Biden's Proposed Capital Gains Tax Hike Unlikely to Impact Average Crypto Investors
Summary:
President Joe Biden's proposed increase of the capital gains tax rate to a historic 44.6% will likely have no impact on the average cryptocurrency investor, according to Matthew Walrath, the founder of CryptoTaxMadeEasy. The suggested hike, targeting individuals earning over $1 million annually, is primarily political rhetoric, intended to appeal to the Democratic Party's lower-income, less-educated voter base. The proposal also includes a 25% tax on unrealized gains for ultra-wealthy individuals.
A suggested rise in the capital gains tax rate to a historic 44.6% by President Joe Biden may hold no consequence for the typical cryptocurrency investor. As Matthew Walrath, the originator of CryptoTaxMadeEasy, expressed to Cointelegraph, Biden's current tax recommendations aren't expected to impact the majority of individuals in the crypto world – even if enacted legally. Walrath classified it as an inconsequential matter for 99.9% of people, essentially referring to it as just a proposal.
The proposed tax rate hike, paired with an additional suggested 25% tax on unrealized benefits, have taken social media by storm even though the details have been public for over a month. The widely referenced increment to 44.6% was initially tabled in a Department of Treasury document on March 11. The document spelled out how the figure would only be effective if two distinct proposals – one to up the top routine tax rate and another to elevate the investment income tax rate – were ratified. A separate document from the Budget Department put forth this proposition.
The tax hike proposal primarily targets people earning over $1 million annually, according to Walrath. High-income individuals can potentially face a considerable uptick in the long-term capital gains tax rate if the budget proposal is ratified. However, the proposal is not likely to influence the average crypto user, he added.
In line with Walrath's stance, a crypto accountant tweeting under the pseudonym SqueezeTaxes stated that the consternation about the proposal was another "headline catfish" before elaborating on what the proposed rules would mean for American citizens. Squeeze elucidated that the proposals aim primarily to raise the highest federal tax bracket to 39.6% and increase the Net Investment Income Tax (NIIT) to 5%. When combined, these changes result in an even 44.6%.
According to Squeeze, the standard income earner will remain unaffected by these changes, as Biden’s tax propositions are mainly targeting those earning a minimum of $400k, and at the upper limit, over a million dollars annually. Data from crypto payment company TripleA indicates that the annual income of an average international crypto investor stands around $25,000.
Disturbingly for some, Biden's federal budget proposal incorporates a 25% levy on unrealized gains for ultra-wealthy individuals. An April 25 commentary from Bitcoin analyst Jason Williams labeled this proposed tax as “extraordinary,” warning that it could have a devastating effect on the economy. Notwithstanding, Biden's proposed unrealized gains tax of 25% would only pertain to individual taxpayers owning over $100 million in net assets, as per tax analysts from taxation advisory firm Grant Thornton.
To conclude, Walrath speculated that Biden’s tax proposals might largely be political rhetoric intended to placate a voter base with lower incomes. "Ultimately, it's a political tactic. The Democratic Party seems to target the wealthy, which appeals to their lower-income, less-educated supporters.".
Published At
4/25/2024 8:34:31 AM
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