United States President Joe Biden and his administration plan to impose a severe tax on cryptocurrency mining operations, citing “harms they impose on society.” The report comes after an online post on Tuesday, May 2, by the White House Council of Economic Advisers (CEA).
BREAKING: President Biden makes history by proposing a 30% tax on electricity used in cryptocurrency mining to be used to minimize the growing industry’s negative impact on climate change.
Cryptomining — the computing process that generates the digital currency — consumes an… pic.twitter.com/yXSiSIiCqc
— Occupy Democrats (@OccupyDemocrats) May 3, 2023
The blog entry by the Biden administration made the case for a U.S. tax equivalent to 30% of the energy cost a mining company spends. Notably, this anomalous industry-specific penalty could threaten the profits of businesses operating in that sector. Citing the CEA’s description of the excise duty christened the “Digital Asset Mining Energy” tax:
Currently, crypto mining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate.
These firms would also be required to report how much electricity they use and what type of power was tapped. The tax would be phased in over the next three years, increasing by 10% yearly.
While other energy-intensive entities would not be burdened with a similar tax weight, the CEA supports that “crypto mining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity.”
A Development In Biden’s 2023 Budget Proposal
Notably, the Biden administration first proposed the excise tax during the release of the 2023 budget proposal on March 9. The proposal, published by the U.S. Treasury Department and dubbed “Greenbook,” details the administration’s proposals and priorities for generating revenue over the next year. However, such a proposal often records a short lifespan as it often dies in Congress when the sitting committee concludes the country’s spending plans.
According to the post, if the proposal passes, the nation could raise upwards of $3.5 billion in revenue over the next decade. Among the firms that would be affected by the punitive excise duty include Riot Platforms (RIOT), Marathon Digital (MARA), Cipher Mining (CIFR), Greenidge Generation (GREE), BitDeer (BTDR), and CleanSpark (CLSK).
CEA Concerned About The Crypto Industry
The administration’s Council of Economic Advisors also released a March report explaining its wider concerns over the industry. In the report, the CEA noted the possible economic effects of mining as one such issue.
Some of the concerns are the possibility of pollution and the impact that having mining firms move close would have on local communities. According to the post, even companies using clean energy could raise the general energy costs and usage of the community around them. The proposal articulates that this tax could potentially lower the country’s overall number of mining machines. An excerpt reads:
The increase in energy consumption attributable to the growth of digital asset mining has negative environmental effects and can have environmental justice implications as well as increase energy prices for those that share an electricity grid with digital asset miners. Digital asset mining also creates uncertainty and risks to local utilities and communities, as mining activity is highly variable and highly mobile. An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.
Congressional Republicans have denied efforts by regulators and the administration to tax the cryptocurrency sector. Accordingly, it should not be surprising if the Republican-controlled House prevents the taxes that would otherwise punish the industry.
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