Windfall Profits Tax on Bitcoin?

by philg

Whenever other people are smarter and more successful than I am, I like to propose a massive tax applicable only to them. Since I neglected to buy Bitcoin…. it is time for a Jimmy Carter style Windfall Profits Tax on cryptoprofiteers! (spoiler: the Tax Foundation says that this is a bad idea)

One challenge with this is that it might be hard to hunt down folks who have a seed phrase and a passphrase written down on a Post-It note. Some Bitcoin success stories invested in ETFs and public equities that are somehow tied to Bitcoin and they’ll be easy to hit with Philip’s 95 percent windfall profits tax. But the richest/biggest fish may get away (renounce U.S. citizenship, pay the exit tax, move to a tax-free country, and then start cashing in the Bitcoin).

Is Bitcoin a bubble? Physicist and general smart guy Brian Keating points out that the “bubble” has lasted for ten years, much longer than tulip mania (six months) and other historical bubbles. Peter Schiff, smart enough to move to Puerto Rico in 2015 and skip on Federal taxes, points out that the Feds began inflating the stock market and housing market in the mid-1990s and the collapse didn’t come until 2008. Schiff: “If people are dumb enough to pay $50,000 for Bitcoin, maybe they’ll be dumb enough to pay $100,000.” Isn’t it a good hedge against governments printing money and inflation? “Maybe Bitcoin is a hedge against stupidity because if people are still stupid they will still buy it. If you’re worried about the dollar going down, don’t hedge it with something riskier than the dollar. Buy Swiss francs.” (watch Keating and Schiff talk)

A bad guy lair (for a Bitcoin early adopter?) under construction in Sarasota:

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9 thoughts on “Windfall Profits Tax on Bitcoin?”

  1. I Am Not A Sophisticated Investor (IANAS??), but my understanding of basic investing strategy is that in times of inflation, you hedge via equity, particularly real property. Instead of Bitcoin, buy real-estate. Even though Trump killed the tax deduction for home mortgage interest, if the loan is used for a commercial property, the interest still counts against the rental income. In fact, my basic math shows that for a typical residential property bought and then rented out, the ability to deduct the mortgage and SALT plus the depreciation means that the income is completely free of taxation and while the depreciation you take will count against capital gains, it’s real-property and therefore an intrinsic hedge against inflation.

    • What on earth do you mean by ‘depreciation counting against capital gains’? Clearly the depreciation taken reduces your basis so increases any capgains you later pay on sale. It’s definitely nice to reduce income taxes and later pay more capgains taxes, so I’ll assume that’s what you meant by ‘counting against’.
      It’s hard to find good home rental properties. People typically go multi-unit.

  2. The wonder of bitcoin is that you can make it yourself. You can print your own money. and the only real cost is electricity and computer equipment.

    Bitcoin stock is inherently limited by available computing power, and the increase of bitcoin stock becomes increasingly more computer intensive as the stock increases by design.

    This blog’s first mention of bitcoin is in 2014, so that’s seven years sour grapes that will only increase in disappointnent.

  3. @Mememe so what is Bitcoin? is it a commodity? a store of value? can you do microtransactions with it?

  4. Bitcoin is a technologically advanced Ponzi scheme with a twist — there’s also a finite amount of it (it’s increasingly difficult to “mine”) so at the tail end it resembles a commodity like gold. If you get in early and get out before it falls apart, you can do very, very well. The key is getting out before that happens. The fact that people like Musk can influence the currency with a TWEET should tell people what it is.

    Frankly, I wish I’d bought some when it first started. I wish people good luck converting all their money back into real currency when it starts to go. If I ran the world’s banking systems, the instant people started to cash out of Bitcoin I would say: “No. Sorry. We don’t exchange ether for money.”

    • The real question to me is why the world’s banking and commodity systems haven’t already said: “You cannot exchange Bitcoin for any other currency, or anything else. Its value is $0. It’s technomasturbation.”

  5. I get the feeling, though, that the reason the world’s banking and commodity systems haven’t done that is because the “good guys” are also the “bad guys” and with the end of Cash coming, they want to make sure they have another anonymous way to move their money.

    Walk into the Hublot store in Curacao and ask to speak to Lawrence Jamieson.

  6. People should be asking some serious questions then just who else we should or shouldn’t tax. What is money and who get to create it? How does the monetary system work and how does taxation played it part in it?

    Gold and silver used to be money. To ease transfer and divisible, note were created for promises of exchange to precious metals. Then they decide to no longer exchange those note for precious metals. So why are people still using such note and who get to create it? Then what happen to ensured it success and how is precious metal price determine nowadays? Why do many people view physical gold/silver differently to the paper gold/silver?

    Taxation used to be small and limited in various part of society. What change and why is nearly everything being tax? What is tax purposes and who get to decide on it rules? The narrative we got given is it is done collected to fund unprofitable projects that benefit society, but is the whole truth?

    Imho, fiat money system is a corrupt system design to benefit a very small minority while harming the majority for sense of stability. It ignore that it was the small minority that cause the majority of instability in the first place.

    Cryptocurrency such as Bitcoin wish to establish a new more transparent monetary system. Unfortunately a tiny number of people see it as such and got in it early, knowing that it might not succeed and could go to zero. Now it the rich minority again have the majority of it due to having more fiat money to buy/mined large chunk of it. History will repeat itself while governments around the world want it share of the cake through taxation, regulation and law.

    Is Bitcoin a bubble since it desire to replace our cash system? The narrative has change to a store of wealth due to it not being scaleable as a unit of exchange, that is it speed and transfer cost has limitation. Or will another cryptocurrency win out and gain universal acceptance?

    Until majority of people start waking up to what fiat money is, cryptocurrency is still a experimental currency/store of value. Maybe cryptocurrency will goes the same way as fiat money, I hope not.

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