As a seasoned crypto investor who’s navigated the complexities of digital currencies for years now, I can’t help but be intrigued by Trump’s recent proposal to eliminate capital gains taxes on U.S.-made cryptocurrencies. It directly addresses the frustration we face with the current tax system that discourages everyday transactions using digital currencies.
In a recent interview, he advocated for eliminating capital gains taxes on crypto transactions.
Trump expressed his opinion that it’s unfair for people to pay taxes on cryptocurrency. “Bitcoin is considered money,” he argued, “so if you use it to buy a cup of coffee, you should have to pay capital gains tax? I was discussing this with a friend, and they felt the same way – it shouldn’t be taxed. Perhaps we could eliminate taxes on cryptocurrency and instead impose tariffs.
As an analyst, I’d rephrase the sentence as follows: In my analysis, this proposal aims to alleviate a recurring issue faced by crypto users – the intricacies of capital gains tax on regular purchases. For example, when Bitcoin is utilized for buying coffee, users are obliged to pay tax on any appreciation in its value since acquisition. Such regulations tend to dissuade individuals from employing digital currencies for everyday transactions due to their complexity.
Currently, Vice President Kamala Harris has suggested an increase in long-term capital gains taxes. Her plan would elevate the highest rate to 28% for those earning more than a million dollars yearly. Conversely, President Biden’s proposed budget for 2025 suggests a rise in this tax to 39.6% for top income earners instead.
If Trump wins the presidency and the Republicans maintain control of Congress, it’s expected that increases in capital gains taxes will probably not be implemented, as per Erica York, a senior economist at the Tax Foundation.
Trump’s Crypto Tax Plan: U.S. Tokens Only
Trump’s plan seeks to exempt taxes on capital gains from U.S.-produced cryptocurrencies, encouraging their use in everyday transactions. He expressed a preference for locally minted tokens over those made in China. This tactic contrasts with Italy’s recent action of imposing a 42% tax on Bitcoin capital gains.
Wealthier individuals may be subject to a 3.8% Net Investment Income Tax (NIIT) on earnings from capital gains, interest, dividends, and rental income if their modified adjusted gross income exceeds specific levels. For individual taxpayers, this limit is $200,000, while for married couples filing jointly, it’s $250,000. It’s important to note that these thresholds do not account for inflation. When considering long-term capital gains taxes as well, high earners could end up paying a maximum of 23.8% on their investments.
Table 1. US Capital Gains Rates
| Capital Gains Type | Holding Period | Tax Rate | Income Range |
|---|---|---|---|
| Short-Term | 1 year or less | 10% | Up to $11,000 (Single) |
| 12% | $11,001 – $44,725 (Single) | ||
| 22% | $44,726 – $95,375 (Single) | ||
| 24% | $95,376 – $182,100 (Single) | ||
| 32% | $182,101 – $231,250 (Single) | ||
| 35% | $231,251 – $578,125 (Single) | ||
| 37% | Over $578,125 (Single) | ||
| Long-Term | More than 1 year | 0% | Up to $44,625 (Single) |
| 15% | $44,626 – $492,300 (Single) | ||
| 20% | Over $492,300 (Single) | ||
| Special Rates | Varies | 28% (Collectibles, Small Business Stock) | N/A |
As an analyst, I foresee a potential move by Republicans to scrap the NIIT. However, caution is advised as prominent experts like Howard Gleckman from the Urban-Brookings Tax Policy Center have expressed concerns that such a decision could exacerbate the already burgeoning federal budget deficit, which ballooned to an alarming $1.8 trillion in fiscal 2024.
Trump’s plan leaves out the majority of digital currencies, such as Ethereum, but includes well-known ones like Bitcoin and XRP. Trump suggests that these digital assets should be viewed similarly to traditional money, exempt from extra taxes. His viewpoint echoes earlier suggestions for replacing income tax with increased import duties.
Trump Advocates for Tariffs Over Income Tax
As an analyst, I’ve been pondering a point Trump has underscored: the possibility of tariffs replacing federal income taxes. During his conversation with Joe Rogan, he expressed his viewpoint by asking, “Why not?” Nonetheless, transitioning from income taxes to tariffs as our primary revenue source would necessitate a significant hike in tariffs, which at present contribute barely 2% to federal income.
In the 1890s, our country was particularly prosperous, even considered one of its wealthiest periods. At this time, there were only tariffs but no income tax. Fast forward to today, we now have an income tax system in place, and unfortunately, some people are struggling financially because they’re unable to afford the taxes they owe.
Regardless of the obstacles, Trump’s campaign advisor, Jason Miller, views this transition as a long-term goal. He also highlighted that the primary concern for the former president would be to prolong the benefits from the 2017 Tax Cuts and Jobs Act and introduce strategic tax reductions.
Lowering tax obligations is a key element in Trump’s election platform, as he pledges to eliminate taxes on gratuities, Social Security earnings, and additional wages from overtime. Although discussions about scrapping personal income taxes abound, there seems to be minimal talk about the future of corporate income and payroll taxes.
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2024-11-16 12:26