Biden Revisits 30% Tax on Crypto Mining in New Budget Proposal

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In the latest budget proposal for the fiscal year 2025, President Joe Biden revived the idea of imposing a 30% tax on crypto mining activities. This proposal from the U.S. Department of the Treasury shows the existing regulatory gap surrounding digital assets, particularly mining operations.

Biden Revives Crypto Mining Electricity Tax

The administration’s approach involves introducing an excise tax, traditionally applied to goods like fuel. This tax, however, specifically targets the energy consumption associated with digital asset mining.

The Treasury’s statement noted that any company using computing resources to mine digital assets would be subject to a 30% excise tax on electricity costs.

This applies to both self-owned and leased companies involved in mining. If approved, this proposal would mandate crypto mining companies to disclose details about the amount and origin of electricity used. Also, companies purchasing external electricity would need to report its value.

Additionally, miners leasing computational capacity would determine their tax base by reporting the value of the electricity from the leasing company.

The effective implementation of the proposal is slated to take effect after December 31, 2024. Meanwhile, the tax phases will take the following form: 10% in the first year, 20% in the second, and a full 30% in the third year.

Notably, the proposed tax extends to companies generating their own electricity, including those employing alternative and sustainable sources such as solar or wind power. For some industry experts like Pierre Rochard, this is simply a move to restrain Bitcoin and promote the adoption of a central bank digital currency (CBDC).

Meanwhile, U.S. Senator Cynthia Lummis has voiced her opposition to the 30% tax proposal. She suggested that while the inclusion of cryptocurrency in the budget indicates a positive stance, a 30% tax could have detrimental effects on the crypto industry’s presence and growth in the United States.

Biden Administration’s Previous Tax Attempt on Crypto Traders

This proposal marks the second instance where the Biden administration has sought to implement a 30% tax on the electricity consumption of crypto miners. Its previous attempt surfaced on March 9 in the 2023 budget proposal.

Meanwhile, in another statement released on March 9, the White House affirmed its intention to terminate a tax strategy related to crypto transactions. This strategy, estimated to generate $24 billion in revenue, would end the practice of tax-loss harvesting in the crypto space.

The practice primarily involves selling digital assets at a loss for tax purposes and repurchasing those cryptocurrencies immediately. 

Essentially, the proposed changes aimed to align crypto trading tax rules more closely with those of stocks, where the practice of immediate buying back of sold assets at a loss is prohibited under wash sale rules.