The White House under the President Biden administration wants to impose a 30% punitive tax on crypto mining operations, citing the environmental impact of mining as justification for these taxes even if it harms the cryptocurrency market as a whole.
In a blog post on Tuesday, May 3rd, the White House’s Council of Economic Advisers (CEA) presented the case for the punitive tax, saying that crypto mining firms would pay an amount equal to 30% of their energy costs in tax. The post reads:
“After a phase-in period, firms would face a tax equal to 30 percent of the cost of the electricity they use in crypto mining.”
Digital Asset Mining Energy (DAME) Excise Tax
According to the publication, the proposal named “The Digital Asset Mining Energy (DAME) Excise Tax” was presented in the Budget for Fiscal Year 2024. The proposal seeks to impose a 30% punitive tax on crypto-mining operations for the “harms they impose on society.”
The proposal’s text states that any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would have to pay the tax. Mining firms must report the type, amount, and value of electricity used if purchased externally. Firms leasing computational capacity would be “required to report the value of the electricity used by the lessor firm attributable to the leased capacity, which would serve as the tax base.”
The proposal cites the electricity costs and related environmental and social issues to justify the burden on crypto miners. The CEA argues:
“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. The DAME tax encourages firms to start taking better account of the harms they impose on society.”
While other energy-intensive industries wouldn’t be similarly saddled with the new tax, the White House said that crypto mining didn’t bring “local and national economic benefits typically associated with businesses using similar amounts of electricity.”
The White House expects $3.5 billion in revenues over ten years. The DAME Tax will likely come into effect after December 31st, 2023, and will be phased in over three years at a rate of 10% in the first year, 20% in the second, and 30% after that. However, it is unlikely that Republican Congressmen will allow this proposal to go forward as they have voiced against the penalization of the crypto sector.
The potential new tax should not come as a surprise, given the past attitude of the Biden administration towards crypto. As reported, the White House’s annual economic report to Congress in March spares no words to label crypto an all-out danger to financial stability.
