There’s No Merit to That 80% Crypto Capital Gains Tax Rumor

The Biden White House is preparing to unveil a comprehensive tax plan that will include significant increases in capital gains taxes on those earning over $1 million, but there is no evidence to suggest that cryptocurrency will be specifically targeted. Bloomberg […]

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By Vladimir Solomyani via Unsplash

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The Biden White House is preparing to unveil a comprehensive tax plan that will include significant increases in capital gains taxes on those earning over $1 million, but there is no evidence to suggest that cryptocurrency will be specifically targeted.

Bloomberg reported that as part of the White House’s next economic package, the Biden Administration will propose a 39.6% capital gains tax for those earning over $1 million. The current maximum capital gains tax rate is just over 20%. When combined with existing surtaxes on investment income, this would push the federal tax rate to nearly 43.4% — and in high tax states such as New York and California this total amount would be over 50%. 

Although gains from cryptocurrency would be included in any sort of calculation on capital gains tax, the White House has not specifically highlighted crypto as a new category for taxable commodities. Needless to say, rumors spread fast on Crypto Twitter that an 80% tax rate on crypto-specific gains was in the works.   

“I think the 80% discussion had no basis in reality,” Max Schatzow, an attorney with Stark & Stark that advises fund managers and RIAs. “I can’t recall any serious sources reporting that figure.”

Regardless of if a crypto-specific tax is in the works, the digital asset market seems spooked about the possibility of higher capital gains taxes. The price of bitcoin fell below the $50,000 market to $49,500, the lowest in nearly two months late Thursday, and is hovering just above the $50,000 point during the US Friday trading session. 

Bitcoin is down nearly 20% over the past week, according to CoinGecko. 

In a note in mid-March investor Ray Dalio argued that the United States is on a path to being “inhospitable to capitalism” because of a “new paradigm” of “shocking tax changes” put in place to pay for the fiscal response to Covid-19. 

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With the recent election, it’s clear that there will be a meaningful shift in crypto regulations and legislation. Trump is likely as pro-crypto as a president can be. He launched (multiple) of his own NFT collections and is launching an Aave wrapper called World Liberty Fi. He has also spoken out and mentioned that he wants to make the United States "the crypto capital of the planet" and transform it into the "Bitcoin superpower of the world". He proposed creating a strategic national Bitcoin stockpile alongside support from Senator Cynthia Lummis, promising to retain 100% of all Bitcoin held by the U.S. government. More importantly, we’re likely to see deregulation across the board in a lot of industries, with crypto being one of them - as Trump has committed to keeping the crypto market largely unregulated. Crypto, DeFi in particular, has historically been knee-capped by overreaching and hostile governmental agencies and regulation by enforcement, as evidenced by the plethora of Wells notices and lawsuits over the past few years. With Donald Trump winning the presidency, Republicans taking control of the Senate, and being on the verge of securing the House, we think it’s likely that crypto realizes positive regulatory clarity. Below, you can find our analysts’ takes:

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