Tax revenue inflows from bitcoin mining companies could represent a meaningful windfall for the United States government. This piece is part of CoinDesk’s Tax Week.
Crypto supporters were taken aback this past July when the infrastructure bill brought to the U.S. Congress claimed it could raise $28 billion from crypto investors by applying new information-reporting requirements to exchanges and other parties. This projection ended up getting beat down on the internet as the dollar amount seemed to be plucked out of thin air. In reality, figuring out how much taxes crypto investors owe based on their capital gains is incredibly difficult to estimate.
Theoretically, the Internal Revenue Service (IRS) could look through every transaction on every blockchain to see profits and losses in each wallet or account. From there, the IRS could figure out the amount of on-chain gains it could tax. However, that raises the issue of whether those assets were sent from one wallet to another with the same owner, something that may not make it a taxable event. On top of that, there’s the difficulty of getting good information from exchanges to figure out the amount of off-chain gains the IRS could tax. In practice, this collection and estimation process is a mess.