Joe Biden’s 2024 budget wants higher taxes on Bitcoin mining firms, more IRS surveillance, and wants to ax tax-loss harvesting for crypto traders.

At a staggering $31.6 trillion, the United States is the single most indebted entity in the history of Earth.

Unless there are still some highly leveraged firms on Jupiter HODLing trillions in Lehman Brothers credit-default swaps, that means the US is the most indebted entity not just on our blue planet, but in the entire solar system.

Zooming back to Earth, the man sheepishly elected to lead the executive branch of the most indebted entity in the history of the Earth, President Joe Biden, has revealed his administration’s plan for $6.8 trillion in spending for the next fiscal year.

At current projection, his plan would add yet another $1.85 trillion to that tab, including the interest that still has to be paid on the debt already accrued.

But worry not, citizen, because that plan also contains yet another plan for reducing future budget deficits of up to $3 trillion over the next decade when he definitely won’t be in office.

To do that, President Biden turned to his number crunchers to figure out a way he’ll be able to plug the holes. And how will they do it? With your Bitcoin gainz, of course!

The president’s budget recommendation — which is nothing more than an outline of what he’d want to see written up in Congress — lays out three specific concerns for Bitcoiners and firms that deal in Bitcoin, especially those with connections abroad.

The first: A brand new “Digital Asset Mining Energy Excise Tax” that would slap an additional 30% on Bitcoin hashing companies and their warehouses of loud ASICs.

“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 percent of the costs of electricity used in digital asset mining.”

General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals

This is both a money grab and an ideological wish: to clamp down on domestic Bitcoin miners. With growing competition and rising electricity prices, it’s not difficult to see how an additional 30% tax on Bitcoin mining firms would have a large impact.

After the China mining ban, we already saw a swift relocation of the Bitcoin mining hashrate to mostly the United States. If Biden gets his wish, there would likely be rampant consolidation in mining (with only the biggest left standing), and likely a general push to move mining outside the country.

As I explained in my article for the Bitcoin Policy Institute, many US states have been falling over themselves to welcome Bitcoin miners and are writing protections for the industry into law. We could easily foresee a situation where states take the courts to protect this new industry from additional federal taxation rules.

We know the Biden administration is heavily infiltrated by “green energy” maximalists who don’t understand Bitcoin nor its potential for harvesting and providing alternative energy to grids. This attempt at an “excise tax” should motivate the right people to ensure hashrate stays in the US, and for us to protect proof-of-work overall.

The second: Requiring yet more “information exchange” (read financial surveillance) of foreign digital asset accounts owned by US citizens and US entities.

“In addition, tax evasion using digital assets is a rapidly growing problem. Since the industry is entirely digital, taxpayers can transact with offshore digital asset exchanges and wallet providers without leaving the United States. The global nature of the digital asset market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore digital asset exchanges and wallet providers.”

General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals

Ah yes, we see the nasty Foreign Account Tax Compliance Act rear its head once more.

This is the piece of legislation that requires all US citizens to report their worldwide income no matter where they live.

Biden’s budget proposal would aim to supercharge FATCA reporting requirements to also include much more on “digital asset accounts”.

While it’s intended to “clamp down” on Americans living abroad, as anyone who has opened a bank account in the last 20 years can attest, it impacts every global citizen.

Your neighborhood bank in Germany or the United Kingdom that’s now experimenting with Bitcoin deposits may have another reason to halt that plan. The additional compliance would basically require every global bank to now keep a special eye on digital asset purchases and accounts. The surveillance dragnet would now become that much more dangerous.

That’s worrying, but it just underscores the need for self-custody and smart privacy practices as we’ve written about here. Pay attention.

The third: Getting rid of tax-loss harvesting for all crypto-assets.

Not every company makes record profits every year. In fact, many businesses spend more than they take in, and have until now had the ability to carry their losses over to be taxed less by the government.

This is standard practice in business accounting, and is often necessary for any company to catch a break from the tax man.

The Biden proposal would specifically make this unavailable to any business dealing with Bitcoin and digital assets, which they’re calling a “loophole”

“Taxpayers with loss positions in digital assets are engaging in transactions that would be subject to the wash sale rules if the digital assets were subject to section 1091. For example, a taxpayer may sell a digital asset that is not considered a stock or security for wash sale purposes at a loss on one day and repurchase the same digital asset the next day. The same loss recognition rules should apply to digital assets held as investments or for trading as would apply for stocks and securities.”

General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals

I see this more as a targeted provision looking at certain BTC whales like Michael Saylor (or perhaps USD whales like Donald Trump) who have been able to carry losses for lower taxes.

Tax changes like this would take a lot of muscle, and it really doesn’t seem like this would pass muster in Congress.

What the hell does all this mean?

You may view Bitcoin as a revolution. The US government sees it as nothing more than a cash cow for their profligate spending. That much is clear now.

And while many of these proposals seem perplexing or even scary, I take refuge in the fact that the US is a representative democracy with three branches of government. While Biden’s plan may seem scary, it’s only a cooked up desire of what he and his allies would want to see in a budget.

It should give us warning, however, that many other governments will be taking notes on how these proposals go. Perhaps Germany, the UK, Australia, and Italy will try their hand at the same, if they haven’t already.

Thankfully, at least for the US, it’ll be up to Congress to formerly draft the budget, where Biden’s party doesn’t have a majority.

What’s more, considering the US Congress hasn’t actually passed a new budget in nearly a decade (instead they just sign off last year’s spending with more projects mixed in), the chances of most of these getting through are slim.

In the meantime, though, we should remain vigilant. The feds know about Bitcoin, they have it in their cross hairs, and they will try any means at their disposal to tax it, restrict it, or seize it altogether.

But today’s Bitcoin tools, used with good privacy practices and self-custody, means they won’t have a chance. That’s the real hope.

Thank a cypherpunk today.


Niko: @nikojilch / nostr: npub1st4elxz4dphx2qxpuaklvs855zetnkglu8dvszdxamgqn5q3pk5svflv5p

Yaël: @yaeloss / nostr: npub15dnln6cukw3yrflnv3hnrntdt9amh0uw466u6tns05ymqp3nal4qzz3lfc

Published on Fix The Money (archive link).