It's absurd to tax something that can so easily migrate to a different country. Of course, crypto mining is absolute wasteful crap. But this tax doesn't decrease the global crypto mining rate: all it does it shift the mining to a different country. And: unlike a lot of industries and heavy manufacturing, the local impact of a crypto mine is very one-sidedly positive—large amounts of cash injecting into the surrounding economy, particularly the energy sector and everyone who works in or profits from it.
I do agree that (this type of) crypto mining is a sad waste of resources, and globally suboptimal for the world economy. But there's more to rationality and to morality than making performative gestures against bad things.
Nah,pushing through negative externalities of wasteful industries to other more desperate economies is a cool use of first world power.
Also strong disagree that local impacts of crypto mines are net positive - here in Texas we have to pay miners not to burn electricity for their fantasy dollars just to keep the AC on at grandma's house in the summer.
> here in Texas we have to pay miners not to burn electricity
It seems like lunacy when you put it that way.
But I'd rather pay crypto miners to shed load during peak times rather than suffer blackouts at hospitals, chemical plants and water treatment facilities.
Grid stability isn't a joke, and sometimes the least-bad option is still bad. Until we have better storage solutions, flexible demand is a necessary evil.
Maybe paying miners not to mine is a lesser evil than paying even more to spin up filthy coal peaker plants and still have rotating outages.
He's also missing that this extra load is driving base demand, which is a big driver of increased capacity installation. In some sense paying crypto miners (and factories, and increasingly amalgamated groups of home owners using smart thermostats to increase the set point 10-15 degrees higher, etc.) is the best solution until storage becomes viable. They are flattening the demand curve across the year when they drop off at high demand times and are there for the rest of the time, and that's actually pretty useful.
Yes, this tax proposal seems to presume that the mining being done is a value-adding operation. However, an adversary desiring to undermine the electrical grid could just set up servers sending back cryptographic proof that they executed some useless inner loop. Who even knows with all the various crypto-coins now.
Proof-of-work crypto mining is particularly egregious because it is quite literally zero sum. The world's Bitcoin miners could spend 100 watts mining crypto or 100 gigawatts mining it and due to the nature of the algorithm, the outcome would be the same number of mined blocks.
If you include all fiat currencies in that category I think that's a keen name.
If it's just a title to bad-mouth crypto in some arbitrary way -- well -- a lot of very real stuff has been bought with crypto, and name-calling generally attracts the very worst allies.
I get the energy concern, and mostly agree with you, but i'm not sure we should pretend that fiat currencies have these problems fixed.
Military backing for the sake of currency stability requires X amount of energy daily to facilitate, it's just not draining Texas. 'Not my problem'?
Other fiat currencies don’t take a bunch of energy to mint. Fiat metals (whose values are worth more than their practical use), however, do have a cost to extract and refine, so it’s not like crypto currency is alone here.
Crypto mining injects virtually zero dollars into the local community. If this passes, and miners move to, say, Mexico, what benefit does that grant Mexico? They'll have higher local electric costs. The bitcoins will be sold internationally and the owners will keep the money wherever they live.
No. Margins on power delivery are marginal. Very little of the money paid for power stays local.
The bulk of the money goes to supply and transportation, which is usually a foreign state or a trans-national entity of some kind, far far from the point of consumption.
Mexico (in this example) could try to siphon off money through a tax or regularion or by investing capital in local supply, but the OP believes taxes/regularions are just a way to foreclose on any opportunity because the miners will just go elsewhere, and investing capital in growing local supply means redirecting it from somewhere else (assuming you can even make local supply price competitive without subsidies).
Some spending can stay local and benefit local economies. Spending on power is generally not one of those.
Much of the developing world operate their grids at a loss (so basically subsidized). Parts of China had to ban bitcoin mining because miners were using a lot of underpriced electricity to mine bitcoin to noticeable effect.
That’s not a given. If the local power plant is owned by a foreign investor, and there isn’t a reasonable tax on the electricity, there’s very little money going into the local economy.
Both the mining itself, and many forms of electricity (especially the cheaper kinds), do not require a lot of labour.
I was at a large bitcoin mining farm today and talked to them about that. Their substation feeds the local community and they paid for upgrades to it so that the local community could have a more reliable source of power. Their funds also go towards maintaining all the lines that feed the community too. They employ about a dozen people from the area. We ate lunch at a local restaurant. Bought groceries from the local grocery store. Staying in a local airbnb.
I this case, I find that response weird because I'm being factual about spending money in a local community that surrounds a large bitcoin mining operation.
