- The Joe Biden administration has proposed an excise tax commensurate to 30 percent of the cost of electricity used for crypto mining.
- Firms involved with cryptocurrency mining will need to report the amount, type, and value of electricity expended in mining activities.
- Senator Cynthia Lummis and other top voices think imposing such a tax would be bad for the US crypto industry.
President Joe Biden has proposed a crypto mining tax that will cost mining firms up to 30 percent of the electricity they expend during mining activities. The disclosure came with the White House’s release of the Fiscal Year 2025 Budget Proposal.
The Department of Treasury also released “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals” which gave more context to revenue reforms concerning current law, reason for change, and proposals. The document also provided more details about the proposal to “impose digital assets mining energy excise tax” among other revenue reforms.
The Excise Tax Is Intended to Reduce Mining Activity
According to the document from the Treasury Department, digital currency mining consumes a large amount of energy, which in turn presents negative environmental effects. Furthermore, it can have “environmental justice implications” and hike electricity bills for people who share an electricity grid with miners. That’s excluding other “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,” said the document.
So far, current law does not provide tax rules that directly pertain to digital assets aside from broker and cash transaction reporting. However, if the current proposition gets approved, crypto mining firms will begin to pay 30 percent of their electricity costs as tax.
Crypto Mining Firms To Begin Reporting Amount, Type, and Value of Electricity Used
The excuse tax proposition would require all firms that mine digital assets in the US to report the amount, kind, and value of the electricity consumed in the process of mining digital assets. Surprisingly, the 30 percent tax is not just limited to miners connected to the public electricity grid; even off-grid miners who use electricity generators and alternative energy sources are all included in the tax scheme.
The proposal would be effective from January 2025 and the tax would be rolled out in three phases of 10%, 20%, and 30% tax respectively for the first three consecutive years. While the government cites environmental and economic reasons for the tax proposal, a 30 percent tax on miners may lead to a massive outflow of crypto mining firms from the US and a drastic drop in the corresponding internal revenue.
Senator Cynthia Lummis, Others Weigh In On The Proposed Excise Tax on Digital Asset Miners
Following the proposal, Senator Lummis, the Junior US Senator from Wyoming, started by commending the White House 2025 budget for being “incredibly bullish on crypto assets.” However, she does not think the excise tax on digital assets miners is the best for the American crypto economy. Lummis believes a “proposed 30% punitive tax on digital asset mining would destroy any foothold the industry has in America.”
Brian Morgenstern, head of public policy at Riot Platforms described the digital asset mining excise tax as “just plain crazy in many ways.” Morgenstern highlighted four downsides to the excise tax which include driving miners out of the US, increase in emissions, and loss of revenue in the mining space to non-American companies. In essence, he believes the 30% tax is counterintuitive and will worsen the problems it was intended to solve.