Government
Dear Members of Congress & the Biden Administration
On the heels of a pandemic, our country endured one of the worst societal disruptions in its history. COVID’s direct and indirect effects have taken the lives of over one million Americans, bankrupted businesses nationwide and further amplified many of the economic imbalances that have eroded our culture for decades. The 2020 and 2022 elections not only reflected a deep desire to return to normalcy, but to build everything back better than it had been before the pandemic.
Following President Biden’s election, much progress was made on his promise to pursue that objective, but some of the most critical parts have languished, particularly those addressing human infrastructure and climate change, in spite of the record levels of support for them found in the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022 (IRA).
This site lays out a strategy on how we, the citizens of the United States, can tackle many of those problems ourselves, without having to rely on the federal government to do it for us, nor on the taxpayer to finance it—principals both parties can applaud.
What & How
Many of today’s challenges can be traced to growing income and wealth disparity. Lack of money is at the root of many seemingly unsolvable societal problems. Historically, communities have looked to the federal government to address that lack, on the assumption that all money comes from the government.
The reality is that the government is not the only entity allowed to issue money. We private citizens and businesses can too, and throughout U.S. history, we often have, according to this 2008 article published by the Federal Reserve Bank of Cleveland titled Private Money in our Past, Present, and Future..2
“Who is allowed to issue money in the United States? The founding fathers made it clear that the power to create money would not be taken lightly. Their experiences with money and inflation during the Revolutionary War made them wary of paper money and conscious of the power wielded by those authorized to create it. They gave Congress the right to issue money and forbade the states from doing so. But the federal government isn’t the only entity that has, in practice, issued money. Private citizens and private companies have, too. . .”3
And therein lies a key to helping address the scarcity of money in the productive economy. The government calls money issued by private parties “virtual currencies”. As citizens of the United States, we can issue our own money as a virtual currency and use it to solve the kinds of problems listed below and more. This is not to be confused with cryptocurrencies (a form of virtual currency issued by private parties) which are driven by profit making objectives. The kind of virtual currencies we advocate for are ones designed to uplift all members of society and not just make some people wealthy, although they are primarily intended to aid those less fortunate than others, as described next.
And there is strong historical evidence that money issued by the people can have a dramatic and positive impact on local economies. Examples of successful local currency programs can be found throughout history. One of the most notable was in Europe during the Great Depression where the small Austrian town of Wörgl issued its own money called stamp scrip (a common form of currency also used throughout the U.S.). That effort was so successful in lifting the town’s economy that it became known as the Miracle of Wörgl.
Hundreds of communities across Europe flocked to Wörgl to learn the secret. Professor Irving Fisher, a leading U.S. economist, studied the Wörgl experiment and told FDR’s administration that “The correct application of stamp scrip would solve the Depression crisis in the U.S. in three weeks.” Even though it was determined that he was correct, no action was taken. (See the full Wörgl story, Fisher’s story and more here.)
The key for all of us is that we can apply the methods used in Wörgl and elsewhere to break free from the stranglehold that the current financial eco system has over us and create a new paradigm outside of its control and influence. We can look to the futurist Buckminster Fuller’s aphorism that “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”
Who is this intended to help?
Examples of What Can be Done with Citizen-issued Money
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Job creation programs |
Fully funded K – post secondary education |
Solvent state & local governments |
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Startup grants |
Fully funded pre-K programs |
Pension plans fully funded |
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Basic income grants |
Healthcare for all |
Renewable energy programs |
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Small business grants & loans |
Day care for children & elderly |
Blight remediation programs |
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Full employment & living wages |
In-home care for children, elderly & infirm |
Clean air & water |
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Student grants & loans |
Paid family leave |
Sustainable local agriculture |
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Tuition-free colleges, vocational & entrepreneurship training |
Elimination of homelessness |
Food grant programs |
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Elimination of student debt |
Elimination of foreclosures |
Regulations in the Way
However, our ability to do so is hampered by specific federal laws and regulations, the most significant of which relates to taxation. Currently the Internal Revenue Service treats all transactions in virtual currencies as though they are conducted in U.S. dollars. Further, it requires that taxpayers pay the IRS any tax due in dollars, rather than the virtual currency.
So, even if communities wanted to issue their own money to fund job creation programs and other expenditures, they would effectively be blocked from doing so because of a lack of dollars to pay any taxes resulting from those economic activities. Thus, even though we citizens can issue our own money legally, there are limits on how such money can be used effectively today.
A Possible Solution
What if the federal government were to accept alternative currencies for payment of fees and taxes. Such a prospect is more viable than one might imagine.
