U.S. President Joe Biden released his official budget plan for 2024 this Thursday and cryptocurrency trading is one of its targets. Many of his proposals include subjecting cryptocurrencies to the same wash-sale rules as stocks and bonds, while also raising capital gains taxes for the wealthiest Americans.
Despite an $835 billion defense budget, the plan would help reduce the budget deficit by $3 trillion over the next decade through a series of business tax hikes and government spending cuts, according to the White House.
Some of the government's tax priorities include raising the tax on share buybacks from 1% to 4%. Meanwhile, for those earning more than $1 million a year, capital gains will be taxed at the same rate as wage income. The plan will also close the "like-for-like trade" loophole, whereby crypto traders can sell their underwater crypto investments, claim deductible losses and buy back their tokens instantly. Estimates from The Wall Street Journal suggest this could add $24 billion to the government.
The budget seeks to reverse many of the tax reforms put in place by the Trump administration that have lowered the effective tax rate for businesses below 10%. "The budget sets the corporate tax rate at 28 percent, still well below the 35 percent it was before the 2017 tax law," Biden wrote. "This tax rate change has other incentives to create jobs and invest in America and secure the A supplement to the proposal that pays its fair share."
The president remains committed to not implementing any tax changes that would affect those making less than $400,000 a year. The government claims its plan would stabilize the budget deficit at around 5% of GDP, compared to 6% without the president's policies. Last month, Trump administration vice president Mike Pence said persistent deficits would plunge the U.S. into a debt crisis for decades to come.
In 2021, Biden’s infrastructure bill introduced a controversial policy to expand tax reporting requirements for cryptocurrency “brokers,” a loose definition that technically applies to miners, validators and developers. Pro-cryptocurrency senators including Pat Toomey and Cynthia Lummis have pledged to revise the language at a later date.
In the drafted legislation, Lummis also proposed excluding bitcoin transactions under $200 from capital gains taxes to better enable its use as a form of currency.
