IRS should not trample on Bitcoin users
Bitcoin users face increasing pressure from the IRS to disclose private information unrelated to taxation purposes. This follows a recent IRS summons against the Bitcoin trader Coinbase, calling for the mandatory collection of detailed customer data.
In 2015, the IRS concluded that bitcoin holders “may fail, or may have failed, to comply with one or more provisions of the internal revenue laws” and that the solution was to demand all US user records from 2013 - 2015 from Coinbase that include transaction history, IP addresses and transcripts with customer support.
This comes despite the IRS having failed to provide comprehensive guidance for bitcoin owners since classifying the currency as property, subject to property tax laws, in 2014.
Perianne Boring, President of the Chamber of Digital Commerce says that if the IRS succeeds in violating consumer privacy, this “would set a terrible precedent.” She added that many bitcoin firms and users are “afraid to speak out” because of the fear of being “directly targeted by the IRS.”
Brian Armstrong, Coinbase founder and CEO made a public statement to voice his concerns against the subpoena. “Asking for detailed transaction information on so many people, simply for using digital currency, is a violation of their privacy, and is not the best way for us to accomplish our mutual objective.” By taking action that is “overly broad,” he continued, “the IRS incorrectly implies that all users of virtual currency are evading taxes.”
Bitcoin advocacy groups have emerged in response to this, calling on federal and state governments to provide a better regulatory and taxation framework for digital currencies.
The Digital Assets Tax Policy Coalition for example has been created to “develop effective and efficient tax policies for the growing virtual currency markets.” The Blockchain Alliance has likewise been facilitated to “open dialogue between the private and public sectors about digital assets and Blockchain technology.”
Bridging the gap between government hurdles and an industry that has risen to $20 billion in market value is increasingly necessary for all stakeholders. A recent Business Intelligence Insider report shows that the current complexity of the US regulatory system is a major hindrance to the development of a “coherent fintech policy.” Moreover, it concludes that without allowing digital commerce to “achieve a scale necessary for success,” the U.S. will continue falling behind the UK and some areas of Europe.
Creating a taxation framework that is stable and standardized, adaptable to digital trends, and maintains basic privacy standards is key to the broader development of the US bitcoin industry.
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Downsizing the regulatory state will upsize the American economy
A recent study by the Phoenix Center on the cost of regulation to the American economy suggests the Trump Administration’s 2 for 1 Executive Order is making positive steps towards accelerating private sector growth and employment.
They show that a 10% reduction of the record breaking 81, 405 pages of regulations implemented since 2008 under the Obama administration would result in:
“$5.6 billion in annual savings, producing an additional $1.2 trillion in GDP over the next five years, or $244 billion annually.”
“A $45 gain for every $1 decline in the regulatory budget.”
“An annual increase of 3 million new private-sector jobs.”
The analysis found an inverse relationship between the size of the regulatory budget and economic growth. It concluded that the opportunity cost of one regulator was the equivalent of 138 private sector jobs and the financial cost, an $11 million annual loss to the US economy.
The size and scope of the federal regulatory state has become so expansive that it can be counted as a nation in and of itself, ranked as the world’s 10th largest economy behind Russia and ahead of India. This illusory economy has of course, come at the expense of the regulated, most of which are small businesses and their employees disproportionately impacted by regulatory excess. Small businesses, with 20 employees or less, currently face an annual regulatory cost that is 36% higher than large firms with 500 employees or more.
These regulations, combined with the financial capacity of large businesses to afford high compliance costs, have distorted the marketplace for 27.9 million small businesses who employ more than 50% of the American workforce. Gallup has since revealed the record breaking decrease of small businesses in operation alongside the increase in the number of firms that have shut down since 2008.
In dismantling the capacity for small firms to thrive, the expanse of regulator power has strangled job opportunities for the American workforce as 65% of net employment from 1995 has been created by small businesses.
The statistics suggest rescinding two regulations for every new regulation enacted is the first of many steps necessary to address the systemic flaws of the regulatory state. Although outcome-based legislation is key to sustaining a smart regulatory framework, policy makers have been offered an ample opportunity to repeal excessive mandated requirements that are stifling entrepreneurial activity.
Instead of adding to a burdensome and lifeless regulatory economy, the careful down scale of federal departments and their budgets will accelerate the life of American innovation, private sector growth and opportunities for the workforce.
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ATR Supports IP Guidelines Coalition
Americans for Tax Reform joined a coalition of over 70 groups urging the 115th Congress to protect intellectual property rights for every American innovator. In this letter, they put forth a set of guidelines and principles that will enable the Trump Administration to uphold, protect and enforce intellectual property protections.
Some points of the letter are extracted below.
Intellectual property deserves the same protection as physical property:
“The Founding Fathers recognized the importance of IP in Article 1, Section 8 of the Constitution: “To promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”
“IP rights are not regulations—they are property rights that, when combined with the freedom to contract, facilitate markets.”
Intellectual property rights are vital for free speech, economic growth and consumer protection:
“Strong IP rights go hand-in-hand with free speech as creators vigorously defend their ability to create works of their choosing, free from censorship."
"IP rights create jobs and fuel economic growth, turning intangible assets into exclusive property that can be traded in the marketplace… IP-intensive industries added $6.6 trillion to the value of GDP in 2014, equal to 38.2 percent of total GDP. In a knowledge based global economy, America’s ability to remain a world leader in creativity and innovation depends on strong protection of IP."
"IP rights protect consumers by enabling them to make educated choices about the safety, reliability, and effectiveness of their purchases.”
Online intellectual property must be protected on the internet:
“Protecting IP and internet freedom are both critically important and complementary—they are not mutually exclusive. A truly free internet, like any truly free community, is one where people can engage in legitimate activities safely, and where bad actors are held accountable.”
Our letter urges the federal administration to uphold the Founding Fathers’ vision for American innovation that is protected and facilitated through sound intellectual property protections.