Complementary Currency

Sounds like something that the IRS would not like since it likely wouldn't be taxed when earned.

Interesting avatar. For a minute, I thought it was one I took this summer, but my bug was crawling on the lace curtains in the Bruce Cafe.

Sounds like something that the IRS would not like since it likely wouldn't be taxed when earned.

Interesting avatar. For a minute, I thought it was one I took this summer, but my bug was crawling on the lace curtains in the Bruce Cafe.

It has actually been used in some towns to try to increase local economic activity. I have been doing some reading about it in hopes of discussing it with some local businesses in the future in DeFuniak Springs.

http://query.nytimes.com/gst/fullpa...op/Reference/Times Topics/Subjects/C/Currency

It has actually been used in some towns to try to increase local economic activity. I have been doing some reading about it in hopes of discussing it with some local businesses in the future in DeFuniak Springs.

http://query.nytimes.com/gst/fullpa...op/Reference/Times Topics/Subjects/C/Currency

I need to correct that. After taking the survey I get the impression that this is a different animal. Oh well.

Seems like I recall some slot machines popping up in small communities in North GA and SC, and guess what you won -- tokens, aka - complimentary currency, and you would later exchange them for, you guessed it, real money. The Feds didn't go for that and started busting gas stations left and right.

Maybe we need some WalCo coins. Can I have the job of Chief Bill Printer?

Sounds like something that the IRS would not like since it likely wouldn't be taxed when earned.

Interesting avatar. For a minute, I thought it was one I took this summer, but my bug was crawling on the lace curtains in the Bruce Cafe.

"my bug".

Seems like I recall some slot machines popping up in small communities in North GA and SC, and guess what you won -- tokens, aka - complimentary currency, and you would later exchange them for, you guessed it, real money. The Feds didn't go for that and started busting gas stations left and right.

Maybe we need some WalCo coins. Can I have the job of Chief Bill Printer?

Berkshares is the one I read about recently.

[ame]http://en.wikipedia.org/wiki/BerkShares[/ame]

Basically you bought their dollars for 90 cents US on the dollar. Then they were honored as dollars and encouraged to be freely exchanged among the merchants for services. The banks would buy them back at any time for the 90 cents US so they never really loss that value. I guess the non-profit that sponsored the program made their money from people collecting them and losing them. The backing would have to stay in the bank but after a bit you would think that interest would be generated that could be used for public projects.

Berkshares is the one I read about recently.

http://en.wikipedia.org/wiki/BerkShares

Basically you bought their dollars for 90 cents US on the dollar. Then they were honored as dollars and encouraged to be freely exchanged among the merchants for services. The banks would buy them back at any time for the 90 cents US so they never really loss that value. I guess the non-profit that sponsored the program made their money from people collecting them and losing them. The backing would have to stay in the bank but after a bit you would think that interest would be generated that could be used for public projects.

I wonder what the point was? Like you say any unredeemed went to the bottom line for the issuer but other than that .

I wonder what the point was? Like you say any unredeemed went to the bottom line for the issuer but other than that .

They say that the 10% discount on the initial purchase helped to keep the dollars circulating in the community. While I never really studied local economic development theories, one that I hear often is you must get dollars circulating as quickly as possible in a community. I guess every time they changed hands the merchant gets a cut.

I have no idea, but I'm going to go check it out. I can think of similar systems such as a home depot gift card, which makes you spend the money at Home Depot, or the Starbucks card where you pay in advance to stock up your credit on the Starbucks card. You Do want to stand out from the occasional customer. AND, if you are a stockholder, you get a stockholder card, which lets all the employees know that you are a stockholder. Those are legit in regards to the IRS concerns, and they make a ton of money from the float on the advance pays, just like starbucks does, and they start deducting small amounts from the card if you don't use it each month (tons more profit), AND, they make pure profit on any lost or stolen cards, AND, it encourages customers with the gift cards to max out that card, and typically, they will go over the amount and come out of pocket with additional cash, increase sales. Talk about a money maker.

Thanks for checking out the survey. I've never made one before and I was attempting to keep it quick and simple. So, the questions could probably use some tweaking in the future.

WaltonGOP you are exactly right on what I'm speaking of. Berkshares are another example of complementary currency. Also, SJ a gift card works along the same lines as complementary currency in that you have to use it at a specified retailer.

Complementary currency has its pitfalls like any exchange system, but its intent is to stimulate local economies, support local communities, be more inclusive of youth, elderly and the poor in an exchange system, and lessen the impacts on the planet by decoupling "wealth" from monetary gain. In a mutual credit system, one could use currency or a simple accounting system to keep track of the "exchanges" that happen between 2 parties. Credit never accumulates like a savings account and printing currency as opposed to keeping an accounting system allows different goods to be exchanged immediately.

These systems are completely legal and there is some debate about taxation, but I haven't gotten that far in my research. LETS has been around for 30 years. Toronto Dollars have been around since 1998 with much evolution over the years. Ithica Hours has over 900 participants. http://www.ithacahours.org/ The system becomes more valuable the more businesses or people with goods to offer participate.

