Paying Taxes With Bitcoin Is A Win-Win-Win

[OgNasty]

The proposal to pay taxes using Bitcoin has gotten a bit of a bad wrap in the community and I think that is misguided.

Rep. Warren Davidson (R-OH) introduced today the Bitcoin For America Act in the U.S. House of Representatives, a landmark proposal designed to modernize the U.S. financial system and position the nation at the forefront of the global digital asset economy.

The bill would allow Americans to pay federal taxes in bitcoin, with all proceeds deposited into a newly created Strategic Bitcoin Reserve (SBR).

► https://bitcoinmagazine.com/news/bitcoin-for-america-act-tax-free-bitcoin

There must be a special place in hell for those who decide to pay their taxes in Bitcoin.

Paying Taxes With Bitcoin Is A Win-Win-Win

If this bill passes and Bitcoin can be used to pay taxes without triggering capital gains taxes, that benefits everyone involved.

• Tax receipts would increase the Strategic Bitcoin Reserve to benefit America.
• The taxpayer can repurchase Bitcoin at current market rates, thereby raising their BTC cost basis for future tax benefit.
• The market would have BTC removed from supply forever to be placed into the SBR and will have buying pressure as that spent BTC is repurchased by the taxpayer.

A win for America.  A win for the taxpayer.  A win for the Bitcoin market.  

We should all be hoping this bill passes.  If it does, anyone with unrealized capital gains on their BTC should consider paying their taxes in Bitcoin and buying more to replace it.

Thoughts?

[_act_]

Having alternatives is always good, so if bitcoin can be used directly to pay tax, it will really will be good and many people will accept it. But I will prefer to use fiat to pay the tax and hold the bitcoin that I supposed to use to pay the tax.

But if the government will not convert the tax paid in bitcoin to fiat, I will prefer to pay the tax in bitcoin and convert more fiat to bitcoin instead. But I doubt if the government will not convert the tax to fiat.

[OgNasty]

But if the government will not convert the tax paid in bitcoin to fiat, I will prefer to pay the tax in bitcoin and convert more fiat to bitcoin instead. But I doubt if the government will not convert the tax to fiat.

He government already came out and said that they would never sell any Bitcoin they take in. They also said they were looking for budget neutral ways to accumulate more Bitcoin. I don’t know if accepting Bitcoin for tax debts falls into budget neutral territory, but I’m fairly certain they wouldn’t sell any BTC they take in.

[zkazy]

I think it is a great idea to me, as it would seem to recognize Bitcoin as an official currency for the payment of (tax) debts.  If enacted, it seems that it would pave the way for the federal government to pay government contractors with Bitcoin rather than pay them in USD, further cementing Bitcoin's status as a currency rather than an investment vehicle.  Perhaps this would open the door to treating it more like cash for tax purposes??

[noorman0]

If increasing the SBR is their primary motive, they'll still continue to accumulate Bitcoin from fiat tax revenue. I do see large entities indeed competing to increase their Bitcoin on-chain holdings recently. This is in order to realize a society where they own nothing and be happy.
Passing this law isn't a universally win-win solution; it depends on how willing citizens are to pay with it. I just think I'd only give them half the ability to monitor me more intensively than before; once I pay taxes with BTC, my privacy is over. Or I'll have to lie about total of my holdings.

-snip-

• The market would have BTC removed from supply forever

Let me guess where they'll store their SBR : 1CounterpartyXXXXXXXXXXXXXXXUWLpVr.
What will happen when budget deficits, mounting debt, or a consensus vote forces it to be cashed in?

[asriloni]

Hmmm interesting. It means if that bill will be passed, US ain't treating bitcoin as only a niche investment, instead of turn it as a true strategic asset and make it clear about Bitcoin's role. However, it can be a bet by the government, and i'm wondering how they will overcome the volatility that may happen to the tax paid in btc.
If the price is appreciating, it's good. However, if it's down, it sounds bad.

[death69]

You pay taxes in BTC. No capital gains trigger. The sats go into an SBR which cannot be sold (that's the whole point of a strategic reserve, it sits there, accumulating, like gold in Fort Knox except actually auditable). You then turn around, and buy replacement BTC at spot price. Your reset your cost basis to a higher amount. The government is a permanent hodler whether they philosophically "get it" or not.

And apply the supply dynamics: each payment of the tax in the BTC will be forever taken out of circulation. Not sold. Not redistributed. Locked. Meanwhile the taxpayer comes back into the market as a buyer - new demand against falling available supply. Do this on a large scale with millions of taxpayers and you're looking at a supply squeeze that makes the halving cycles look gentle.

The people screaming "don't give the government your Bitcoin!" are missing something very basic. The government is going to tax you either way. That's not an issue of bitcoins, that's an issue of citizenship. So how to pay in such a way that helps strengthen the network you believe in?

Fiat payment: dollars in general treasury, spend on whatever, inflate away, nothing changes.

BTC payment: sats get locked into reserve, supply tightens, your cost basis gets better, Nation-State gets in lock-step with the success of Bitcoin.

What is the outcome that you actually want?

[davis196]

Tax receipts would increase the Strategic Bitcoin Reserve to benefit America.
The taxpayer can repurchase Bitcoin at current market rates, thereby raising their BTC cost basis for future tax benefit.
The market would have BTC removed from supply forever to be placed into the SBR and will have buying pressure as that spent BTC is repurchased by the taxpayer.

Are you suggesting that all BTC being paid as taxes would be held in the Strategic Bitcoin Reserve? Does the US government have any benefit in collecting tax revenue only to store it in a reserve? The USA has a 2 trillion dollar budget deficit. Collecting taxes in BTC and not using them for government spending doesn't solve the budget deficit problem.
I get the point of reducing the total BTC supply and creating buying pressure, but using the US tax system to artificially pump the price of a financial asset seems sketchy to me. Will the taxpayers have the option to choose between fiat and BTC, when paying the tax? If yes, I think that most taxpayers would choose to pay with fiat, because the BTC price might increase in the future.

[Sammye3]

With this initiative, it would really be good for Bitcoin and the American economy but I don't see how this could be really beneficial to the taxpayers at large because not everybody in America has the knowledge of Bitcoin and with the law enacted, the price of Bitcoin would rise definitely making Bitcoin more expensive to buy but holders of Bitcoin would benefit from this too, because Bitcoin could be bought at a lower amount and used to pay tax in the future.

For the American government, with this Bitcoin has being accepted as a money-like asset and could affect the dominance of dollar in the economy and I think to control regularity of Bitcoin to dollar equivalent, a conversion strategic team could be set up to regulate the fluctuations of current price of bitcoin with the dollar value.

And America could possibly see new crypto start-ups initiatives as paying taxes in Bitcoin could be a really good boost for the crypto world, so it's actually a win-win-win situation.

[krishnaverma]

A win for America.  

It might be good for users but not for government. It is very impractical for the government. The volatility in crypto price will make the revenue unpredictable. How will proper planning be done based on this ?

[Zlantann]

A win for America.  

It might be good for users but not for government. It is very impractical for the government. The volatility in crypto price will make the revenue unpredictable. How will proper planning be done based on this ?

The plan is to keep the Bitcoin in a strategic reserve where it wouldn't not be sold. The government wouldn't have to worry about volatility since the price of Bitcoin has kept appreciating over the years. Although we know that these laws can be amended and another government may decide to auction the Bitcoin in the reserve. The past government led by Joe Biden reduced the amount of Bitcoin held by the US because it kept on selling.

Having more options for paying taxes is good. It also saves the stress of converting Bitcoin to fiat before paying taxes. It could also reduce the transaction cost of paying taxes. Since the blockchain is open to all, paying taxes I Bitcoin will also promote transparency. Taking some Bitcoin off the market sounds nice since it could affect the price.

[Aanuoluwatofunmi]

Yes, it's a win-win from our end because we have to pay tax as at when due in fulfilment if all obligations, secondly they are now in support of what they once attacked before and now demands for making payments in it, this is showing something, that they are left with no alternative than to join us in the same adoption, even though they never wanted it to prevail over the use of fiat because of their own personal interest in controlling the system.

[FortuneFollower]

A win for America.  

It might be good for users but not for government. It is very impractical for the government. The volatility in crypto price will make the revenue unpredictable. How will proper planning be done based on this ?

I do think if the bill passes not - that many - people will get their hands on paying up with BTC right away. Mostly, it still would be fiat going in.

[pooya87]

It looks more like Win-Lose-Lose to me.

The US government will win since they'll freely acquire bitcoins without any effort. And that will also help them increase their surveillance on all Americans who own any coins which the IRS will use in the future to extort more money from them.

It is a lose for the taxpayer because many people still see bitcoin as an investment and they don't want to spend their coins let alone hand it over to the government. That's the stash they've worked so hard to accumulate.
Additionally the lose of privacy is going to hurt them in the future.

