The proposal has been deemed the Digital Asset Mining Energy (DAME) excise tax, and the president said levying such a tax demonstrates a commitment to both the economy and the environment. The tax is set to be phased in after Dec. 31, 2023. As such, the tax would be 10% the first year it is enacted, 20% the second and 30% for each year after.
“Digital asset mining also creates uncertainty and risks to local utilities and communities, as mining activity is highly variable and highly mobile,” reads an explanation of the proposal. “An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.”
Presently, tax law does not provide specific rules to address digital asset taxation, short of certain provisions dealing with cash transactions and broker reporting, notes the Department of the Treasury.
From Twitter
Wayne Vaughan @WayneVaughan ·May 3
"The Biden Administration has proposed a defacto ban on Bitcoin mining in the US via a 30% tax. This tax would make Bitcoin mining unprofitable. This is an element of a broader strategy by Democrats to ban Bitcoin and crypto. https://t.co/IWnNxXCRIs"
As the proposal explains, firms mining digital assets would have to report what type of electricity was used in the process, how much of it was used and in cases where it was purchased externally, the cost to buy the electricity. For firms leasing computational capacity, “the value of the electricity used by the lessor firm attributable to the leased capacity” would represent the tax base.
“Currently, cryptomining 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,” reads the President’s budget plan.
From Twitter
"Nic Carter on proposed 30% tax on Bitcoin miners: “If this precedent is set, any politically disfavored energy consumer will potentially be in the crosshairs. Ie the next DAME tax targeting data-centers running AI models that aren’t sufficiently woke” (…or think states that have banned abortion…) #Bitcoin @nic__carter"
According to Biden’s reasoning, other counties like China and several provinces in Canada have already taken similar measures; as such, the likelihood miners will simply relocate to more mining-friendly destinations is shrinking.
“Of course, the DAME tax is not a panacea—it is only one example of the Administration’s efforts to fight climate change, reduce energy prices, and increase access to electrified options for all Americans,” adds the proposal. “Similarly, it is just one example of the President’s larger efforts to ensure the responsible development of digital assets, modernize their tax treatment, and mitigate risks to financial stability.”
