US Treasury proposes 30% tax on electricity costs
US-based crypto mining companies could be subject to a 30% tax on electricity costs under a new budget proposal aimed at reducing mining activity.
According to a supplementary budget explanatory document from the Ministry of Finance, any firm using owned or leased mining rigs will be “imposed an excise tax equal to 30 percent of the cost of electricity used in digital asset mining.”
In particular, the proposed tax will be implemented next year and phased in gradually over a period of three years at a rate of 10% a year, reaching the target of a 30% tax rate by the end of 2026.
Crypto miners must also report the amount and type of electricity they use, as well as the value of that electricity. This means that even miners who use off-grid electricity for their operations still have to pay taxes.
Biden Administration aims to reduce mining
The provision expressly mentions that the new amendment aims to reduce mining activities “along with associated environmental impacts and other damages”. The Ministry of Finance added that the energy consumption of crypto mining increases prices for those sharing a network and creates uncertainty and risk for local communities.
“The increase in energy consumption attributable to the growth of digital asset mining has negative environmental impacts and may have environmental justice implications, as well as increasing energy prices for those who share a power grid with digital asset miners,” the document states.
“Digital asset mining also creates uncertainty and risk for local utilities and communities, as mining activity is highly variable and highly mobile. A special tax on electricity use by miners with digital assets could reduce mining activity along with associated environmental impacts and other damages.”
Meanwhile, some in the crypto community have criticized the new proposal, noting that the structure is flawed. “If you care about climate, you should penalize/tax cryptomining’s carbon footprint, not total energy consumption,” said John Buhl, a crypto venture builder, in a recent tweet.
The new proposal comes just a week after US Senator Edward Markey and Representative Jared Huffman revealed intentions to reintroduce the Crypto-Asset Environmental Transparency Act in Congress in an effort to promote greater transparency around crypto mining and its environmental impacts.
Should it be approved, the proposed legislation would mandate that cryptomining operations publish their emissions data for operations that use more than 5 megawatts of power, or for multiple cryptoasset mining facilities under the same ownership, each with a power load of less than 5 megawatts but with a cumulative power load of 5 megawatts or more.
In addition, the legislation would require the head of the Environmental Protection Agency (EPA) to lead an interagency investigation into the effects of cryptomining in the United States. This inquiry will receive a budget of $5 million and be required to release the results within 18 months of the bill being ratified.
