At Crypto Tax Hearing, Warren Questions Witnesses on Multi-Billion Dollar Cost to Taxpayers of Crypto Industry Handouts

At Crypto Tax Hearing, Warren Questions Witnesses on Multi-Billion Dollar Cost to Taxpayers of Crypto Industry Handouts

"Industry lobbyists want special tax rules for crypto that will make crypto billionaires richer and give crypto an unfair advantage over other kinds of competing financial products."

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Washington, D.C. - Today, U.S. Senator Elizabeth Warren (D-Mass.), member of the Senate Finance Committee and Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, questioned Andrea Kramer, founding member of ASKramer Law LLC, and Annette Nellen, professor at the San Jose University College of Business, at the Senate Finance Committee's hearing on "Examining the Taxation of Digital Assets."

Ranking Member Warren questioned the witnesses on how proposals to clarify crypto's tax treatment could ultimately give crypto an unfair advantage over other financial products. She asked Ms. Kramer about the potential effects of creating a de minimis exemption for crypto transactions and allowing crypto miners and stakers to delay paying taxes on crypto until they sell it. She also questioned Professor Nellen on whether exempting crypto businesses from additional IRS and FinCEN reporting requirements could make it more difficult to spot money laundering and criminal tax evasion.

Below is the full transcript of Senator Warren's questioning:

Senator Warren: Thank you, Mr. Chairman. I'm just going to start by acknowledging how absurd it is that the Senate is convening to discuss other than this Republican shutdown and stopping Donald Trump from throwing 15 million people off their health care and more than doubling health insurance premiums for millions of Americans.

Now, this hearing is supposedly about clarifying crypto's tax treatment. The context is that crypto holders aren't paying at least $50 billion per year in taxes that they owe. In theory, reform proposals could plug those crypto tax loopholes, which would be a good thing.

But the proposals I'm seeing follow a familiar movie script: Industry lobbyists want special tax rules for crypto that will make crypto billionaires richer and give crypto an unfair advantage over other kinds of competing financial products.

So I want to run through a few of those.

Ms. Kramer, you're an expert on our tax laws, so I've got some very simple questions for you. Let's start with the de minimis exemption, a proposal that would allow crypto investors to avoid reporting income from crypto transactions under $300. If someone bought $300 worth of gold, or $300 worth of Apple stock, would they be required to report any income they made from those transactions?

Andrea Kramer: Yes, they would.

Warren: Alright. If crypto investors get this de minimis exemption would they pay less in taxes than traditional stockholders for precisely the same kinds of transactions?

Kramer: They would pay less

Warren: Alright. The Joint Committee on Taxation estimates that this proposal alone would be a $5.8 billion tax boost for the crypto investors.

So, let's do a second one.

An accountant who runs his own business, gets paid for updating books and records-you know, just standard stuff. In the crypto world, miners and stakers get paid for updating the blockchain, crypto's financial ledger. The accountant, of course, pays taxes on their income when they receive it. But one crypto industry proposal would allow miners and stakers to delay paying taxes on the crypto they earn as income until they sell it-which could be many years later, if ever. Ms. Kramer, if this provision passed would the miners and stakers effectively pay less in taxes than accountants, even when they are doing almost exactly the same work?

Kramer: They would pay less.

Warren: So, that's right. And the estimate here is that it would be to the tune of about $4.3 billion, according to the JCT.

So, let's do a last one: Professor Nellen, you teach tax law. If a business receives over $10,000 in cash, under current law, they have to submit additional reporting to the IRS and to FinCEN, in large part so the government can spot money laundering and criminal tax evasion. I think you were talking about that earlier with Senator Hassan, right?

Annette Nellen: Right.

Warren: Okay. So, one proposal the crypto lobbyists have been floating would exempt crypto transactions from that requirement. Would that proposal make it more or less difficult for law enforcement to counter crypto money laundering and tax evasion?

Nellen: Well, given the purpose of that provision, and it is already part of the law, it was added back in November 2021, but waiting for regs to make that effective, that is the purpose of it is to help identify where there is a particular use of that. Some differences though between cash and crypto is, you know, in a cash transaction, the customer is most likely right in front of you. That would not be the case but-

Warren: I understand. I understand that crypto has put out its reasons why it wants an exception. All I'm trying to get at each time is the crypto lobbyists are crawling all over Capitol Hill. And what are they looking for? They're looking for special rules for crypto. And not special rules that sometimes make it more expensive to operate crypto and sometimes make it less expensive. Not special rules that sometimes make it easier to track crypto transactions and sometimes make it less, more difficult to track crypto transactions. It's that every one of these special rules tilts in the same direction-and that is for anyone investing in crypto to pay less than the equivalence elsewhere in the financial system. And in this case, to make it harder to track what's happening in crypto transactions if they are being used for illegal purposes.

Look, I'm all for getting rules that are appropriately tailored, but I think we should abide by the same principle that we have used for decades in Congress- and that is same basic transaction, same kind of risks means we need the same kind of rules. And that should be true for crypto just like any other financial product.

Thank you, Mr. Chairman.

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