The crypto tax provisions in Biden's infrastructure bill are a mess
The amount of money Congress hopes the current, terribly worded cryptocurrency tax provision will raise.
The current draft of Biden’s much sought-after infrastructure bill could prove to be a nightmare for countless cryptocurrency users, developers, miners, and startup companies. To account for roughly 5 percent of the estimated $550 billion in new spending on areas like public transit, roadways, energy grids, and tunnel systems, the proposal seeks to expand the definition of a “broker” to any person or service “effectuating transfers of digital assets on behalf of another person,” an augmentation so nebulous that it could rope in people and entities who don’t actually have access to the newly required information.
As Coindesk notes, anyone falling under the revised “broker” category would need to submit transaction reports to the IRS, “despite the fact that some of these entities don’t have customers with know-your-customer information.”
No new taxes — Although some senators (such as Rob Portman, the Republican from Oregon rumored to be behind all this) claim the provision will raise $28 billion via no new taxes, in actuality the increased pool of “brokers” required to submit their transactions would (hypothetically) lead to more taxes owed. “Whoever came up with this is actually pretty crafty. It’s easy to say ‘hey, I don’t want to increase taxes on something’ but if it’s just increasing reporting, it’s pretty hard to get a senator to turn their back,” Reid Yager, a former lobbyist and Blockhaus’s director of communications, told Coindesk.
Earlier today, Senators Rob Wyden and Pat Toomey announced a proposal to revise the language to be more precise, accurate, and feasible. “There is a sense that there are some opportunities that really provide a window for addressing what this technology is all about. The text of the bill originally didn’t do that and there’s a group of us working together to get it fixed,” Sen. Wyden told reporters.
Huge privacy concerns — In addition to the current phrasing and definition of “broker” being vague to a fault, groups like the Electronic Frontier Foundation argue that the provisions could spell huge privacy issues for the cryptocurrency community. “The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users,” they explain.
And while the EFF concedes this may not have been an intended side-effect of the language, it nonetheless should be thoroughly reviewed and addressed before blindly being enacted into law. “Make no mistake: there is a clear and substantial harm in ratcheting up financial surveillance and forcing more actors within the blockchain ecosystem to gather data on users,” the EFF says.
Understand the industry you’re taxing — Regardless of the motive, at the end of the day the infrastructure bill’s snafu appears to largely come from widespread illiteracy regarding the cryptocurrency markets’ technological underpinnings, with Sen. Wyden tweeting that, “it fails to understand how the technology works.”
Before sweeping legislation is passed on the subject, politicians should at least brush up on how these things work on a basic level.