That’s because of action by the Internal Revenue Service Advisory Council (IRSAC), a long-standing IRS advisory group created by Congress to analyze tax issues and make recommendations to the IRS. In 2018, the IRSAC was asked for suggestions on how to focus guidance to taxpayers on the use of virtual currencies (their term for complementary currencies).
In their year-end Public Report the IRSAC noted that, “Use of virtual currency as a payment method has grown in popularity and has emerged as an alternative to using fiat currencies (i.e., government-issued currency).” The report went on to say that “Virtual currency poses tax compliance risks [arising] from non-willful conduct by a taxpayer (e.g., lack of understanding regarding the taxability of virtual currency transactions, how to calculate basis of gain/loss from virtual currency transactions, how to characterize income, third-party reporting responsibilities, etc.). Compliance risks can also arise from willful conduct by a taxpayer (e.g., using virtual currency to evade taxes).”
One of the key questions addressed by the IRSAC concerned the idea of the IRS accepting virtual currencies for payment of taxes. The IRSAC concluded that the IRS is already authorized to do so. Not only that, but the IRSAC recommended that the IRS should do so! Section 6311(a) provides that the IRS may receive “any commercially acceptable means [of payment of tax] that the Secretary deems appropriate to the extent and under the conditions provided in regulations prescribed by the Secretary.”
In that report, the IRSAC recommended that IRS: “Accept payment of tax liabilities with virtual currency. If the regulations under section 6311 were amended to provide for the payment of tax through virtual currency, the IRS could leverage the information and experience obtained from voluntary payments of virtual currency to strengthen enforced collections.”
This would solve a HUGE problem for anyone receiving a payment in a virtual currency that IRS would consider taxable, and as stated above, the IRS requires the taxpayer to pay the taxes due the IRS in dollars, not the virtual currency. So, if anyone were to pay employees, in whole or part in a complementary currency, the employer and the employee would have to pay any taxes due the IRS in dollars. Obviously very convenient for the IRS but VERY inconvenient for the taxpayers.
However, even though the IRS accepted and adopted a number of the recommendations in that report, they elected not to adopt this recommendation. When asked why by a senior U.S. Senator why not, the IRS replied:
“The position of the IRS is that virtual currency is property. See Notice 2014-21. Virtual currency does not have legal tender status in the United States and transactions with virtual currency are treated like transactions in any other property for tax purposes. There is no provision of federal law under which taxes may be paid by a voluntary transfer of real or personal property to the federal government…”
Note that they say “voluntary.” That does not mean that the IRS cannot accept property for payment of taxes. The Service has long seized property “involuntarily” from tax payers for payment of taxes, so systems are in place to handle receipt of property of all types.
This Could Create Massive Problems for the IRS
However, while the above solution would be very taxpayer friendly it would be less so for the IRS. There are currently thousands of alternative currencies in circulation today, many in the form of cryptocurrencies and many others that are not. In any case, accepting all manner of virtual currencies would likely be an unmanageable task for the IRS. Is there a easier solution? Yes, here it is.
A Better Solution
The remedy is relatively easy and either Congress or the president can implement it. In the case of Congress, a small rider attached to just about any bill would do it; for the president, a simple executive order is sufficient.
We are calling on Congress to enact a small piece of legislation that will dramatically enhance the ability of citizens to issue their own money without incurring any tax liability at all. Alternatively, we call on President Biden to mandate the same via an executive order
People's Money
At the heart of this proposal is the good fortune that “we the people” are able to issue our own money and use it to address our own needs. Both domestically and abroad, this practice has been commonplace for centuries and remains a standard practice worldwide.
In the U.S., non-federal currencies that go by various names such as local, regional or community currencies have been used throughout our history, first as paper money and now increasingly issued digitally.
They come in many familiar forms, from popular “Buy Local” campaigns, to credit card mileage awards and, most commonly, coupons that Americans use daily. (Local virtual currencies should not be confused with “crypto” currencies which are speculative, regulated securities. By contrast, local virtual currencies are simply mediums of exchange, transacted now digitally, similar to how debit cards, mobile wallets or banking apps work.)
That FED article mentioned above states clearly:
“The government isn’t the only entity allowed to issue money. Private citizens and businesses can too, and throughout U.S. history, they often have.”
Done right, a local currency can effectively bootstrap a local economy, allowing the people to lift themselves up rather than rely on external sources like banks or the federal government for assistance. However, successfully launching a local currency requires educating a sufficiently large group of individuals and businesses on the benefits of using a local currency just as they would use U.S. dollars. Unfortunately, current federal tax policy inhibits achievement of this critical mass.
