- White House proposes 30% excise tax on cryptocurrency mining firms based on their associated electricity costs.
- Tax is expected to reduce government deficit by $74 million in the first year and may grow to $444 million by 2033.
- The proposed tax justifies the environmental and social impacts of mining on communities and encourages firms to account for the harms they impose on society.
The White House recently released a report justifying its proposed 30% excise tax on cryptocurrency mining firms, citing a lack of “economic benefits” from digital asset mining. The proposed tax would impact digital asset miners beginning in 2024, requiring any such firm to pay a tax that’s based on their associated electricity costs – starting out at 10% and ticking up each year until it reaches 30%.
The report estimates that crypto miners in the U.S. consumed around 50,000 gigawatt hours of electricity in 2022 between Bitcoin and Ethereum, almost as much as televisions and notably more than home computers. The tax will apply equally to digital asset miners that earn income by validating transactions on proof-of-work networks like Bitcoin and proof-of-stake networks like Ethereum, despite having vastly different levels of energy consumption.
So, apparently it doesn’t matter where the electricity comes from – coal, gas, 100% renewable, etc. If the government doesn’t like how you USE the energy, you’ll be penalized. Oh, and just wait until they add a CBDC… https://t.co/ut5cUA6YkB— Brian Quintenz (@BrianQuintenz) May 2, 2023
The White House’s 2024 budget, which introduced the tax in March, estimates that it could help the government reduce its deficit by $74 million in the first year, potentially growing to $444 million by the fiscal year 2033. The report argues that the proposed tax “encourages firms to start taking better account of the harms they impose on society” and “firms do not have to pay for the full cost they impose on others.”
As part of the proposed tax, digital asset miners would be required to disclose the amount of electricity they use, its source – whether it’s from renewables or not – and its associated value. It also applies to power generated off-grid, such as converting what would otherwise be wasted natural gas. Among those critical of the proposed tax was investment firm a16z’s Head of Policy Brian Quintenz, who called attention to its focus on electricity as opposed to carbon emissions.
The report argues that digital asset mining disproportionately impacts communities of color because of pollution and drives up renewable energy costs. The administration argues that digital asset mining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity, stating that “the energy is used to generate digital assets whose broader social benefits have yet to materialize.”
Democratic presidential candidate Robert F. Kennedy Jr. seized on the administration’s logic, aligning himself more closely as an advocate of digital assets after calling out a so-called “war on crypto” the day before. “Bitcoin mining uses about the same as video games, and no one is calling for a ban on those,” he said on Twitter. “The environmental argument is a selective pretext to suppress anything that threatens elite power structures.”
Yes, energy use is a concern (though somewhat overstated), but bitcoin mining uses about the same as video games and no one is calling for a ban on those. The environmental argument is a selective pretext to suppress anything that threatens elite power structures. Bitcoin, for…— Robert F. Kennedy Jr (@RobertKennedyJr) May 3, 2023
In conclusion, the proposed excise tax on cryptocurrency mining firms has been a hot topic since its introduction in March. The White House’s recent report justifying the tax cites the lack of “economic benefits” from digital asset mining and focuses on the environmental and social impacts of mining on communities. While critics of the tax argue that its focus on electricity as opposed to carbon emissions is misguided, supporters argue that it will encourage firms to take better account of the harms they impose on society.