Federal Income Tax on Bitcoin: Getz’s Proposal

US Congressman Matt Gaetz proposed a bill. Paying Federal Income Tax Using Bitcoin.

The bill's passage would be a big boost for crypto adoption, but it would also have ramifications for Bitcoin investors.

Matt Gaetz presented Bitcoin for federal income taxes

Florida Representative Matt Gaetz wants to amend the 1986 Internal Revenue Code to allow federal income taxes to be paid in Bitcoin. The bill requires the Treasury to pay any taxes levied on the taxpayer with BTC.

Arguably, Getz sees this as a way to promote innovation, increase efficiency, and provide greater flexibility for American citizens.

“[Treasury to] To develop and implement a method of paying in Bitcoin any taxes imposed on an individual,” read an extract from the proposed bill.

Representative Nancy Massey of South Carolina supports the bill, leaning toward advancing her own ideas on property ownership.

“Okay, we hear you: Use your Bitcoin to pay taxes on Rep. Matt Gaetz's bill and borrow with crypto,” Massey wrote.

If it passes, it would mark a huge boost in crypto adoption in the US. Of course, this would not only mean a major change in the current US Treasury Code, but it would also have serious implications for Bitcoin investors. Every time the government wants to meet its expenses, it has to cash out these holdings, causing a supply shortage.

To put it in perspective, the total amount of federal income tax paid by American taxpayers in 2023 was around $1.7 trillion. If I assume that only a small percentage of these individuals, 1%, pay their taxes in Bitcoin, that would be around $18 billion in Bitcoin given to the government.

However, the introduction of Bitcoin payments for taxation requires clear regulatory guidelines and legal frameworks to ensure compliance and prevent abuse of the system. Uncertainty related to tax payments in Bitcoin or regulatory changes could affect market sentiment and the price of BTC.