A local currency called “bread” is slowly rising even though some worry that it allows for small-scale tax evasion.
The currency, launched by a Berkeley-based group called Bay Area Regional Exchange and Development in 1997, is used by about 280 members in the area who participate in a barter system.
Advocates say it creates communitywenty local currencies in circulation in the United States, according to Dina Mackin, project coordinator for Bay Area Regional Exchange.
A group in Ithaca, New York launched the first American currency of its type, 'Ithaca Hours,' in 1991.
In both programs members provide goods and services in exchange for bread, and in turn, use the bread to buy goods and services from other participants. Most members are individuals providing a wide-range of services – from massage, to accounting, to garden work.
But a few local businesses, including a cafe, a bakery and bike messenger service, take part as well. Bread is measured in hours, and comes in denominations ranging from one-twelfth of an hour to two hours. An hour of labor is generally worth an hour of bread, but members are free to negotiate fees.
Advocates say the currency, which is legal under federal law, helps to build a sense of community, support the local economy, and, by promoting the purchase of goods made in the Bay Area, cut down on the pollution caused by trucks and tankers hauling products over long distances.
But Fred Collignan, professor of city and regional planning at UC Berkeley, said the use of local currencies, which generally operate without much public attention, can provide openings for tax evasion.
Bay Area Regional Development has set the value of the currency at $12 per bread hour and Mackin said that members are responsible for reporting bread as income and paying taxes.
Miyo Sakashita, a volunteer for the organization, and consistent user of the local currency, said it is easy to keep track of bread income and pay taxes properly.
But, some local users said they take in relatively small amounts of bread, and do not bother to report it to the state and federal government.
“I ignore that,” said Karen Rose, a Berkeley resident who trades career counseling services for the local currency.
Shane Rhodes, co-owner of Pedal Express, a Berkeley bike messenger service, said the company takes in only meager amounts of bread, and uses it to buy food for messengers.
The company does not use bread to pay its employees, Rhodes said, making payroll taxes on Social Security and Medicare a non-issue. Still, the bread the company receives qualifies as income, and Rhodes says Pedal Express has not bothered to report it.
Bill Lambert, Berkeley’s manager of economic development, said he is unconcerned about the effect on local government fees, like business licenses, that are assessed based on a company’s income.
“I can’t imagine the amount that we’re talking about is significant,” he said.
But Jesse Weller, spokesperson for the San Francisco Bay Area office of the Internal Revenue Service, said that tax evasion, no matter how minor, raises concerns.
“Certainly we’re concerned in any event that taxable earnings go unreported,” he said.
Collignan, the UC Berkeley professor, also suggested that local currencies can actually harm small businesses by depriving them of much-needed dollars.
“Small businesses live and die on cash flow,” he said, arguing that a fledgling company cannot hope to grow, or survive a sudden crisis, without a solid reserve of standard currency.
Local entrepreneurs who accept bread say they have addressed the concern by asking for a mix of cash and local currency from their customers.
David Melly, who worked repairing string instruments until recently, said that the bread community actually provided him with a niche in the economy.
“I had a business that was relatively young and it actually helped,” he said. “I had a couple hundred people, who, if they wanted to spend bread, and they had instruments, they came to me.”
But Melly said the real benefit of bread lies in its ability to bring together people who exchange services.
“Meeting my neighbors and getting a sense of community,” he said, “it’s the number one thing.”
Sakashita said the use of local currency also represents an important political step. “It’s a really pro-active solution to some of the problems presented by globalization,” she said, arguing that support for local business means less money for international corporations that might exploit workers or clear-cut forests.
Mackin said Bay Area Regional Exchange is better poised than ever to make economic and political change. This summer, she said, the organization opened its first office, centralized its database, hired her as its first paid employee, and purged about 200 members who had moved out of town or were not actively participating in the system.
“Everything has become a lot more efficient,” Mackin said.
The organization has also stepped up its fundraising efforts, Mackin said, taking in roughly $50,000 in the last twelve months, compared to the $19,000 it averaged in previous years.
In the future, Mackin said, Bay Area Regional Exchange hopes to use “bread,” and its focus on local economics, to educate people about their role in the global economy.
“Every day, we trade in dollars,” she said, “and we don’t even think about the consequences.”
For more information on bread, or to become a member, call Bay Area Regional Exchange and Development at 644-0367.