Also of concern was the potential for future tax revenue loss if purchasers of the coins were able to claim the surcharges paid when purchasing the coins as a charitable donation and thus reduce their tax liability.
Peach warned that if S.1230 were to become law, “the Federal Government would not only forego about $260 million in seigniorage revenues but also assume the risk of depreciation in the market price of gold and silver.”[3] He also noted the bill’s potential to create a future tax loss of $100 million. In total, the GAO believed that Federal financing of the coinage program outlined by S.1230, as passed by the Senate, could exceed $360 million.
In addressing St. Germain’s HR.6058, Peach noted that it included provisions that would lessen the potential forgone seigniorage by $50 million and that it eliminated the potential future tax loss of up to $100 million. As a result, the GAO estimated that HR.6058 lowered the potential foregone Federal revenue to $210 million.
Peach concluded his review of the coinage bills by addressing Annunzio’s HR.6069, a bill calling for a single silver dollar to be marketed by the Treasury Department. He stated that the bill resolved the issues raised by the GAO regarding foregone seigniorage, potential tax revenue loss, and the risk of precious metal depreciation. Peach could not, however, comment on the potential success of the streamlined coinage proposal.
The GAO did not recommend one bill over another but advised that any bill passed could resolve its concerns by including language preventing them from being marketed as “tax deductible,” and specifying that the sales price of the coins should recover their face value, the value of their bullion content and their production costs. For example, the $50 gold coin proposed in S.1230 (4.937 grams of 0.900 fine gold), the sales price in 1982 would need to have been at least $110 ($50 face value + $60 bullion value) plus the Mint’s actual production costs.
The GAO also recommended that the denominations for the coins be set at the historic US standards of $1.00, $2.50, and $5.00 vs. the S.1230-proposed $10, $50, and $100. This position was strongly supported by the numismatic community and had been highlighted by Chester “Chet” Krause, among others, during the previous Senate hearings.
St. Germain was the first to question Peach and pointedly addressed the GAO’s forecasts of foregone revenue. He made it clear that the amounts stated were not actual losses to the Federal government (i.e., monies to be paid out of the US Treasury) but rather reductions in potential future revenue. He also questioned this assumption, by noting that no such revenue would be earned by the government without a coinage program being authorized. He thus found it difficult to concur with the GAO’s position that the losses forecast should be considered actual losses and be the basis for rejecting either S.1230 or HR.6058.
Lengthy, sometimes heated, discussion followed regarding the marketability of the proposed programs and the technical specifications of the coins to be minted. Peach and his GAO colleagues frequently found themselves caught in the crossfire between proponents of the competing coinage bills. At times, several Committee members seemed to take on the persona of an adversarial prosecutor in a criminal case while questioning the GAO team. In the end, however, Peach and his colleagues were commended for their cooperation and “constructive testimony.”[4]
The concept of foregone revenue and the GAO’s recommended formula for determining the minimum sales price of the proposed coins to minimize financial risk to the Government would resurface in future hearing sessions, and be used by Annunzio in an attempt to undermine the viability of opposing coin bills.
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