The bar for proof here is pretty low, it isn't like I am claiming to prove that the MRNA vaccine works or not.
Do you need to see my receipts for purchases at the local stores? My airbnb account?
> It's absurd to tax something that can so easily migrate to a different country
It creates an incentive in that country to tax it. If you have followed EU's Carbon Border Adjustment Mechanism, it is exactly how the EU intends to export its legislation. It says: your imports are going to be taxed on their CO2 emissions, unless you implement a tax of your own on their CO2 emissions. The exporting country now has every incentive to tax it and remove the tariff.
In many cases, US jurisdiction does not end at its borders, and they can’t outlaw crypto entirely (yet). You get done what you can get done, even if it pushes the externality to a country without the appetite to tackle it. That’s their power grid’s problem.
I feel instead of taxing it we should just make it illegal and toss people in prison for doing it. If it goes to another country that's their dead weight loss.
> the local impact of a crypto mine is very one-sidedly positive—large amounts of cash injecting into the surrounding economy, particularly the energy sector and everyone who works in or profits from it.
driving up costs of electricity due to increased demand and encouraging the continued use of fossil fuels isn't positive. it is good for the wealth of the energy sector but a negative drag on everything else.
> Raising the corporate tax rate from the current 21 percent to 28 percent, combined with the average state-level corporate tax rate, would give the U.S. the second-highest combined corporate tax rate in the OECD, significantly worsening the competitive position of U.S. businesses and reducing prospects for business investment and workers.
This is pretty misleading: the US's effective corporate tax rate is significantly below the OECD average[1], and has been so for a while. The Tax Foundation could lay the blame for this on tax complexity, but curiously only seems to blame tax complexity when taxes go up for businesses, not down.
If I'm reading this list correctly, an effective 28% corporate tax rate would put us in the middle of the OECD pack. But even then: raising the statutory rate to 28% does not actually guarantee that the effective rate rises to 28%.
Edit: By the Tax Foundation's own calculations, the OECD average effective rate is around 26% when adjusted by GDP[1]. So 28% is not extraordinarily out of band, especially when we consider that that's statutory and not effective.
Mining is actually good for stabilizing grid, which is very important for accommodating renewables.
Yes, mining is "wasting" electricity, but it's not a full picture. Sometimes being able to "waste" electricity is actually very useful. Mining is a immediately reactive and flexible load on the grid, and in a free market , at the near-perfect competition, mining naturally gravitates to places where electricity is abundant and can benefit from doing something productive (burning off methane, capture over-production).
People who wish to ban or "harm" mining have no idea what they are talking about. Electricity is not something that can sit in a basement and wait to be used indefinitely if someone doesn't just "waste" it. That's just not how things work.
From the perspective of cryptocurrency users banning also completely doesn't matter. If you ban mining in place X, then too bad for the miners in X, mining will just move to a different location, where possibly electricity might be less clean (not from renewables), and on the global scale things just get worse.
And there needs to be someone willing to pay for the water more than the electricity used, transport and capital and operational cost. And such price needs to be lower than alternatives. No one is going to build such an infrastructure for charity, or overpay for water "because it helps balance the grid".
The thing with miners is also that they are highly portable. The moment it's banned, heavily taxed or simply better uses for electricity out-competed it, they will pack them on shipping containers and off they go, so capital risk is lower.
The fact that cryptocurrency users are willing to subsidize production and deployment of such a flexible and portable load balancers is an opportunity, irrespective what one thinks of cryptocurrencies, but most minds are too narrow to go over "uses electricity == bad" narrative.
I love this argument. "Can you define EXACTLY what you want to ban"? I'd say a significant part of all criminalized activities can't be EXACTLY defined. Somehow we still manage.
It is such a tired argument now. Firs of all, the magical internet gambling tokens are not an alternative to "fiat" or world financial system. The global financial system consumes far less energy per transaction considering that billions of transactions take place around the world per second.
I really fail to understand the fetish of the crypto crowd with the word fiat and whatever they think it means. I get it, people just want to gamble and want to be ultra rich without doing anything, I am sure there are ways of doing that (gambling) without wasting a ton of energy.
Fiat as opposed to crypto currency? Crypto is the most fiat currency imaginable. I know crypto bros tries to redefine reality to trick people into thinking crypto is somehow tied to real tangible value, but it’s just not.
Non-fiat currency is physically tied to the creation of real-world value, like say mining gold which has thousands of real-world applications. Traditional fiat currencies are fundamentally designed to be a proxy for real world value. In a well designed system it’s most of its creation is tied to debt issues to, say a gold mine or an oil well or solar farm. Cryptocurrency is - in its utter insanity - fundamentally tied to the destruction of physical value. That is, burning electricity while creating nothing useful. So: more fiat than fiat. Another huge step removed from the creation of real physical valuables.
