Biden’s Budget Proposes 30% Tax on Crypto Mining Electricity Usage

President Joe Biden’s proposed budget, which aims to “reduce mining activity,” might eventually subject crypto miners in the United States to a 30% tax on electricity bills.

According to a Department of the Treasury supplementary budget paper published on March 9, any company using resources, whether they are owned or rented, would be “subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.”

It is suggested that the tax would come into effect after December 31 and would be rolled in over three years with a rate of 10% per year, rising to the top tax rate of 30% by the third year. Reporting criteria for cryptocurrency miners would include ” the amount and type of electricity used as well as the value of that electricity.”

In accordance with current regulations, cryptocurrency investors are allowed to sell their assets at a loss for tax reasons (a practice known as tax-loss harvesting) and then quickly buy those digital assets back.

The tax would still apply to cryptocurrency miners who obtain their electricity off-grid, and they would be obliged to calculate the cost of electricity produced by any “electricity generating plant.”

Crypto Mining has Negative Effects on the Environment

In support of the taxation, the Treasury argued that energy use by crypto mining operations “has negative environmental effects,” raises costs for customers who share a grid with the activities, and poses  “uncertainty and risks to local utilities and communities.”

It added: 

“An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.”

The White House also verified allegations that it is going to abandon a tax policy for cryptocurrency transactions that it believes would earn $24 billion in a statement on March 9.

Notably, the Biden White House presented its first framework for cryptocurrency regulation in the US in September 2022. It outlined how the financial services industry could grow to support borderless transactions and how to combat market fraud.