A conservative think tank, the American Institute for Economic Research (AIER), recently gave a failing grade to President Biden’s Council of Economic Advisors (CEA) regarding the proposed tax on crypto miners. The CEA’s Digital Asset Mining Energy (DAME) tax plan intends to impose a federal 30% charge on the costs associated with crypto mining, including for popular cryptocurrencies such as BTC . This initiative has been met with considerable disapproval, as experts and industry leaders question the administration’s understanding of energy usage, bitcoin, and economic policy.
AIER’s report, written by Joshua Hendrickson, points out that taxing a specific electricity-using activity does not provide any incentive to reduce electricity usage. Instead, it encourages individuals to engage in untaxed electricity-using activities. Industry insiders argue that a tax as high as 30% would essentially shut down bitcoin miners with US operations.
The CEA argues that bitcoin mining is detrimental to third parties, claiming that it drives up electricity prices for consumers. However, Hendrickson contests that the environmental cost comes from electricity generation, not bitcoin mining, and suggests that a tax should be placed on electricity generation instead.
One of the CEA’s key arguments is that pollution from electricity generation disproportionately affects low-income neighborhoods and communities of color. However, Hendrickson proposes that bitcoin miners might be able to combat climate change. For instance, they can buy leftover electricity units from power grids, which could limit harmful methane emissions when the electricity is generated from natural gas.
Environmental organization Greenpeace acknowledged that the DAME tax might be a step in the right direction, but emphasized that the US cannot tax its way out of climate change. The tax initially appeared in a March 9 federal government budget proposal, with a proposed phase-in period of three years, starting at 10% and increasing by another 10 percentage points each year.
In conclusion, it’s clear that there are differing opinions and suggestions concerning the Biden administration’s proposal to tax cryptocurrency mining. While some believe the tax could help combat climate change or address other social issues, detractors argue that it does not provide the right incentives and could further damage the industry.
Source: Blockworks
