U.S. communities take local economy into their own hands
by AccountingWEB on
Unwilling to hand over hard-earned paychecks to faceless corporations for goods and services, a handful of communities have created their own commerce - local currency that encourages residents to keep their money close to home.
Burlington, VT, has Burlington Bread; Traverse City, MI, has Bay Bucks; Ithaca, NY, has Ithaca Hours; and Berkshire County, MA residents are using BerkShares at restaurants, shops, and lawyer’s offices. Some observers see local currencies as a grand economic experiment that fights globalism and elevates the local, somewhat like rejecting the chain supermarket in favor of the farmers’ market.
Looking nothing like U.S. greenbacks, the money often depicts local icons or historical figures, using the artwork of local artists, of course. Brooklyn, NY, which is considering its own local currency, put out a call for suggested designs and received illustrations of a kielbasa, an ice cream cone, and a portrait of Brooklyn writer Jonathan Safran Foer.
Proponents think of local currency as a stimulus program for their hometowns. One Ithaca Hour equals $10. If you bought something from a local store using an Hour, that store would in turn pay that Hour to an employee or local supplier, keeping the economy growing locally rather than shipping the money off to Wal-Mart headquarters in Arkansas.
These local currencies are perfectly legal, according to the U.S. Treasury - as long as they can’t be mistaken for U.S. dollars and are in denominations of at least $1. Local coins are not allowed. Local currencies are OK with the Internal Revenue Service too, as long as it gets its share. All state and federal taxes still apply, as local currencies are considered to be a cash equivalent. “It’s not some form of tax evasion,” said Mary Jeys, an artist who started the project in Brooklyn. “It’s a way to create a community exchange and make sure the money won’t leave the area,” she told the New York Daily News.
The Local Currency Education Project, which promotes RiverHOURS for the Columbia River Gorge area of Washington state, explains the accounting this way: “It is unnecessary to file any special IRS forms for your local currency activity. When you receive a RiverHOUR, ask yourself, "If this were a $10 bill, would I report it as taxable income and pay tax on it?" If the answer is "yes," then add $10 to your business income and pay tax on it.”
Experimental local currencies don’t always stand the test of time. Forbes magazine reported that programs in California, Florida, and Kansas have become inactive in recent years. And in Montpelier, VT, Green Mountain Hours promoters could not persuade enough businesses to sign up. Steven Gorelick, program director for a nearby nonprofit, told Forbes: "The problem is, it intersects the mainstream economy in so many places, there are a lot of hurdles to overcome.”
Ithaca Hours may be the longest-running experiment of its kind, with 500 businesses using the currency since 1991. Historically, local currencies spring up when the economy is down. Newsweek magazine reported that dozens of such systems emerged during the Great Depression and re-emerged in the 1990s as a way to keep wealth in local communities. Now, the magazine reported, “The dream of homespun cash is back because it keeps people liquid even if they're unemployed or short on traditional dollars.”
In fact, Steve Burke, who runs Ithaca Hours, says he’s been taking calls from people all over the country who are interested in developing their own local currencies. For example, Greensboro, NC residents are interested; so are community activists in Ojai, CA.
BerkShares started with a bang, with more than 1 million in circulation in the first nine months when it launched in the fall of 2006. Today, the currency is accepted at more than 360 businesses. Five different banks are on board, and 13 branches serve as exchange stations. Susan Witt, who leads the BerkShares nonprofit, said that with BerkShares, "You can get a divorce, plan a funeral, and go to just about any restaurant in town.”
You may like these other stories...
By Jason Bramwell A bipartisan bill introduced in the Senate on November 5 that would simplify and standardize state income tax collection for employees who travel across state lines for temporary work assignments has...
By Jason Bramwell The Governmental Accounting Standards Board (GASB) on July 2 issued for public comment an exposure draft, Pension Transition for Contributions Made Subsequent to the Measurement Date: An Amendment...
By Jason Bramwell The Government Accounting Standards Board (GASB) is seeking public comment on a proposed concepts statement it issued on June 20 that would guide the GASB when establishing standards regarding the...
Upcoming CPE Webinars
BAR is an acronym for: Boundaries, Authority and Role. This simple tool will provide participants with a solid understanding of leadership essentials to improve their performance.
This material is designed to provide a start-to-finish overview of how to plan and complete high-quality small audits efficiently.
In this session Excel expert David H. Ringstrom, CPA shares numerous techniques that you can use to work with charts more efficiently.
Key Accounting and Reporting Issues for Nonprofits No. 1: Overview and Statement of Financial Position
This material focuses on non-profit organizations organization, accounting and reporting.