Proposal for 30% Bitcoin Mining Tax Seemingly Quashed Amidst Debt Ceiling Agreement

Bitcoin miners can now rest easy as a proposal by the U.S. government to impose significant taxes on the industry seems to have been shelved, following an overarching agreement between President Biden and key Republicans to prevent the United States from succumbing to a debt default.

The tax proposal was first suggested by the White House in early May as part of a potential new legislation named the Digital Assets Mining Energy Excise Act, or the DAME Act. This bill proposed a 10% tax on the power consumption of Bitcoin and other cryptocurrency miners starting in 2024, with the possibility of this rate escalating to 30% by 2026.

Despite no subsequent updates from the White House regarding this tax proposal, Ohio's Republican Congressman Warren Davidson confirmed on Sunday that the mining tax will not be implemented.

Davidson tweeted on Sunday in reply to a cryptocurrency executive's observation that the excise tax was absent from a new bill outlining the conditions for increasing the so-called debt ceiling, "Yes, one of the victories is blocking proposed taxes." Davidson's tweet came after he posted a link to the bill, which represented a consensus between the White House and the Republican leadership concerning the elevation of the federal debt limit.

The Treasury Department has yet to respond to a query from Fortune about the current status of the DAME Act. However, for now, the legislation seems to be stalled as another high-ranking Republican stated that the debt ceiling agreement “thwarts Democrat attempts for new taxes and rejects all $5 trillion of Biden’s proposed tax hikes.”

The White House initially asserted that the DAME Act could have generated $3.5 billion in revenue over a decade.

In recent years, crypto mining has emerged as a significant focus of environmental activists and Democratic policymakers, who argue that it unnecessarily consumes vast quantities of energy while offering limited advantages, and in some instances, leads to increased electricity bills for residents in areas where mining activities are located. Conversely, proponents of cryptocurrency contend that the environmental criticism against Bitcoin mining is exaggerated and that detractors misunderstand the industry, a large portion of which relies on renewable energy sources within the U.S.

While Bitcoin does demand substantial energy to function, newer blockchains utilize a considerably smaller amount of electricity, as they are based on a different system called proof of stake. Ethereum, the second most popular cryptocurrency, which adopted proof of stake last fall, exemplifies this.

Even though the U.S. government's plan to tax cryptocurrency mining seems to be off the table for the time being, the debt ceiling agreement is not without its challenges, and it must receive approval from both the House and the Senate before it can be enacted.

Photo by David McBee:

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