My personal interest is to research complementary currency and try to determine if something like this would work in SoWal and would it be beneficial to the community. I see this as an opportunity for people to exchange goods where otherwise there would be no market, as well as divert attention away from a continuous economic growth pattern that is destructive to the planet and our very existence.

For more info. check out, Money: Understanding and Creating Alternatives to Legal Tender by Thomas Greco.

These systems are completely legal and there is some debate about taxation, but

I would imagine the debate is very one sided..the IRS would see nothing to debate about.

I just wanted to follow up on the survey and taxes on local currency. Thanks to those who took a moment to respond to the survey. I have 32 responses so far with comments I'll be sharing later. I was hoping for 50 respondants, hint hint. It will be accessible for another week or so.

Local currencies are legal, BTW and I'm using the term "local currency" interchangeably with "complementary currency". It's basically an exchange medium that is used locally to facilitate trade between two parties.

As for the taxes, here's some info. I pulled from one site:

Local currencies are lawful and have a long history.
Local currency must appear different from Federal Reserve Notes (US federal currency.)
Local currency is subject to federal anti-counterfeiting laws.
Local currency Hours earned are considered income and are subject to federal income tax. Basically, local currency functions like normal Federal Reserve Notes with regard to taxes with some exceptions. It is taxable based on its "fair market value" in US currency.
Local currency is valued at / Hour. This dollar amount is added to gross income for determining taxes.
Each person is responsible to do their own record keeping and tax reporting.
Taxes must be paid in US federal dollars.
Business expenses in local currency are considered deductible. Sales tax must be paid in Federal Reserve Notes. Workers must be paid at least the equivalent of the minimum wage in Federal Reserve Notes, but may receive local currency as part of their paycheck.

And another:


Say I'm a plumber. I come to your house and fix the plumbing. And you give me a nice cake in payment. I'm supposed to declare the value of that cake and pay taxes on it, because I'm in the plumbing business. Now say I am a professor at a university. I come to your house. I fix your faucet. You give me a $100 bill. I'm not obliged to declare it because I'm not in the plumbing business. As I said: it is not the currency used that determines whether a transaction is taxable or not, but the nature of that transaction.

WTH - part of my post went missing!


Lastly, the government passed theTax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which basically acknowledges "barter" systems and their taxability. Of course, there is more to it than that. Info. here: http://www.irs.gov/taxtopics/tc420.html

I just wanted to follow up on the survey and taxes on local currency. Thanks to those who took a moment to respond to the survey. I have 32 responses so far with comments I'll be sharing later. I was hoping for 50 respondants, hint hint. It will be accessible for another week or so.

Local currencies are legal, BTW and I'm using the term "local currency" interchangeably with "complementary currency". It's basically an exchange medium that is used locally to facilitate trade between two parties.

As for the taxes, here's some info. I pulled from one site:

Local currencies are lawful and have a long history.
Local currency must appear different from Federal Reserve Notes (US federal currency.)
Local currency is subject to federal anti-counterfeiting laws.
Local currency Hours earned are considered income and are subject to federal income tax. Basically, local currency functions like normal Federal Reserve Notes with regard to taxes with some exceptions. It is taxable based on its "fair market value" in US currency.
Local currency is valued at / Hour. This dollar amount is added to gross income for determining taxes.
Each person is responsible to do their own record keeping and tax reporting.
Taxes must be paid in US federal dollars.
Business expenses in local currency are considered deductible. Sales tax must be paid in Federal Reserve Notes. Workers must be paid at least the equivalent of the minimum wage in Federal Reserve Notes, but may receive local currency as part of their paycheck.

And another:


Say I'm a plumber. I come to your house and fix the plumbing. And you give me a nice cake in payment. I'm supposed to declare the value of that cake and pay taxes on it, because I'm in the plumbing business. Now say I am a professor at a university. I come to your house. I fix your faucet. You give me a $100 bill. I'm not obliged to declare it because I'm not in the plumbing business. As I said: it is not the currency used that determines whether a transaction is taxable or not, but the nature of that transaction.

If I give my plumber a $20 cake for unclogging my sink he declares that as income and I reduce my tax basis on my home by $20. $20 less that I will pay taxes on when I sell (if I sell for a gain-posted for Shelly). If you come to my house and I give you $100 for the same you do not have to pay taxes on that and my tax basis is not reduced. Though in a comprehensive audit by the IRS they would inquire as to where that $100 came from. That said there is also the gift limit. It has been a while since I have had to consider this.

Seems to me that it would be easier to just pay Cash, which you can spend anywhere, and just as fast for transactions as complementary currency. I dislike the idea of gift cards, simply because it limits where I can spend what is essentially, my money. I'm still not seeing any benefits for using this system as opposed to CASH.

Seems to me that it would be easier to just pay Cash, which you can spend anywhere, and just as fast for transactions as complementary currency. I dislike the idea of gift cards, simply because it limits where I can spend what is essentially, my money. I'm still not seeing any benefits for using this system as opposed to CASH.