Traditional currencies are far more efficient and a basic necessity for the economy to function at all.
Cryptocurrency is fundamentally unsuited to become a real currency by its very design. Every one I’ve seen so far has been made by people who seem to lack even the most basic understanding of what the main origin of currency is. (Hint: it’s not metal coins..)
> Traditional fiat currencies are fundamentally designed to be a proxy for real world value.
The US went off the gold standard in 1971. It's all just bullshit paper now. I'm not sure why you're talking about something that doesn't even exist today.
I'd love it if "traditional fiat" currencies existed as you describe, but they don't.
crypto in and of itself is a really cool and valuable tool. the hype bubble around it and subsequent power/environmental consequences are not good - but the tech is cool and should be appreciated. blockchain is also a great tool for the right usecases (distributed ledger)
the hype bubble around it and subsequent power/environmental consequences [...]
The energy consumption is not the result of anything, it is a fundamental design element. [1] To reach a meaningful consensus, you have to give all participating users equal or at least similar voting power. But Bitcoin does not want a central database of users which opens the door for Sybil attacks - you can just invent an essentially unlimited number of users out of thin air and have them vote the way you want. The solution to this problem in case of Bitcoin is to tie votes to computing resources for calculating hashes. While you can invent users out of thin, you can not invent computing power out of thin air. This gives each user voting power in proportion to the amount of money they are willing to invest in computing resources. Not really equal voting power for all users but close enough in practice. If miners would not burn enormous amounts of energy, anyone could come along and influence or alter the transaction history or just mine empty blocks and with that block all transactions.
[1] For Bitcoin and similar proof of work systems, there are alternatives.
You can't understand why people want to be free from the shackles of government issued money? Arguments can reasonably be made about the viability of crypto, the stability and how useful it actually is, but it should be crystal clear why many people are desperate for mediums of exchange and stores of value outside of the government-controlled medium (crypto, gold or otherwise).
That governments can't control access to cryptocurrencies and gold is the biggest fantasy that crypto rubes believe. That people in developed countries don't want governments to control money to claw it back from fraudsters is the second biggest fantasy.
>That governments can't control access to cryptocurrencies and gold is the biggest fantasy that crypto rubes believe.
Cryptocurrencies are math. Governments cannot control math, as much as authoritarians wish they could.
>That people in developed countries don't want governments to control money to claw it back from fraudsters is the second biggest fantasy.
The assumption that most people in developed countries want government to "control money" is delusional at best. There are certainly many people in developed countries who want the government to control money, control speech, control political discourse and control everything else - but there are just as many who oppose all of that.
Governments can't stop you doing maths, but they can make it very difficult to either do it at scale, or convert your maths back into government issued currency.
> Cryptocurrencies are math. Governments cannot control math, as much as authoritarians wish they could.
And there's the misconception. Trading government money for cryptocurrency is subject to regulation. Do you think you can hack the President's communication and send it to Putin because it's math? Do you think you can set the interest rate on a loan to 500% because it's math?
> The assumption that most people in developed countries want government to "control money" is delusional at best.
How strange then that every single developed democracy has implemented it. I must have just imagined the entire field of tort law and people clamoring for relief from the courts.
You are trying to retcon the reason why (e.g.) Bitcoin was created in the first place:
> Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
What's strange about it? The creator of Bitcoin could not predict that volatility. The inflation of fiat currency is one major reason why crypto exists. Bitcoin has a 21 million BTC supply limit. That's the point.
However even with the volatility, it's way more stable than the Venezuelan currency. Crypto is widely used in Venezuela.
The thing people who are against crypto mining miss is that the cryptocurrency industry is economically self sustaining. Electricity burned on mining crypto is not wasted, it is used to maintain a system that is objectively more economically valuable than the electricity itself is.
Trying to regulate what people are allowed to spend their money on just because you personally don't agree those things are valuable is a fool's errand.
To the extent there are negative externalities associated with electricity use those externalities are not specific to crypto, therefore singling out crypto for attack just because it uses electricity is unfair and harmful to the broader economy.
