Fairer, Clearer Crypto Taxes Would Stimulate Growth and Tax Payments
The Wall Street Journal reports that the actual economic growth from the Trump tax cuts has not been very impressive. Tax cuts are one way to stimulate an economy. When companies feel they will not incur a lot of extra tax liability in expansions, they often will. There are other factors that have to be considered. All too often, tax breaks function like giveaways for those who don’t benefit enough from them. By “benefit,” I mean they don’t need the money they save already, so they don’t spend it in ways that grow the economy. It’s been proven over and over again that tax rebates for the poor stimulate actual economic growth. Better solutions have to do with attaching tax breaks to corporate spending that creates jobs and expands the industrial interests of the nation.
Trump’s 2017 tax package brought the corporate tax rate down by 14%, to 21%. This is still 6% higher than the capital gains tax rate that Bitcoin traders and users are expected to pay when they realize their assets, at least if they wait a year or more to realize those gains. Traders who trade all the time will pay the ordinary income tax on their income from trading. Overall, I’m not sure about this statement. This is based on a couple hours trying to figure it out. Which is the point: the attractiveness of anything, to someone with skin in the game — a family to be separated from, or a job to lose, by going to jail or whatever — is significantly lowered when it’s not immediately apparent the legality of it.
The tax situation is confusing enough that there is at least one company dedicated to creating software to help people. You can think of it like the “QuickBooks of Crypto Trading.” The user simply has to plug in their various exchange details, and in the end a report will be generated. It helps tax professionals who are also confused by the tax situation.
Bitcoin Tax Confusion Has Accountants Turning to Specialized Software
Every time you convert Bitcoin to anything, be it goods or services, other cryptocurrencies, or even tax payments, it…
The amount of regulation on the crypto industry already is absurd, and the taxes are equally absurd.
Bitcoin is still not considered money, just valuable property. The situation has led to very few people actually filing taxes on crypto gains. The prosecutorial abilities of the IRS probably are not vast enough to catch everyone, even if that were their goal. Their goal, in fact, has always been for people to voluntarily pay taxes. Tax evasion cases can ruin lives, and there is an entire cottage industry of law dedicated to helping people fight the system. They all seem to report good results.
This is America. We don’t like taxes. We don’t like regulations much, either. Why should we ask permission to innovate? Well, there are definitely cases where regulators have done the right thing. And if they keep their scope focused on people like Jared Rice, Sr., then it’s unlikely the crypto community will see it as unreasonable forever.
And What Use Are You, Government?
Yet, let’s consider a few things. One, what services of the US government does the crypto economy actually utilize? We use cryptography for protection of virtual assets. It would be a rare case that law enforcement can actually help in a case where funds are lost or stolen by a random criminal. In the case of scams, the SEC and DOJ have expended some resources enforcing against bigger scale scammers. Cases like Josh Garza or Rice definitely ring a bell here.
But what else? What really does the government do for the crypto economy, besides tax it and tell it what to do?
Most crypto projects seek to build a world where government is less necessary, if necessary at all. This is fundamentally in line with the goals of the founders of this country, who debated for years even small increases to the size of the military.
Chapter 5: American Military History, Volume I
ciently armed and accoutered." Its reluctance to create a standing army was understandable; a permanent army would be a…
There is no aspect of society which the blockchain can’t improve in some way. Some of the areas that should be made demands on government to implement distributed ledgers are the following:
Acquisitions and contracting systems.
Accounting of public funds.
There is value to be had in transparency, and most government mandarins do not share this as a value. They set their own pay rates, make their own rules, and by and large act in any manner they choose. Respect for government reached a new all-time low under the last two administrations, both of whom have balooned the national debt beyond any forseeable repayment. Partisan politics are probably more toxic than they have ever been, so much so that conservatives in Alabama openly endorsed someone who was reasonably accused of pedophilia.
These are the sorts of situations we in the crypto world would like to remove ourselves from, through technology. We’d prefer our money be governed by cryptography, not whimsical policy enacted by barely-elected sociopaths on either side of “the aisle.”
Yet, we are also realists. We know that one thing the government doesn’t skimp on is the purchase of guns and people to enforce its rules. Therefore, we’d overwhelmingly prefer to comply with whatever rules the government sets.
But may we plead, for a moment, for some sensible policy? Here are a few policies which we should demand from our represenatives:
1. A period of absolute amnesty for cryptocurrency transactions lasting at least 18 months. During this period, anyone who’s ever transacted in crypto could contact the IRS and get personalized guidance on what will be required of them by the time the grace period is over.
2. A 24-month tax holiday on crypto and blockchain companies. Crazier giveaways are given to other industries all the time. We’re asking for time to grow before we take on the weight of a system we have openly sought to subvert in our original incarnations. During this time, no federal agency would be welcome to any funds generated in the crypto economy. The period would stimulate a massive growth, and when taxation kicked back in, a much more booming industry would exist. We can be sure this would be the case because people would feel much more comfortable expanding in this direction, and the selfsame corporations who’ve failed to capitalize on the tax policies already implemented by the Trump administration would seek to invest in blockchain industries for this very reason. Long-term it wouldn’t be a tax-free enterprise for them, but they would stand to realize enough gains that potentially several tens of thousands of jobs could be added to the economy per month.
3. A blockchain Visa program similar to the one being enacted by the French. Plainly speaking, it will be a decade before we have enough home-grown talent to scale the industry.
French Lawmakers Want to Give Bitcoin Investors a Tax Cut
According to a French news website, France's lower house of parliament (Assemblée Nationale) has backed a proposed plan…
4. A committment from the government to consider blockchain solutions for all areas which affect the public, everything from voting to the issuance of benefits. During the tax holiday, it would behoove the government to find ways to make peace with its opacity problem. You are a democratic organization and you actually have no right to privacy. In the areas where you actually require and are legally (under the consitution) entitled to such privacy, we can help with that too.
The alternative, I fear, is a mass exodus of talented and genuine individuals, to other jurisdictions which are more friendly to our cause.
I myself have recently begun the process of filing for a passport for the first time in my life, so that I can explore the living conditions elsewhere in the world.
If the long-term situation continues to be that what I consider one of my core philosophies is treated as semi-legitimate and borderline un-American, with greedy politicians getting handsy toward my meager crypto holdings and attempting to tax small scale transactions well beyond reasonability, I have to say: I’d rather leave, and I’m not alone.
I don’t envision a future without blockchain technologies. I think the best historical parallel is the rise of the Internet. Can you think of one area of life that is not affected by the Internet today? Even those which are exempt from it likely have superior alternatives built upon it. The blockchain will be the same. It will invade every aspect of life and become ever-present. Future generations will not know a life without blockchain. The US needs to determine now how much of this innovation they want to miss out on. Short-term tax gains and ignorant prosecutorial policies are overwhelmingly dwarfed by the long-term gains the Republic stands to have from fostering a blockchain-positive environment at every level.