References to ‘Wizard of Oz’ aside, skeptics warn all that glitters isn’t gold
By Tim Carpenter
TOPEKA — Republican Sen. Michael Murphy sold the Kansas Legislature on granting investors in gold and silver an exemption from state capital gains tax by noting the insightful allegory about monetary policy woven into “The Wonderful Wizard of Oz.”
Murphy, who represents the Sylvia area near Hutchinson, fought the past three years as a member of the House and now the Senate to pass a bill declaring gold and silver coin or bullion to be legal tender in Kansas. Under House Bill 2515, forwarded to Gov. Laura Kelly, future transactions conducted with the two precious metals wouldn’t be subject to the state income tax nor be eligible for assessment of sales or property taxes.
Comments from skeptical legislators about rewarding investors with the tax break prompted Murphy to delve into L. Frank Baum’s story about a young Kansan swept away by a tornado to the Land of Oz. With a dog, Toto, she traveled with Scarecrow, Tin Man and Cowardly Lion on the Yellow Brick Road. Children have been taught the book was a tale about an individual’s bond with home, the value of friendship and discovering inner strength.
“Lot of people don’t think about it, but that was written about monetary policy,” Murphy said.
He said pulling back the curtain revealed a drama about economic conflict in the United States during the 1890s. He said the Yellow Brick Road represented the path taken with a national gold standard. Dorothy’s slippers — silver in the book, but ruby in the movie — represented the free-silver movement. To carry the idea further, Emerald City could stand for Washington, D.C., and officials’ preference for convenience of paper money. Scarecrow represented debt-strapped farmers, while Tin Man carried a torch for the working class.
Sen. Mike Thompson, a Shawnee Republican, didn’t delve into the novel, but he joined Murphy in extolling the bill’s virtues during debate Friday night at the Capitol.
Thompson argued the Federal Reserve, operating as the central bank of the United States, spent decades tinkering with the economy in ways that undermined 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.
“This gives Kansans an opportunity to … hold silver, hold gold — something that’s going to hold value,” Thompson said.
If the governor signed the bill, Kansas would become the sixth state to hold the door open for players in gold and silver markets. The bill wouldn’t 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 Freeman Global Investment Counsel, Kansas Campaign for Liberty, National Security Investment Consultant Institute, State Shield and Transactional Gold Project.
“We don’t know the unintended consequences,” said Senate Minority Leader Dinah Sykes, D-Lenexa. “We don’t understand the ramifications of what we’re voting on.”
Over 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,” said Rep. Rui Xu, D-Westwood. “Nobody is using these to buy groceries or pay their utility bills. This bill explicitly says that stores or banks or government agencies don’t have to accept these. Basically, what this bill does is carve out a special capital gains exemption for a niche asset, primarily held by wealthy investors, which shrinks the tax base for all of us.”
In rebuttal, Rep. Steven Howe, R-Salina, said movement in the United States away from circulation of coins with intrinsic value was a blunder.
He said if a person earning the 1965 minimum wage of $1.25 per hour was paid in quarters minted in 1964 or before, which contained 90% silver, the melt-value of those five coins would now be about $74.
“There are a lot of working-class people in my district in gold and silver as a hedge on inflation,” he said.
