Next Up, Paying Uncle Sam Taxes in Bitcoin
Originally published on: CCN
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January 12, 2018
The ink is barely dry on President Trump’s tax legislation, and a new bill has surfaced in Arizona that kicks things up another notch. The bill proposes using bitcoin to pay state income taxes, and it was submitted by Senators Warren Petersen and David Farnsworth as well as Reps. Travis Grantham and Jeff Weninger, all of whom are Republicans.
SB 1091, whose short title is “income tax payments; bitcoin,” was introduced on in recent days. While the bill is specific to the state of Arizona, if it takes off, there could be a push for federal adoption of a similar policy.
In addition to paying the old-fashioned way, by check, the bill suggests:
“A payment gateway, such as bitcoin or other cryptocurrencies, using electronic peer-to-peer systems. The Department shall convert cryptocurrency payments to US dollars at the prevailing rate within 24 hours after receipt and shall credit the taxpayer’s account with the converted dollar amount.”
The risk of doing so, of course, is tied to the volatility in the bitcoin price. For instance, the bitcoin price in 2017 ranged from $1,000 at the start of the year, to nearly $20,000 before finishing year-end at around $13,000.
Indeed, bitcoin surged by “quadruple digits” in 2017, and as long as it continues to do so will work in the state of Arizona’s favor. But in the event of a correction, that exposes the state to possibly getting the short-end of the stick, unless they have some hedging features integrated into the payments system, which is the approach taken by blockchain-based P2P lender Salt Lending.
Arizona is not the maiden US state to pursue the use of cryptocurrencies for tax payments. Last year at about this time, New Hampshire policymakers submitted a similar bill designed to allow the use of bitcoin to pay taxes. That bill never saw the light of day, however, after overwhelmingly getting shot down. Policymakers took one year-plus to vote on the predecessor bill, and if it takes that long for the latest attempt the bitcoin price could be in a different stratosphere.
Meanwhile, Arizona is somewhat progressive when it comes to new technology. Governor Doug Ducey, for instance, supports a sharing economy, even taking a spin in a Google self-driving car. He also signed a law in 2016 supporting blockchain and smart contracts for sales, leases, etc., perhaps seemingly setting the stage for a deeper push into cryptocurrencies. Nevada, meanwhile, “recognizes blockchain and smart contract technologies,” they were also the maiden state to “ban local governments from taxing blockchain use.”
Each state will likely take its own stance on cryptocurrencies, and more bills similar to the Arizona one could surface throughout the year, with the possible amalgamation of such policies being introduced at the federal level, someday.
Featured image from Shutterstock.