> 30% excise tax on electricity costs associated with crypto mining
Curious how you measure that electrons are flowing towards silicon calculating hash functions but only hash functions where the output is not used 99.99% of the time but once in a while goes into a bitcoin block.
trying to wrap my head around how this would be enforced.
what if 51% of your server duties are handling API requests for your SAAS or some bullshit product, and 49% is crypto? is your electric bill crypto related or is that just something you do with idle power?
or you start a company that builds battery storage to accumulate energy off-peak for some admirable "green purposes" - meanwhile another company (that you own) is a customer of this and uses power from that storage facility "free of charge" since it is a humble research project.
so many ways to loophole this.
power is power, if you are paying for it you should be able to use it how you please. considering marijuana is federally illegal, shouldn't power for grow operations be treated the same way? it's a slippery slope.
if they want to disincentivize crypto they need to do something about the tragic state of the us dollar.
You're treating the law like a set of programmable rules, where in fact it is not. If you operate a "partial" crypto operation like you said, the IRS will ask you to open your books and show them how you account for your power usage.
I see this time and time again, but public officials aren't idiots. The IRS aren't idiots. Broad, non-specific laws are enforceable. Eventually the burden will be on you to prove you're not doing anything illegal. Fun fact: the vast majority of people who would make arguments like this are hiding an illegal crypto operation.
My first thought was running a "district heating system" by moving the generated heat somewhere useful and "selling" it at a loss. Watt for watt, it's almost as efficient as resistive heating, but is probably not located near people would want piped heat.
> power is power, if you are paying for it you should be able to use it how you please
different users have different rates in most regions depending on their demands. Some users even can get paid to use power, when the grid frequency goes too high.
The red diesel argument fuels mine. We need to move away from taxing fuel to generate road revenue and do that in a use tax especially now that EV’s are taking over. This is a current debate right now.
It's enforced when you yourself declare how much electricity your mining operation used, because you want to expense that cost to avoid paying unnecessary income taxes. This isn't about personal activity, and frankly this reflex to argue against regulation of commercial entities as if they're aimed at individuals is odd. If you do your own individual-scale cryptocurrency mining and spend the resulting coins for your own personal uses, nobody is going to come knocking or really even care post facto - because it's obviously quite unenforceable at an individual level. What this really affects is industrial scale operations that report profits as fully system legible financial income.
corporate tax increases will just get passed on to consumers...
And mining taxes on power usage is just ridiculous... why don't you add an extra tax on gold used for jewelry too? and luxury cars, yachts, and anything that isn't really useful?
Then how about a luxury that you wouldn’t want to give up like eating meat, which is far more wasteful than eating plants directly? Or any of the other luxuries you take for granted?
except that they don't enforce much rules when it comes to food. Two examples are fish and olive oil... you probably will never know if you got what you paid for... They just don't inspect. It's probably a bigger problem for fish, because you can get fish that taste about the same but is full of mercury or other toxins.
Yet another example where a supposed “gotcha” is simply a good idea.
There’s two sides to eating meat:
1: In many cases it’s actually not less efficient than eating a plant. If I eat some lamb or sheep in my area, they’re eating wild stuff growing in the hills and mountains. I’d like to see you try to eat what they’re eating, or grow anything we can eat there without destroying nature. In many cases cattle is raised on land not suited for growing food for human consumption, especially high quality protein. In many regions, you’d have no chance of getting local sustainable high quality proteins without meat or fish.
1.5: There’s also the aspect that raising animals is the only way to do sustainable, regenerative agriculture. How do sustainably fertilise your soil without them?
2: In the cases where meat is produced in an unsustainable way, it IS indeed a luxury that should be taxed. We shouldn’t cut down rainforest to grow soy for cattle feed or to make pastures for cattle for export.
Taxing profits can't directly be passed on to consumers because the point of profit maximization remains unchanged. IE if a restaurant makes more money charging 25$ for a meal than 30$ then increasing prices simply reduces profits.
What gets passed on is things that increase costs for the industry like property taxes. If every landlord in the city pays an extra 50$ a month/unit in property taxes you bet rent's going up to compensate.
Taxing profits is similar (but not identical) to taxing all investment returns. From the company’s perspective, it reduces the value of domestic corporations to investors (thus advantaging foreign corporations). From the individual’s perspective, it reduces investment incomes (including those funding retirement accounts). In this way, it is passed on.
From another point of view, individuals (are supposed to) react to taxes by reducing 'luxury' spending, but businesses don't enjoy luxuries, only their investors do.
Taxing profits would be equivalent to taxing investment returns except foreign inverters don't pay US income taxes. It's therefore advantages for US taxpayers to Tax companies operating in the US.
Well, it depends: if the restaurant is able to keep the same number of meals per day with a price point of $30, then they still make more at $30 than at $25, even with a higher tax.
It's just you can't blanket assume that a particular price point is going to increase or decrease sales until you try it, so...
