A groundbreaking bill has been proposed by Republican congressman Matt Gaetz to modernize the US tax system by allowing federal income tax payments in Bitcoin. Inspired by El Salvador's adoption of Bitcoin, this bill aims to innovate and increase efficiency in tax payments.
Gaetz introduces bill to accept Bitcoin for tax payments
On June 25, Republican congressman Matt Gaetz filed a bill that could revolutionize the US tax system by allowing federal income tax payments in Bitcoin. This bold move requires the US Treasury Secretary to develop and implement a system to accept Bitcoin payments. Gaetz said the bill would spur innovation, increase efficiency and provide more flexibility for American taxpayers.
Republican Matt Gaetz
According to Mr. Gaetz, this bill will create favorable conditions for innovation and improve efficiency in the tax system. To minimize risks from price fluctuations, the bill also proposes a mechanism to instantly convert Bitcoin to USD.
Precedents and challenges of paying taxes with cryptocurrency
This proposal is not without precedent. Several US states such as Colorado, New Jersey, Kentucky and Utah have begun implementing regulations surrounding tax payments in cryptocurrency. However, integrating Bitcoin into the federal tax system poses many challenges.
First, the IRS will need to establish a reliable method to convert Bitcoin into fiat currency immediately to avoid the volatility characteristic of the cryptocurrency market. Additionally, the security of taxpayer information is a major concern, as Bitcoin transactions are publicly recorded on the blockchain, potentially exposing sensitive taxpayer information to bad actors.
The experience of El Salvador, the first country to accept Bitcoin as legal tender, shows the limitations in practice. Since the Bitcoin law came into effect in 2021, allowing individuals and businesses to trade and pay taxes in Bitcoin, usage rates have remained modest. In 2023, only 12% of Salvadorans will use Bitcoin for transactions, down from 24.4% in 2022. This shows that, despite the legal framework, actual use may be limited by physical barriers international.
Potential impact on the US economy
Although the results in El Salvador are not really positive, the context in the US may be different. With a larger economy and broader cryptocurrency access, Bitcoin adoption and usage in the US may be more positive. Implementing this system could strengthen the legitimacy of cryptocurrencies and accelerate their integration into the financial system.
However, the actual benefits of paying taxes with Bitcoin remain controversial. Crypto-to-fiat conversion solutions have evolved and are easy to use, making direct tax payments in Bitcoin likely a redundant feature. If this bill succeeds, it will mark an important step forward in integrating cryptocurrency into mainstream financial practices.
