President Biden’s plan to combat the United States’ growing deficit includes clamping down on a glaring crypto tax loophole.
Last Thursday, US President Joe Biden revealed his official 2024 budget proposal, which includes bitcoin transactions. Among his numerous recommendations is to subject cryptocurrency to the same wash sale laws as stocks and bonds, as well as to raise capital gains taxes on the wealthiest Americans.
According to the White House, the proposal will help reduce budget deficits by $3 trillion over the next decade through a combination of company tax increases and government expenditure cutbacks, despite a higher-than-expected defense budget of $835 billion.
One of the administration’s tax goals is to increase the tax on stock buybacks from 1% to 4%. Meanwhile, for people earning more than $1 million each year, capital gains will be taxed at the same rate as wage income.
The idea would also address the “like-kind exchange” loophole, which allows crypto traders to sell their underwater crypto assets, claim a deductible loss, and buy their tokens instantly. According to the Wall Street Journal, this may save the government $24 billion.
The budget attempts to reverse many of the tax reforms adopted by the Trump administration, which reduced effective corporate tax rates to less than 10%.
President Biden’s plan committed to avoiding enacting any tax changes that will hurt those earning less than $400,000 per year. The government maintains that its plan would keep the budget deficit at roughly 5% of GDP, as compared to 6% if the President’s initiatives are not implemented.
President Biden’s Problems With Taxing Bitcoin
In 2021, President Biden’s infrastructure bill introduced a controversial policy to expand tax reporting requirements for cryptocurrency “brokers,” whose loose definition could technically apply to miners, validators, and developers. Crypto-supportive senators including Pat Toomey and Cynthia Lummis have promised to see that language revised at a later date.
In drafted legislation, Lummis also recommended excluding Bitcoin transactions of under $200 from being subject to capital gains taxes, to better enable its use as a form of currency.