President Joe Biden’s proposed budget has included a plan to introduce a 30% tax on electricity usage by crypto miners in the United States. The tax would be phased in at a rate of 10% per year over three years and would cover both on and off-grid electricity sources. The tax proposal aims to reduce mining activity, which the Treasury has claimed has negative environmental effects, increases electricity prices for others on the grid, and creates uncertainty and risks for local utilities and communities.
On March 9, the Department of Treasury published an explanation of the proposed tax. It stated that any firm using resources, whether owned or rented, would be subject to the excise tax equal to 30% of the costs of electricity used in digital asset mining. Even crypto miners who acquire their electricity needs off-grid would be subject to the tax and would be required to estimate the electricity costs generated by any electricity-generating power plant.
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
The Treasury proposal includes a phased implementation of the tax over three years, with a 10% rate increase each year. The tax would reach its maximum of 30% by the third year, after December 31, 2023.
The White House also confirmed on March 9 that it is looking to end a tax strategy for crypto transactions that allow investors to sell digital assets at a loss for tax purposes and then immediately buy back those cryptocurrencies. The strategy, known as tax-loss harvesting, is not permitted under wash sale rules for stocks. The proposed change in rules is estimated to raise $24 billion.
The Treasury proposal is part of President Biden’s broader climate change initiatives, aimed at reducing the environmental impact of digital asset mining. It also aims to reduce the negative impact of mining activities on local communities and utilities.
The proposed tax has been met with mixed reactions, with some experts saying it could encourage miners to move their operations outside of the United States, while others welcome the move as necessary to address the environmental impact of mining activities.
