Bitcoin miners in the United States will not be taxed for consuming energy following US debt ceiling negotiations.
The Biden administration’s federal budget proposal to impose a 30% tax on all U.S. bitcoin miners has been scrapped, a national policymaker confirmed on Sunday.
The withdrawal is part of a series of tax-related concessions the administration has made in negotiations over the nation’s fast-approaching debt ceiling.
No more mining tax
Ohio Rep. Warren Davidson on Sunday shared the text of a newly proposed debt ceiling deal, the culmination of negotiations between Democratic President Joe Biden and Republican House Speaker Kevin McCarthy.
The bill would completely suspend the debt ceiling through January 1, 2025, removing it as an issue in the 2024 federal election. On the other hand, it would implement a number of spending cuts, including limiting non-defense spending and cutting funding for the IRS.
In response to Davidson, Pierre Rochard, vice president of research at bitcoin mining company Riot Platforms, pointed out that the bill does not mention the Digital Asset Mining Energy (DAME) tax that the administration had previously proposed. Davidson confirmed that the proposal had been scrapped and that one of the Republicans’ negotiating victories was blocking the tax proposed by the Democrats.
The proposed tax would subject proof-of-work cryptocurrency miners to a 30% tax on all energy consumed in the mining process, effectively raising the cost of operating a mining operation in the United States.
The administration defended the tax in guidance to Congress earlier this month as a way to make miners “pay for the full costs they impose on others” through “higher energy prices” and “greenhouse gas emissions.”
Critics of the consumption tax
However, critics claim that the energy tax arbitrarily targets specific industries and will drive mining out of the United States, which is currently the world's most popular mining hub.
Among them is Sen. Cynthia Lummis, who told an audience at the 2023 Miami Bitcoin Conference that onerous taxation “is not going to happen.”
She said at the time, "It is absolutely important that the development of this technology and that bitcoin mining itself occurs in the United States."
Many Bitcoin supporters question the idea that mining is so harmful to the environment in the first place. In September, MicroStrategy Executive Chairman Michael Saylor published a blog post arguing that miners’ carbon emissions “would go virtually unnoticed were it not for competing guerrilla marketing campaigns by other cryptocurrency promoters and lobbyists.”
Ripple co-founder Chris Larson last year funded a $5 million environmental campaign to encourage bitcoiners to move their protocol to a less energy-intensive consensus mechanism like proof of stake, and groups such as the Environmental Working Group and Greenpeace have joined.