United States crypto miners could eventually be subject to a 30% tax on electricity costs under a budget proposal by President Joe Biden aimed to “reduce mining activity.”
A Department of the Treasury supplementary budget explainer paper released Mar. 9 said any firm using resources — whether they be owned or rented — would be “subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.”
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
It proposed the tax would be implemented in the taxable years after Dec. 31, 2023, and would be phased in over three years at a rate of 10% a year, reaching the max 30% tax rate by the third year.
Crypto miners would have reporting requirements on the “amount and type of electricity used as well as the value of that electricity.”
Related: US legislators renew call for EPA investigation of crypto mining emissions data
Crypto miners who acquire their electricity needs off-grid would still be subject to the tax, and would be required to estimate the electricity costs generated by any “electricity generating plant.”
In its reasoning for the tax, the Treasury claimed the energy consumption of crypto mining operations “has negative environmental effects,” increases prices for those sharing a grid with the operations and creates “uncertainty and risks to 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.”
In a Mar. 9 statement, the White House also confirmed reports that it’s looking to scrap tax subsidies for crypto transactions that it reports will raise $24 billion.
Current rules allow crypto investors to sell assets at a loss for tax purposes in what’s known as tax-loss harvesting, they’re then able to immediately buy back those cryptocurrencies.
The new rules would bring crypto trading tax rules in line with stocks where such a practice is not permitted under wash sale rules.