President Biden Draws Confusion and Backlash from Crypto Industry with $18 Billion Tax Loophole Claim
President Joe Biden’s recent tweet criticizing Republicans for their budget priorities has sparked confusion and backlash from members of the crypto industry. In the tweet, Biden claimed that if Congress eliminated “tax loopholes that help wealthy crypto investors,” the government could net $18 billion. However, many within the industry have denied the existence of such a loophole.
We don’t have to guess what MAGA House Republicans value. They’re telling us. pic.twitter.com/BM6JGMEFeq
— President Biden (@POTUS) May 9, 2023
Adam Cochran, managing partner at Cinneamhain Ventures, tweeted that crypto actually suffers compared to other assets when it comes to gains being taxed on transfer between asset types. He challenged anyone to cite the supposed loophole that Biden referred to. The president’s budget does propose eliminating the wash sale loophole for digital assets, which is expected to bring in $23 billion over the next decade, with $1.24 billion anticipated in 2024.
The question remains, where is Biden getting the $18 billion figure from? The Wall Street Journal reported in March, ahead of the budget’s release, that the president had proposed a change to how crypto transactions are taxed, which would raise $24 billion. At the time, the administration claimed that crypto assets were not subject to the same wash trading rules that apply to stocks and bonds. Wash trading is prohibited for stock traders in the US and can result in illicit tax benefits.
Bloomberg recently reported that crypto traders have been avoiding billions of dollars in taxes by exploiting wild price swings and employing wash trade tactics. A National Bureau of Economic Research paper cited by the outlet estimated that if traders had used these tactics in 2018 at the scale they are currently using the wash trading exception, the US Treasury would have lost a projected $16 billion. Meanwhile, a 2022 research note from Joseph Abate at Barclays estimated that the funding gap from unpaid taxes by crypto traders could amount to around $50 billion a year, based on a 2017 IRS calculation.
It’s worth noting that nowhere except for the president’s tweet does the crypto tax loophole seem to amount to $18 billion. This isn’t the first time that Biden has drawn criticism from the crypto industry. He recently proposed a 30% tax on the cost of electricity used by bitcoin mining, which prompted mining companies to push back strongly.
As the debate around crypto taxation continues, it remains to be seen whether Biden’s proposed changes will gain traction in Congress. The crypto industry’s objections to the proposed measures suggest that they will continue to push back against any perceived unfair treatment by lawmakers.
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