. Basically, this bill gives a special capital gains exemption for a particular asset, held primarily by wealthy investors, which lowers the tax base for all of us.”
In rebuttal, Rep. Steven Howe, R-Salina, said the move away from circulation of coins with intrinsic value in the United States was wrong.
He said that if a person earning the 1965 minimum wage of $1.25 an hour was paid in 1964 or earlier in the quarter, which contained 90% silver, the melt value of those five coins would now be about $74.
He said, ‘Many working class people in my district are in the grip of inflation in gold and silver.
