On Thursday, March 9, U.S. President Biden revealed his budget proposal for 2024. Under the Biden Budget, the U.S. Treasury Department is looking to introduce a 30% excise tax on crypto mining operations.
According to a section in the Treasury department’s 2024 revenue proposals document, the Biden administration advances 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 percent of the costs of electricity used in digital asset mining.”
For full implementation of this tax fee, all crypto mining firms will be required to submit reports detailing their electricity consumption amount and its value. Therefore, this proposal will also cover crypto-mining firms which acquire power from off-grid sources like power generating plants, with the 30% tax calculated based on estimated electricity cost.
New Tax Aims To Reduce Crypto Mining Activity – Says U.S. Treasury
Asides from revenue generation, the U.S. Treasury states new tax proposal aims to discourage crypto-mining activities in the United States due to its harmful environmental effects, electricity price hikes, and potential risks to “local utilities and communities”. Following approval by the U.S. Congress, this proposal will come into effect after December 31, 2023.
However, the excise tax will be introduced over a space of three years at a rate of 10% per year; thus, attaining the proposed 30% tax rate by 2026.
Biden Budget Outlines Other Plans For The Crypto Space
Aside from the proposed 30% tax rate on mining firms, President Biden’s budget proposal listed other tax changes for the crypto industry. For example, the budget aims to increase the capital gains tax rate from 20% to 39.6% on all long-term investments – crypto assets included – generating at least $1 million in interest.
Furthermore, the Biden budget proposal for 2024 also plans to eliminate crypto wash sales. To this end, they intend to stop “tax-loss harvesting” in crypto transactions, a popular tax evasion practice whereby traders sell their crypto assets at a loss to reduce their capital gains tax before proceeding to immediately purchase those assets back.
Currently, wash rules in the U.S. are only applicable to stocks, shares, and bonds. However, approval of The Biden budget will place all digital assets on that same list.
In essence, the Biden budget is projecting that these crypto tax changes could generate about $24 billion from the industry, especially as the United States aims to decrease its fiscal deficit by $3 trillion within the next 10 years.
In other news, the crypto market is still experiencing a downward spiral due to the ongoing liquidation saga of Silvergate bank. According to data by Coingecko, the market’s total cap has declined by 7.75% in the last 24 hours.