Not long after expressing his support for the cryptocurrency industry and accusing his opponent in the US presidential race, Joe Biden, of animosity towards the sector, President Donald Trump has signaled major tax cuts if elected.
Trump also referenced President Biden’s latest proposal, which would introduce new and increased capital gains taxes potentially impacting crypto investors. He countered by promising the largest tax cut for all social classes in a campaign statement on May 12.
Instead of a Biden tax increase, I will implement a Trump tax cut for the middle, lower, and business classes—a substantial reduction. They will receive the biggest tax cut. We were fully prepared to implement it.
Continuing his previous policies, Donald Trump’s campaign proposal aims to reduce the top capital gains tax rate to 15%, following his last term where the administration lowered it from a higher rate.
Impact of proposed tax cuts on the crypto industry
Despite this, the previous tax law signed by Trump in late 2018 lacks clarity for investors, traders, crypto miners, and issuers because it does not primarily address digital assets such as Bitcoin (BTC), Ethereum (ETH), and tokens from initial coin offerings (ICOs).
However, it still has an indirect impact, as some lawyers believe that capital gains taxes could apply to crypto assets. Conversely, some crypto investors consider the sale of Bitcoin for Ethereum, for example, to be a like-kind exchange exempt from section 1031 of the tax code.
Jeremy Naylor, a partner at Proskauer Rose LLP, warned that taxpayers treating crypto-for-crypto exchanges as like-kind property ‘run the risk that the IRS will not support them in an audit because it’s now clear under the new law that you can’t do that.
Moreover, the exemption that section 1031 previously granted to ‘property of the same kind’ now only applies to ