The Cryptocurrency Tax Fairness Act seeks to exempt purchases made with Bitcoin below $600 from capital gains tax per current IRS rules. This would open up the market for Bitcoin adoption with vendors.
There must be something in the water in D.C. A hint of swamp drainage bringing in some fresh water to clear the heads of some members of Congress.
Reps. Jared Polis and David Schweikert, who co-lead the Congressional Blockchain Caucus, are hoping to alleviate some of the issues resulting from that ruling with the Cryptocurrency Tax Fairness Act.
Polis (D-CO) and Schweikert (R-AZ) must have gotten the first taste of that fresh water and had, what some alcoholics call, “a moment of clarity.”
The current IRS rules, begun in 2014, treat cryptocurrencies as property and so every transaction is subject to capital gains tax. This is, of course, complete nonsense. And the idea that it is either rational or enforceable is ludicrous.
All this rule does is criminalize non-reporting of all your past cryptocurrency transactions if you are audited and they are able to trace your transaction history on the blockchain to serve you with a larger tax bill.
One, this is easier said than done. And two, with the rise of full-anonymity with coins like Dash and Monero (which by the way, is being forced to hard fork sooner than expected because of its meteoric rise in price and popularity)
The rule was designed to make it a nightmare for vendors to accept bitcoin in transactions because it needlessly complicates its tax reporting among other things.
The new bill, if it becomes law, which is a long way away, would pave the way for Bitcoin and other cryptocurrencies to be spent back into the economy vastly increasing its liquidity because of the lowered tax reporting burden.
I’m having a hard time believing that will happen but if President Trump is serious about truly restarting the entrepreneurial spirit in the U.S. continuing to drive it underground with bad IRS and SEC rules is not going to work.
Cryptos are here to stay. We will find ways around these rules or simply ignore them. Services like Purse, which matches buyers and sellers of cryptos using Amazon or vendors on its network as the intermediary, are one such example. Yes, the transaction still implies a capital gains tax, but again, is this worth the IRS’s time and energy?
Freeing the crypto-market up from this burden will end the one-way capital flow into them without it coming back into the general economy. This is why the ICO market is such a madhouse right now. There is all this new-found wealth that cannot be easily or legally spent without alerting the IRS.
So, start a new company by issuing coins to diversify your holdings.
Polis and Schweikert should be commended for this bill.