Currently, when two or more parties exchange goods or services using any form of currency, the IRS considers such transactions taxable (as if they were conducted in US dollars) if they exceed the thresholds that trigger taxability. The problem is the IRS requires the tax to be paid in dollars rather than the currency used. The net effect is that many local economic development programs, based on the issuance of a local currency, die before they get off the ground, or expire before delivering sustainable benefits to their communities.
However, if all transactions using non-profit issued currencies were to be exempt from federal taxation, even for a prescribed period of time, then many such programs would be enabled.
How Can the Federal Government Help?
The Congressional Solution
A small rider attached to just about any bill would address this taxation problem. Doing so would have profound, positive and lasting impact.
The proposed rider would require the IRS to exempt certain community virtual currencies from federal taxation, and require the Federal Reserve to purchase those currencies from banks and credit unions. Here is the essence of our recommendation:
- Require the IRS to exempt from federal taxation all transactions in community virtual currencies issued for regional economic development purposes by non-profit organizations registered under IRS section 501(c)(3) or 501(c)(4).
- Require the Treasury or the Federal Reserve to purchase those community virtual currencies from banks and credit unions. That would free up local banks’ and credit unions’ balance sheets and enable them to deploy vital capital critical to their communities’ stability and growth.
And while simple in concept, the ramifications of these two elements being enacted would be hard to overestimate—their inclusion and passage in any bill will have profound impact. Taking these two simple steps will greatly enhance the ability of local economic development groups to bootstrap jobs programs, accelerate infrastructure improvements, address food insecurity, and much more—all activities ultimately resulting in increased regional GDP, aiding small business, improving community assets, and advancing future bankability.
This page4 provides the proposed text of the rider.
The Administrative Solution
Even though the above Congressional proposal should be supported on both sides of the aisle, the current partisan divide could complicate or delay its implementation.
Fortunately, there is an alternative. Given the nature of the changes required in taxation, those can be applied within the Internal Revenue Service. The IRS is an agency of the Department of the Treasury, part of the executive branch of government and therefore under the control of the President.
Now that President Biden has dropped out of the 2024 Presidential race, he is determined to take full advantage of his authority as President to accomplish goals not yet realized, while he is still in office. However, given that the House is currently controlled by Republicans and there is the slimiest of margins in the Senate, the likelihood of any further significant legislation between now and January 20 is very low. Nonetheless, there is much he can do unilaterally under the powers of the Presidency, potentially augmented by the enhanced powers recently ruled on by the US Supreme Court. One such area is in the form of Executive Orders. (For a more in-depth exploration of executive orders, see this Congressional Research Service document Executive Orders: An Introduction).6
President Biden can issue an executive order5 to require the IRS, under the auspices of the Secretary of the Treasury, to exempt from federal taxation all transactions in community virtual currencies issued for regional economic development purposes by non-profit organizations registered under IRS section 501(c)(3) or 501(c)(4) under the existing rules concerning exempt activities on the part of such non-profits. That is done by simply stating that such currencies would be considered as part of those non-profits’ exempt mission.
In addition, banks and credit unions could serve as “clearing houses” for those currencies, purchasing them the public (at a slight discount like a foreign exchange service) thereby providing a means to convert those currencies into dollars. In turn, the President can mandate that the Department of the Treasury purchase those community virtual currencies from those banks and credit unions at full value, yielding a profit for those banks and credit unions.
Some agencies are independent of Presidential authority and therefore not subject to an executive order, including the Federal Reserve (FED). The President does not have control over the FED (Congress does). Nonetheless, the president can request that the FED take action to support this effort, and in particular, the Treasury Department could “encourage” the FED to purchase from the Treasury, those virtual currencies acquired by Treasury, in a fashion very similar to the manner in which the FED purchases all manner of assets from banks (including worthless toxic assets). Thereafter the FED would just keep those currencies on its balance sheet, just like they do with the assets purchased from banks.
This page7 provides the proposed text of that executive order and what it entails.
What Can Be Done with this Concept?
The document, Virtual Currencies, IRS, Treasury & Federal Reserve8 provides an in-depth look at complementary currencies and how making some exempt from taxation can have a widespread and positive impact on society. And this document, Troubled Asset Acquisition Program: Tackling Debt & Blight.9 provides a detailed exploration of a couple of key, but profoundly impactful things, that can be done if this proposal is adopted.
Endorsements
The following page10 lists individuals and organizations, along with individual letters and other documents explaining why they support this concept .