Bill Overview
Title: Virtual Currency Tax Fairness Act
Description: This bill excludes from gross income, for income tax purposes, a limited amount of gain from the sale or exchange of virtual currency, unless such sale or exchange is for cash or cash equivalents, property used in the active conduct of a trade or business, or property held for the production of income. The exclusion does not apply if the total value of the sale or exchange exceeds $50, or the total gain exceeds $50 (both amounts adjusted annually for inflation). The bill defines virtual currency as a digital representation of value that functions as a unit of account, a store of value, or a medium of exchange, and is not a representation of the U.S. dollar or any foreign currency.
Sponsors: Sen. Toomey, Patrick [R-PA]
Target Audience
Population: Individuals worldwide engaged in small virtual currency transactions
Estimated Size: 750000
- Virtual currencies have become more widely adopted worldwide, with cryptocurrencies like Bitcoin and Ethereum being used by millions of individuals.
- Despite the increasing use, the population engaging in small transactions (less than $50 gain) is relatively smaller because most attention tends to be towards larger investments and trades which exceed the $50 exclusion.
- A significant portion of virtual currency users might engage in small, day-to-day transactions below the outlined threshold, affecting a niche segment of the population.
Reasoning
- The US cryptocurrency user base is relatively large, but only a small portion is likely to engage in frequent, small-day-to-day transactions using virtual currencies, which the policy targets.
- Considering the budget constraints and the estimated number of people impacted by this policy, not everyone in the cryptocurrency community will benefit, primarily those engaged in small transactions.
- Individuals who engage in frequent small transactions, either for casual spending or minor business services, are much more likely to see the immediate impact of this policy.
Simulated Interviews
Freelance Graphic Designer (San Francisco, CA)
Age: 23 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 10/20
Statement of Opinion:
- This policy will save me a little on my small client payments, but not much since the gains are often minimal.
- It's helpful to save on taxes, but the true value is more symbolic.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Retail Store Manager (Miami, FL)
Age: 31 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 9/20
Statement of Opinion:
- I think it's a cool policy for people like me who dabble in crypto for small purchases.
- Any amount that saves me money on taxes is a bonus.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 5 |
IT Specialist (Austin, TX)
Age: 40 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 14/20
Statement of Opinion:
- This policy targets smaller transactions which don't really impact my larger investment strategies.
- The concept is interesting, but not very applicable to my financial situation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
College Student (Seattle, WA)
Age: 19 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 5/20
Statement of Opinion:
- This could make it a little easier for me to keep earning in crypto without worrying about taxes.
- I appreciate any tax relief I can get while being a student.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 4 | 4 |
Tax Advisor (New York, NY)
Age: 45 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 1.0 years
Commonness: 16/20
Statement of Opinion:
- Professionally, this policy might simplify some processes for small transaction crypto users.
- Personally, I don't feel impacted aside from advising others.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Food Delivery Driver (Denver, CO)
Age: 28 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 7/20
Statement of Opinion:
- It seems like a reasonable policy, but I don't usually make gains large enough to worry about.
- Anything that simplifies my taxes is a plus.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Small Business Owner (Chicago, IL)
Age: 34 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- It's a small step toward easing taxes, but the transactions are minimal for my business.
- Could encourage wider crypto adoption if more transactions are simplified.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Bartender (Portland, OR)
Age: 29 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 2.0 years
Commonness: 6/20
Statement of Opinion:
- I appreciate the tax leniency on small tips received in crypto.
- Not a big impact financially, but the idea is appealing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Retired (Phoenix, AZ)
Age: 51 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- I don't do transactions frequently, mostly holding.
- This won’t impact me much beyond making some small trades tax-friendly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Teacher (Boston, MA)
Age: 36 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- This could encourage using crypto more casually without tax worries.
- It's a nice touch for crypto newbies like me but won't dramatically change my finances.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Cost Estimates
Year 1: $100000000 (Low: $75000000, High: $125000000)
Year 2: $103000000 (Low: $77000000, High: $129000000)
Year 3: $106090000 (Low: $79310000, High: $132870000)
Year 5: $112625000 (Low: $84187500, High: $141562500)
Year 10: $125000000 (Low: $93750000, High: $156250000)
Year 100: $500000000 (Low: $375000000, High: $625000000)
Key Considerations
- The inclusion of an inflation-adjusted threshold for exclusions increases the allowance gradually over time, expanding the potential impact.
- Present dynamics in virtual currency adoption could lead to underestimation if adoption expands beyond current growth projections.
- Monitoring virtual currency trends will be essential as their integration into everyday transactions could significantly alter fiscal impacts.