Berkshares are bought for ninety cents on the dollar. The benefit being you save 10% if the merchant participates and allows them to be used.

If it is used to get discounts, why not just have a discount card, allowing you ten percent off at participating merchants?

If it is used to get discounts, why not just have a discount card, allowing you ten percent off at participating merchants?

The benefit is suppose to be the business owner then uses those dollars with another participant, keeping the money within the local community. A discount card is not necessarily going to have that effect.

I do understand that part about it keeps the money within that circle. Let's say that we have a local currency, and I make my living by making things, in exchange for the local currency. If I want to buy anything from outside participants, let's say like Publix grocery store, I have to find a "bank" to convert my local currency to US Dollars before making that purchase at Publix. I could only guess that most banks wouldn't exchange the local currency and any "bank" which did, would charge an exchange fee. From what I have read thus far, it just seems like it would be much easier to use cash. Would these participants in the local currency also take cash or credit cards in exchange for their goods? If not, they may turn away many buyers.

I somewhat disagree that the participant discount card wouldn't keep the people frequenting the local businesses. If price is a factor, I think most people would shop at the lesser expensive of two places. I've been a member of some organizations which offer members discounts at particular businesses, and if I have a choice, and all else is equal, I'll support the places participating in my organization and get the discount.

I certainly think it is good to explore changes to our systems, because what we've done for years isn't always the best or most efficient way, so I applaud anyone willing to mix up the status quo.

It's definitely easier to use cash, without a doubt. Certainly one of the most beneficial claims of using complementary currency is to support local economy, which can be partially accomplished now, by choosing to shop with a local vender.

I'm not necessarily advocating the usage of CC at this time, but I am interested to find out if the ideas behind why a community would want to use local currency are valid and measurable. I'm glad that some of you are voicing your thoughts here because it will help me in researching those concerns.

Some of the reasons noted for using local currency are in one sense altruistic and idealistic and at the same time, in the best interest of the individual. These reasons are:

• support local economy
• keep money in the community
• provide a buffer in the event of economic crisis
• empower individuals of lesser monetary means
• restore quality of life
• lessen our impact on the planet
• rebuild communities
• build personal relationships based on cooperation not competition
• and to put monetary power back in the hands of the people, not the government and banks. In case people are unaware, our money is no longer created by the government, but by the creation of loans by banks, essentially the creation of debt. Currency is still made by the Treasury and issued and regulated by the Federal Reserve, but money is not created until a bank makes a loan.

I have been able to find examples of poor and crime ridden communities that have seen positive results from using CC, though I'm interested to see what benefits a community like SoWal could derive from its use. I have a phone meeting w/ the director of Ithaca Hours to see if he can shed some insight into measurable benefits that Ithaca has witnessed from using Ithaca Hours.

In terms of having to trade in your complementary currency to pay a company that doesn't support CC, that's why I use the term complementary. It's not intended to replace the existing currency, but to be used in addition to. In Ithaca, an individual can buy into the system, $10 buys 2 Ithaca Hours, which is equivalent to $20 or $10/ hr. Businesses or individual participants can choose to accept any percentage of the currency they wish or some only accept Ithaca Hours during certain business hours. The US dollars that are collected go into creating the currency and a directory that lists all the producers that accept Ithaca Hours. Other currencies employ things like expirations and easy means to buy in and out of the system and as mentioned earlier, some percentage of the currency is usually used to benefit the community directly.

In principle and theory, this all sounds good, but like I questioned before, would this area be a good candidate for complementary currency and how will those benefits be measured? Oh boy, sounds like I just came up with the main focus for my research paper.

What medium/form is used for the complimentary currency?

I like the idea of using interchangable paper money. Whatever system you use, it would have to be very simple. I would think that it would be very beneficial for a non-profit to support this sort of thing in a high tourist location. Just seems you are going to have so many dollars never redeemed as they are collected, lost, and forgotten about.

I am sold. I am volunteering myself as Sowal Bank Chairman and will issue $owals at an initial artificial rate of 1 $owal to 90 cents U.S. I pledge to keep reserves of 20% for redemption purposes and put the other 70% back to work in the form of community loans at 10$owals loaned for 1$owal in reserve against defaults. Just gimme the cash. Google second life and etopia I think it is called. Online mmorpg's with currency that floats against the US $.

I am sold. I am volunteering myself as Sowal Bank Chairman and will issue $owals at an initial artificial rate of 1 $owal to 90 cents U.S. I pledge to keep reserves of 20% for redemption purposes and put the other 70% back to work in the form of community loans at 10$owals loaned for 1$owal in reserve against defaults. Just gimme the cash. Google second life and etopia I think it is called. Online mmorpg's with currency that floats against the US $.

Community foundations are the coming thing in Florida. So set one up and run the currency program out of it, then hire yourself as the director.

Community foundations are the coming thing in Florida. So set one up and run the currency program out of it, then hire yourself as the director.

Yes great idea- enlightened self interest. Thats where the extra dime is going to go to and the extra 10% from my %20 and %70..well wanna be my CFO?