Why the U.S. doesn’t need a tax on mining: Senator Lummis explains

Senator Cynthia Lummis has published a report opposing a proposed 30% energy consumption tax on miners.

The politician published a report titled “Stopping Progress: Why a Bitcoin Mining Tax is Hurting America”, which examines the US President Joe Biden administration’s proposal to impose a 30 percent excise tax on energy consumed by Bitcoin (BTC) miners.

What does the report say?

However, Lummis said the Biden administration’s move could devastate the rapidly growing American Bitcoin mining industry, which began to flourish after China banned mining.

Source: Bitcoin mining article

The senator believes the tax could push industry out of the country and into the arms of other countries, and he said the Treasury’s reasons for imposing the tax are based on outdated views about energy use and technology.

Lummis cited the Bitcoin Energy Sustainability and Emissions Tracker as evidence that Bitcoin mining is cleaner than commonly thought, noting that 52.6% of BTC mining could be emissions-free.

“In terms of the amount of energy used, Bitcoin mining uses as much energy as standard household appliances. For example, a recent KPMG report found that the total energy used by Bitcoin miners is about the same as the total energy used by clothes dryers.”

Bitcoin mining paper

The politician also noted the growing role of Bitcoin mining facilities in ensuring the security of the energy system. Mining operations provide large, dynamic electrical loads that can be used to balance and redistribute energy across power grids as needed.

Lummis also called the proposal a poorly designed policy that could harm the goals it aims to achieve. Thus, the Administration claims that Bitcoin mining threatens the functioning of local energy systems, but does not provide any evidence. However, research shows that Bitcoin mining strengthens energy networks.

Finally, the senator explained that imposing a 30% excise tax on miners would discourage them from finding sustainable energy sources and developing new methods of processing energy.

Bitcoin mining tax

In March, the US Presidential Administration proposed imposing a 30% excise tax on electricity used for mining cryptocurrencies such as Bitcoin.

The Biden administration is proposing a 30% tax on electricity consumption. #bitcoin miners, even if you are off-grid using your own solar and wind generation. All the reasons they provide are excuses, their real reason is that they want to suppress Bitcoin and launch a CBDC. pic.twitter.com/juNHvO2NBx

— Pierre Rochard (@BitcoinPierre) March 12, 2024

The document justified the claim by stating that increasing energy consumption for the extraction of digital assets harms the environment and increases energy prices.

The tax is expected to be phased in: in 2025 the rate will be 10%; next year it will be 20% and then it will reach 30%. The taxable base will be electricity consumed for mining, even if it is produced from off-grid sources.

Lummis criticized the initiative, saying the tax would deprive the crypto industry of “any foothold” in the United States.

The White House’s 2025 budget is incredibly optimistic about crypto assets, some might even say it’s going to the moon.🚀

But the proposed 30% punitive tax on digital asset mining would destroy any foothold the industry has in America.

— Senator Cynthia Lummis (@SenLummis) March 11, 2024

First attempt to impose a tax on mining

In May 2023, the Council of Economic Advisers under the Biden administration proposed adding a 30% tax on electricity used by miners to the federal budget. The proposal called for a 10% tax on miners’ electricity use starting in 2024 and gradually increasing to 30% by 2026.

Politicians have pointed out the significant electricity consumption of miners and criticized its negative environmental impact. According to the Presidential Administration’s calculations, DAME could generate $3.5 billion in revenue over a decade. The initiative has drawn backlash from major American mining companies, who see it as an attempt to marginalize the crypto community and drive crypto businesses out of the country.

Politicians have also said that crypto mining pollutes the environment and consumes too much electricity amid rising energy prices. According to the White House, this tax would allow companies to better assess the harm they do to society.

The White House said miners’ heavy electricity consumption could increase public electricity prices and lead to unstable power grid operations, with equipment overloads and service outages possible.

Another reason for introducing such a tax is that mining crypto assets does not provide local or national economic benefits.

American miners use as much electricity as an entire state

While Americans started mining about a decade ago, the industry has grown significantly since 2019. The recent surge is largely due to the relocation of cryptocurrency mining operations from China to the United States after the republic launched a crackdown on miners in 2021, analysts say.

Last year, crypto miners accounted for 0.6% and 2.3% of all U.S. energy consumption, respectively. The entire state of Utah used about the same amount of electricity, according to figures from the Energy Information Agency (EIA).

By the end of last year, about 137 farms in the country belonged to cryptocurrency mining companies. The equipment is spread across 21 states, with the most active being Texas, New York, and Georgia. In 2023, Bitcoin mining energy consumption reached 0.2% to 0.9% of global energy consumption.

How will the law affect mining in the US?

Last year, the US finally gave up on imposing an additional 30% tax on industrial crypto mining businesses. If the law is abandoned again, the mining industry in the US will start to flourish.

This could become strategic for the United States, allowing it to maintain its leading position in the digital economy and attract high-tech investment on the world stage. Therefore, it is likely that the proposed restrictions and tax rate increases for miners will not be accepted and implemented.