The example was presupposing a profit maximizing price. Of course businesses should optimize what they charge, but the incentives exist independent of minor changes to the US tax code.
Think it though. If you could make more money long term while using cheaper ingredients or similar cost saving measure then what's to stop you from doing that without the tax increase?
Depending on the circumstances, that's a big "if". If your not-so-cheap ingredients are one of your restaurant's selling points (even if not explicitly), using cheaper ingredients could reduce your sales such that the savings turns out to be a wash, or a waste.
I think this happens all the time: it's not uncommon to see a restaurant review that goes something like, "I'd been coming here for years, but the quality of food has gone down recently". Granted, you don't know why: maybe they switched to cheaper ingredients, or maybe they got some new cooks that prepare things poorly (or even just differently), etc. But some type of cost-cutting measure could be to blame. And if that person -- and others (and perhaps potential new customers who see the recent bad reviews) -- stops visiting or visits less frequently, those cost-cutting measures may turn out to not have been worth it.
> corporate tax increases will just get passed on to consumers...
Like how the corporate tax decreases in 2018 got passed on to consumers...right? Don't we all remember the big deflation in the past 6 years? And all that money was totally not used for stock buybacks and what not, right?
It covered more than just yachts, but the biggest loser was the yacht industry, which saw sales plummet:
[quoting wikipedia]: The federal government estimated that it would raise $9 billion in excess revenues over the following five-year period. However, only two years after its imposition, in August 1993, at the behest of the luxury yacht industry, President Bill Clinton and Congress eliminated the "luxury tax" citing a loss in jobs.[6]
Atwood, Liz. "Boat dealers predict sales increase Luxury tax repeal helps ANNE ARUNDEL COUNTY BUSINESS". baltimoresun.com. Retrieved 23 August 2019.
[end wikipedia quote]
It turns out that luxuries are just that, luxuries, and the rich were more than willing to "do without" yet another yacht (or other luxury good) while the tax was on the books, and the tax never netted the "budget gains" its proponents predicted it would net, due to sales of all the taxed goods dropping off precipitously.
This is the lump of labor fallacy in reverse isn't it? Those people would eventually be employed by other industries - both the labor and $ formerly going to yachts would be used somewhere else.
How is building yachts for people who demand it more wasteful than producing perfumes, collectibles or nicer lamps?
Who gets to decide what is waste as long as there is demand?
In a democracy, ultimately the public should get to decide. Even if "taxing yachts" is not a win for the economy it might be a win for society. The USA is way too timid when it comes to using the tax code to incentivize and shape companies' and people's behavior. We really need to "re-internalize" the costs that big business and the rich externalize onto the public, and one way to do this is to impose very narrowly-directed taxes at things that the public bears but doesn't benefit from.
The “luxury car” label gets applied to anything that isn’t aggressively cost cut IMO. True excessive luxury cars do exist, but the label is basically meaningless at this point.
This is not about crypto mining per se, but the electricity used:
> Impose a new 30 percent excise tax on electricity costs associated with digital asset mining
Seems like an effective incentive to migrate cryptocurrencies from Proof-of-Work to the more eco-friendly Proof-of-Stake. Ethereum already did this two years ago.
I think crypto-mining could be help with bringing on more electricity from renewable resources online faster and more gracefully in the absence of sufficiently large scale grid batteries.
Imagine a solar or wind power plant that currently has sufficiently problematic swings in electricity production. A crypto-mining data center nearby could consume some if not all of this problematic excess electricity production more gracefully than disabling sections of the solar or wind power plant. In this application, crypto-mining would not be the primary reason to have all of this crypto-mining hardware. As the local grid requires more power generation, crypto-mining nodes could be turned offline to offset their electricity use.
This thought is just something I had, and there might be problems with it.
Not sure why you're being downvoted, but a carbon tax is a little too elegant to expect from a modern politician. This is far messier and more arbitrary. And just one of numerous proposed changes (the linked page is only tangentially about crypto mining).
Carbon taxes were a pretty popular topic of discussion until the democrats lost congress in 2010. It’s just another thing that’s fallen by the wayside while our democracy struggles at the lower levels of the pyramid of self-actualization.
Just outright ban the stupid planet burning ponzi. If the habitual gamblers want to gamble with make believe internet tokens, let them do it with tokens that don't waste a country full of energy. I am sure they can cook up some story to keep the crowd engaged.
I do agree that (this type of) crypto mining is a sad waste of resources, and globally suboptimal for the world economy. But there's more to rationality and to morality than making performative gestures against bad things.