President Joe Biden’s budget plan to reduce mining activity could lead to a 30% tax on the electricity costs of crypto miners in the United States.
A supplemental budget explainer paper from the Department of the Treasury was released on March 9. It said that any company that mines digital assets using its own or rented resources would have to pay an excise tax equal to 30% of the cost of electricity.
It was proposed that the tax be implemented after December 31 over three years at a rate of 10% per year, and reach its maximum rate of 30% by the end of the third year.
One of the few surprises in the Biden budget. A proposed excise tax on electricity usage from crypto mining. Phasing in at 10% in year one and climbing to 30%. pic.twitter.com/UPgUdr8CeG
— John Buhl (@jbuhl35) March 9, 2023
Crypto miners would be required to report the amount and type of electricity used in addition to the value of that electricity.
Off-grid crypto miners would still have to pay the tax and have to figure out how much electricity their electricity-generating plant costs.
The Treasury said that cryptocurrency mining operations’ energy use negatively affects the environment, raises prices for people who share a grid, and creates uncertainty and risks for local utilities and communities.
“An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.”
The White House confirmed in a statement released on March 9 that it intends to end a tax strategy for crypto transactions that it estimates would generate $24 billion.
Current regulations permit crypto investors to sell digital assets at a loss for tax purposes — a practice known as tax-loss harvesting — and then repurchase them immediately.
The new rules would make tax rules for crypto trading the same as those for stocks, where a wash sale is not allowed because of wash sale rules.
