U.S. President Biden unveiled his 2024 budget plan on Thursday, March 9. The U.S. Treasury Department intends to impose a 30% excise tax on cryptocurrency mining businesses as part of the Biden Budget.
The Biden administration supports the motion that “Any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30% of the costs of electricity used in digital asset mining,” according to a section in the Treasury department’s 2024 revenue proposals document.
All cryptocurrency mining companies will have to submit reports outlining their exact electricity consumption and cost in order for this tax to be fully implemented. As a result, this proposal will also apply to cryptocurrency mining companies that use off-grid energy sources like power plants, with the 30% tax determined by the anticipated cost of electricity.
In addition to raising money, the U.S. Treasury claims that the new tax proposal aims to deter crypto-mining in the country due to its negative environmental effects, increases in electricity prices, and potential hazards to “local utilities and communities”. This proposal, if approved by the U.S. Congress, shall take effect on or after December31, 2023.The anticipated tax rate of 30% will be reached by 2026 thanks to the introduction of the excise tax over a three-year period at a rate of 10% per year.
President Biden’s budget proposal included further tax adjustments for the cryptocurrency business in addition to the 30% tax rate that would apply to mining companies. For instance, the budget wants to raise the capital gains tax rate on all long-term investments—including cryptocurrency assets—generating at least $1 million in interest from 20% to 39.6%.
Also, the Biden budget proposal for 2024 includes a provision to stop crypto wash sales. To this aim, they want to put an end to the practice known as “tax-loss harvesting” in cryptocurrency trades, which involves traders selling their crypto assets at a loss in order to lower their capital gains tax before buying them again right afterwards.
Presently, only stocks, shares, and bonds are subject to wash rules in the United States. Yet, if The Biden budget is approved, all digital assets will be added to that same list.
In essence, the Biden budget assumes that these tax adjustments for cryptocurrencies might bring in around $24 billion from the sector, which is significant given that the US wants to reduce its fiscal deficit by $3 trillion over the next ten years.
