Recently we only heard news about the birth of the infrastructure bill. It was a long process, the child was in imminent danger of being stillborn. The unlikely midwives are bipartisan, at least that’s what they would have us believe. As usual in such cases, it was a cesarean section, and the child was born long after the gestation period and the child is still on life support. The latest news in the crypto world has focused on the provisions of the bill dealing with the reporting requirement for digital asset “brokers” and the definition of digital assets. These reporting requirements are designed to extract a tax from users who misreport or underreport their taxes. These definitions can be found in a section called Income Provisions. The revenue provisions attempt to assess how the bill will pay for itself. It’s in the Washington tradition of justifying spending, akin to projecting whether the child will become a productive member of society or a rascal. Provisions for income fall into the category of predicting the future. Which, at best, is a roll of the dice.
These “Pay For” provisions that appear in any bill are quickly forgotten by everyone except the OMB (Office of Management and Budget), which works for the president, and the CBO (Congressional Budget Office), which aims to be bipartite. . For example, the law on employment and taxation adopted in 2017 forecast a deficit of around 1.5 T $ over 10 years, after these two years of extreme economic constraints and fiscal largesse, as well as prodigious returns for some. companies, these estimates may miss the mark by a similar amount, meaning the total cost (including missed revenue) may exceed $ 3.5 T. Optimistic projections of corporate tax cuts leading to capital or research investments have not been confirmed. Most of the money that companies collected was returned to investors or used to buy back stocks.
The CBO performs a self-assessment of its estimates. It is difficult to distinguish the effects of different pieces of legislation, even huge bills like the law on tax and employment with generalized long-term consequences, their estimates for five years or more in the future are lagged by more than 5%. The CBO reports are designed to curb the tendency of politicians to spend the nation’s money on favored projects, including balanced budgets and deficit financing are meant to curb them. Popular and necessary expense bills also have to deal with it, like the infrastructure project. An examination of these tortured negotiations reveals the giblets in the Washington sausage-making process. The war in Afghanistan reveals how more than $ 2 million can be poorly spent, creating a phantom army that melts, assuring medieval and anti-democratic forces the best weapons money can buy. Talk about unintended consequences. The objections to the crypto provisions of the bill all relate to unintended consequences.
Of the “pay for” provisions, none have garnered more attention and press than the so-called digital asset law. Initial ‘pay for’ suggestions to strengthen the IRS and simplify the tax code should have generated huge gains through better tax compliance, especially by the wealthy, the figure stands at around 1 Trillion dollars a year. After ‘pay for’ suggestions were rejected by politicians interested in IRS funding, bipartisan collaborators were forced to grapple with things like unspent Covid funds, Covid unemployment benefits blocked by state lawmakers and what they thought could be an easy win, more stringent reporting on digital asset transfers that could fetch $ 28 billion. There is no evidence (at least in the bill) where the $ 28 billion figure came from. For $ 28 billion to be new money, there has to be a lot of tax evasion in crypto investments. This sparked huge howls of protest from the crypto-community and bad press surrounding the innovation-killing measure. Huge sums of money have been earned by many trading cryptocurrencies, it is only natural that such profits are taxed, there is nothing wrong with strengthening tax compliance. Coinbase, a venerable exchange (in cryptographic terms), has been sending 1099s for profits since 2017. However, as usual with bills written in secret without technical experts among the writers, the definitions were too broad and subject to interpretation by the Treasury. . As the Electronic Freedom Foundation and many others have noted, the unintended consequences of two broad definitions can be significant. These are the definitions of digital assets and brokers in the bill. All referrals use the govtrack.us website to search for the invoice and use the latest version of the invoice. Second. 80603. Information reports for brokers and digital assets. Article 80603 does not appear until August 10, it is not referenced in the version of the bill adopted by the House on July 1. Section 80603 was inserted into the August 10 version that was passed by the Senate, to comply with a demand that the bill pay for itself.
Digital assets: Unless otherwise provided by the secretary, the term digital asset means any digital representation of value that is recorded on a cryptographically secure distributed ledger or similar technology as specified by the Secretary. According to many, this broad definition can include loyalty cards, airline miles, cash from commercial banks, etc.
Broker: any person who (for a fee) is responsible for regularly providing any service that transfers digital assets on behalf of another person. This could possibly include developers, miners, and others.
Brokers as defined above are also subject to the return requirement for any transfer without selling digital assets to a non-broker. Maybe a 1099? All of these were put in late in the game to get the bill (HR 3684) passed in the Senate. The damage such an insertion could cause includes the collection and retention of large amounts of personal information from a growing number of users, including the threat that it would stifle innovation due to the complexity of compliance. In short, unexpected consequences that get carried away.
Most of these effects are supposed to be mitigated by the assurances of the Secretary of the Treasury on the definition of broker, the interpretation of which is in the hands of the Secretary. Also a stricter interpretation of the meaning of a digital asset. Lawmakers or their staff do not fully understand how cryptocurrency works, they need more technical assistance. Additionally, the definition of a digital asset may include other forms of digital representation of value, including any type of symbolized asset, including NFTs.
One of the biggest unintended consequences of the constitution of the United States was the creation of the Senate, where 30% of the American people control half of the Senate. The same unintended consequence that vetoes all legislation into a single senator from West Virginia with a population of nearly half of Brooklyn, NY. The creation of an electoral college years later triggers another unintended consequence.
HR 3684 is on life support. The prediction from skopos labs gives it a 2% chance of being adopted. This is a bill supported by the majority of Americans, which has already been passed by the Senate. Talk about the will of the people.