The Biden administration has launched a comprehensive attack on crypto investors as part of its ambitious tax reform proposal, causing an uproar in the crypto investment community.
Biden proposing to double capital gains taxes from 20 to 40% and not allowing for tax loss harvesting on #bitcoin …. WTF… pic.twitter.com/SnJNglpoAA
— Lark Davis (@TheCryptoLark) March 9, 2023
The new measures include the removal of tax breaks for crypto trading and the introduction of a capital gains tax, aiming to increase tax revenues and make the US tax system more progressive.
The proposal has received mixed reactions from the industry, with some investors concerned that the changes will lead to a decrease in overall investments made, while others have welcomed the changes and believe that they are necessary to ensure that billionaires pay their fair share of taxes.
Joe Biden wants you to pay a 40% tax on anything your investments make, which is money that was already taxed when you earned it.
This would destroy the middle class’ ability to advance financially. https://t.co/LrzFvwURG8
— Bonchie (@bonchieredstate) March 9, 2023
According to Bloomberg’s report, the administration’s proposal includes a minimum tax rate of 25% for billionaires, affecting many high-income earners. Despite being unpopular with some investors, these changes have been a part of the Biden administration’s broader agenda to increase revenues and rework the US tax system to be more progressive.
Tax Increases Targeting the Wealthy
In March 2022, Biden proposed a billionaire minimum income tax to ensure that households worth more than $100 million pay at least 20% in taxes on both income and unrealized gains from unsold investments.
The proposed changes to the capital gains tax rate are designed to make the US tax system more progressive by increasing the amount of taxes paid by high-income earners. With income inequality becoming a major issue in the US, the Biden administration has been under pressure to introduce such measures since he was elected.
Following up on their old proposal, the changes target a loophole that allows some wealthy investors with “passthrough businesses” to avoid paying tax on their investments, while also increasing the top tax rate for Americans making $400,000 a year to 39.6% from 37%, reversing a tax bill introduced during Trump’s presidency.
The Biden administration is set to undo all Trump-era changes by also raising the income levies on corporations and billionaires, with the corporate tax set at 28%
Tax Increase Impact on the Crypto Industry
The Biden administration has been known to be unfriendly towards the cryptocurrency industry in the past, to say the least.
In 2022, they planned to strengthen the enforcement and regulation of cryptocurrencies and digital assets in the US by developing new rules and guidelines. The proposed regulations have faced opposition from some in the cryptocurrency community who viewed them as overly burdensome to innovation in the sector.
The latest proposed change for the removal of tax breaks for crypto trading means that cryptocurrency investors will no longer be able to defer capital gains taxes on their investments.
This news has caused many crypto investors to worry about the potential impact on the industry, which has benefited from tax breaks for many years.
The proposal is likely to face significant opposition from the GOP. However, the administration is determined to push ahead with its agenda and is likely to unveil its budget plan on Thursday.
The proposed plan comes amid a stalemate between Republicans and the White House over raising the debt ceiling.
The national debt stands at $31 trillion, and Republicans, led by House Speaker Kevin McCarthy, have been insisting that any increase in the debt ceiling should be followed by significant spending cuts rather than higher taxes.
Biden has claimed that his plan will reduce the deficit by almost $3 trillion over the next decade through tax increases. Reaching a consensus on the proposed changes is likely to be a challenging task for the White House, with Republicans currently holding a majority in the House.
The latest tax reform proposal represents a significant challenge to the crypto industry as well, with future impacts on the industry’s long term growth uncertain if the proposal should pass.
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