White House Report Justifying 30% Crypto Mining Tax Cites Lack of “Economic Benefits”

A proposed 30% excise tax on cryptocurrency mining companies was the focus of one report released by the White House on Tuesday, in which the administration reiterated its position that pinching miners’ profits is in the best interests of American communities and the environment.

“Companies do not have to pay for the full cost they inflict on others,” the report said, adding that the proposed tax “encourages companies to start paying more attention to the harm they inflict on society.”

The proposed excise tax would affect digital asset miners starting in 2024 and require such firms to pay Uncle Sam a tax based on their associated electricity costs – starting at 10% and increasing each year until it reaches 30%.

The White House in 2024 budgetwhich introduced the tax in March, estimates it could help the government reduce the deficit by $74 million in its first year, potentially growing to $444 million by fiscal year 2033.

Officially named the Digital Asset Mining Energy (DAME) tax, it applies equally to digital asset miners who earn income by validating transactions on proof-of-work networks like Bitcoin and proof-of-stake networks like Ethereum, despite that they have vastly different levels of energy consumption.

The report estimates that crypto miners in the US consumed around 50,000 gigawatt hours of electricity in 2022 between Bitcoin and Ethereum, almost as much as TVs and especially more than home computers.

To estimate these numbers, the White House started with global estimates of cryptomining power usage and segmented out a representative fraction for US-based Bitcoin and Ethereum operations.

As part of the proposed tax, digital asset miners will be required to disclose the amount of electricity they use, the source – whether it is from renewable energy or not – and the associated value. It also applies to electricity generated off-grid, for example conversion what would otherwise be wasted natural gas.

Among those critical of the proposed tax was investment firm a16z’s head of policy, Brian Quintenz, who drew attention to the focus on electricity as opposed to carbon emissions.

“So, apparently it doesn’t matter where the power comes from,” he said on Twitter. “If the government doesn’t like how you use the energy, you will be punished.”

Aside from addressing environmental concerns, the administration argues that digital asset mining disproportionately affects communities of color through pollution and increases the cost of renewable energy. The report also makes a valuation of crypto.

“Cryptomining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity,” it said. “Instead, the energy is used to generate digital assets whose wider social benefits have yet to materialize.”

A day after the White House report was released, Democratic presidential candidate Robert F. Kennedy Jr. administration’s logic, and positioned himself as an advocate for digital assets after that shout out a so-called “war on crypto” the day before.

“Bitcoin mining uses about the same as video games and no one is calling for a ban on them,” he said on Twitter. “The environmental argument is a selective pretext for suppressing everything that threatens the power structures of the elite.”