It is a lose for the bitcoin market since the US government having bitcoin will translate into them wanting to control that market and even pull off market manipulation to cover part of their budget deficit which would damage bitcoin image and the bitcoin market.

[CryptSafe]

It is a good one to say, as it would positively affect the bitcoin and crypto market in a good way. The adoption would definitely increase, and many would want to use Bitcoin since the government has started encouraging the use of Bitcoin amongst its citizens and traders as well. It would further trigger an increase in demand for Bitcoin, which will also further increase the price value of Bitcoin. There are many enthusiasts out there who would be excited over this development if it scales through readings successfully, but I will not dare use my BTC to pay tax, but rather ill prefer to use fiat for my tax since the payment is optional.

Bitcoin is too precious to waste on the government just to pay tax when they, too, are hoping to use it as a store of value and possibly gain from holding it for a long term, and after which they have made some gains, they likely sell it and take profit, then I will keep fueling their wealth with my hard-earned bitcoin.

[hero_the_bossman]

It looks more like Win-Lose-Lose to me.

The US government will win since they'll freely acquire bitcoins without any effort. And that will also help them increase their surveillance on all Americans who own any coins which the IRS will use in the future to extort more money from them.

It is a lose for the taxpayer because many people still see bitcoin as an investment and they don't want to spend their coins let alone hand it over to the government. That's the stash they've worked so hard to accumulate.
Additionally the lose of privacy is going to hurt them in the future.

It is a lose for the bitcoin market since the US government having bitcoin will translate into them wanting to control that market and even pull off market manipulation to cover part of their budget deficit which would damage bitcoin image and the bitcoin market.

I don't think it will be that much for them in the long run, imo, however, I see where you are getting from.

BTC as an option to pay up is not bad on paper, but when you look at it from the perspective to where it goes, it's not as shiny and dandy.

[OgNasty]

It looks more like Win-Lose-Lose to me.

The US government will win since they'll freely acquire bitcoins without any effort. And that will also help them increase their surveillance on all Americans who own any coins which the IRS will use in the future to extort more money from them.

It is a lose for the taxpayer because many people still see bitcoin as an investment and they don't want to spend their coins let alone hand it over to the government. That's the stash they've worked so hard to accumulate.
Additionally the lose of privacy is going to hurt them in the future.

It is a lose for the bitcoin market since the US government having bitcoin will translate into them wanting to control that market and even pull off market manipulation to cover part of their budget deficit which would damage bitcoin image and the bitcoin market.

I don't think it will be that much for them in the long run, imo, however, I see where you are getting from.

BTC as an option to pay up is not bad on paper, but when you look at it from the perspective to where it goes, it's not as shiny and dandy.

Nah, that’s a horrible take and obviously biased in a major way. You don’t lose privacy by spending BTC unless you don’t care about protecting your privacy. You can also buy back your BTC with money you would have had to pay for taxes. As far as manipulation and control goes… Everyone has been trying to do that for over a decade already. Bitcoin isn’t fragile. It needs to be constantly battle tested.

[Apocollapse]

It is a lose for the taxpayer because many people still see bitcoin as an investment and they don't want to spend their coins let alone hand it over to the government. That's the stash they've worked so hard to accumulate.
Additionally the lose of privacy is going to hurt them in the future.

Well it's kind of seeing Bitcoin as an investment, but they would want to spend their coins because it didn't trigger capital gains. They're getting benefit over holding an investment and they can pay the same amount like using fiat, it's a win if we're talking about financial.

But I agree with you, it's a lose for Bitcoin market, this would make Bitcoin less decentralized.

[pooya87]

I don't think it will be that much for them in the long run, imo, however, I see where you are getting from.

I agree, since we also have the example of el Salvador. Despite bitcoin being legal tender, not that many have used it as currency over there.

As far as manipulation and control goes… Everyone has been trying to do that for over a decade already. Bitcoin isn’t fragile. It needs to be constantly battle tested.

Controlling and manipulating the "market" is not the same as controlling bitcoin network and its protocol. The former is easy, specially by a state because of the semi-centralized nature of the market; while the later is impossible by anyone because of decentralized nature of bitcoin.

[cr1776]

If you don't have to realize a gain when paying taxes with bitcoin, that is a plus.  Whether this is a win-win-win or a lose-lose-lose (or some permutation), depends on the details and on future elections.