KEY POINTS
- The leaked economic plan, said to have been originally Biden's, includes a tax on unrealized gains
- TRES Finance's Tal Zackon said such a tax is 'counterproductive' for the crypto industry
- The tax plan could push large holders and investors out of the U.S. and into friendlier jurisdictions, he said
- Harris has yet to confirm whether she will actually implement such a tax on unsold assets
- She has also yet to publicly discuss her views on cryptocurrencies and the industry as a whole
Political backers of Vice President Kamala Harris have said some Democrats, the Democratic presidential nominee included, are looking to "reset" the party's engagement with the cryptocurrency community. However, a leaked tax plan that Harris supposedly endorsed has irked many in the industry, as the economic blueprint includes taxing unsold assets.
Harris Backs Biden's Tax Plan?
The leaked blueprint was originally the tax plan of outgoing President Joe Biden and includes some controversial federal revenue-boosting measures, as per some reports.
The proposed tax on unrealized gains applies to individuals with at least $100 million in wealth who don't pay at least a 25% tax rate on income. Such people will pay taxes on unsold assets if at least 80% of their wealth is invested in tradeable assets.
In the crypto space, there are concerns that while the said tax is specifically targeting very wealthy Americans, it could also have an impact on other smaller digital asset holders in the long run. There is also fear that such a plan may further drive away crypto companies outside the country.
A 'Counterproductive' Plan
Tal Zackon, the co-founder and CEO of on-chain financial "data lake" for Web3 firms, TRES Finance, agrees that the plan could have a negative impact on the crypto sector.
"This move is counterproductive and swiftly heads into the possibility of hindering competitiveness of the U.S. crypto market. Holders will be pushed to move and invest their funds under more tax-friendly jurisdictions outside of the U.S.," he told International Business Times.
Zackon added further that the crypto industry may see "an unintended domino effect, where capital is moved overseas and used to invest and grow outside of the U.S." due to the tax plan targeting wealthier individuals who have the funds to support crypto startups.
He expects an "aftershock" should the plan be approved and implemented, noting how it is "the highest capital gains tax in U.S. history and the world."
Harris Should Expect Resistance – A Blow to Compliance
As early as now, even as Harris has yet to officially comment on the divisive unrealized gain tax, crypto users are already pushing back.
Prominent crypto influencer Alex Becker said the tax plan "is cancer." For him, the taxation plan is a form of "theft" and makes it "nigh impossible to make it" in the crypto space. Trader Jason Pizzino called the plan "absolutely disgusting."
People are gonna yell to “not get political” and “stay in my crypto lane”
— Alex Becker 🍊🏆🥇 (@ZssBecker) August 21, 2024
But 45% tax on long term gains and 25% unrealized is cancer.
Its DOUBLE tax on long term crypto you sell. It’s an instant 25% tax on any gains you’re currently in. Being neutral is no longer possible.
Zackon noted that if Harris wins and she approves the said tax, "the government can forget compliance because a new wave of resisting individuals and firms will be at bay."
Notably, the Biden administration, especially the U.S. Securities and Exchange Commission (SEC) under Chair Gary Gensler, has been implementing an enforcement-first approach toward regulating digital assets. With a taxation plan that could hit crypto whales and large institutional investors, Zackon expects significant resistance.
"New loopholes for tax evasion will be on the brink as we witness a new era of unwillingness from the masses to comply," Zackon warned.
Harris Didn't Endorse the Tax?
Prominent analyst Adam Cochran said Harris "did not endorse" a tax on unsold assets, but said her campaign did endorse the tax rate hike on corporate taxes. "So no, she did not endorse an 'unrealized gain tax' and even if she did, you don't earn enough for it to impact you," he said.
While Cochran may have a point, the crypto community's pushback may stem from the fact that the Democratic presidential nominee has yet to directly speak about digital assets and her views on the broader crypto industry.
