Biden Proposes New Tax Changes For Crypto Investors and Miners• March 11, 2023 11:50 am • Comments
President Biden just released a new budget proposal where he released a policy that would essentially impose a 30% tax on all electricity that is used to mine crypto.
Further details show that the 30% tax would not be imposed immediately, but would gradually increase in increments of 10% over the course of 3 years.
With that being said, such a tax hike is still tremendous and may reduce the popularity of crypto mining which may impact the blockchain ecosystem.
Whether or not the impact is actually significant enough to make a difference is still unknown given that many crypto miners may just relocated outside of the US to avoid the tax hike.
It is clear that the proposal wants to reduce mining activity, but many investors and speculators are hopeful that the proposal will fail to pass.
U.S. President Joe Biden will propose changes to crypto taxation in an upcoming budget plan, according to a report from the Wall Street Journal on March 8.https://t.co/tZAPgENLVj
— Michael Branch (@Michael63140627) March 9, 2023
This means any firm using computing resources, whether owned by it or leased from others, to mine Bitcoin and other assets would be subjected to the 30% tax. Through this initiative, the administration intends to “reduce mining activity.”
Notably, the current law does not provide tax rules specifically addressing digital assets. However, there are certain exceptions when it comes to the rules, related to broker reporting and cash transactions.
Outlining the reason for the change, the proposal mentioned,
“An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.“
The proposal highlighted that computational effort and the large amount of energy required were major drawbacks. Additionally, it pointed toward the negative environmental effects and risks to local utilities.
Biden’s new budget plan also is starting to target crypto investors and the ways they do taxes regarding digital assets.
This indicates an increased focus from the Biden administration to target crypto investors more aggressively and the crypto industry by extension.
For example, the new budget plan from Biden proposes to close some crypto tax loss harvesting loopholes that have benefited many crypto investors such as the wash sales tactic.
By removing some of these loopholes, the government is expecting to be able to raise more funds at the expense of crypto investors.
Still, many expect that the plan has a low chance of actually passing as it would need to pass both the House of Representatives and the Senate before it gets enforced.
American crypto investors may no longer be able to utilize "wash sales" to benefit from crypto tax-loss harvesting should proposals in Biden’s new budget plan go through. https://t.co/htsB4vY9an
— Cointelegraph (@Cointelegraph) March 9, 2023
This isn’t Washington’s first effort to close this “loophole” – lawmakers introduced a bill in late 2021 that would similarly prevent investors from claiming a loss only to repurchase the same cryptocurrencies again.
The president’s team has already passed one crypto tax-related piece of legislation into law; in 2021, the Bipartisan Infrastructure Framework, which later became the Infrastructure Investment and Jobs Act, included a controversial tax provision that would impose certain reporting rules onto brokers facilitating crypto transactions.
The definition of “broker” was seen by many in the industry to be overly broad, to the point where miners and other types of entities that don’t directly facilitate transactions or collect personal data from those conducting the transactions could be considered brokers.
The U.S. Treasury Department has indicated that it would define the term brokers more narrowly, though it has yet to publish formal guidance on the matter.
Eliminating the like-kind exchange provision or the 1031 exchange rule could have serious consequences for #crypto investors. https://t.co/JPjSVPE4wZ
— Bitcoin News (@BTCTN) March 10, 2023
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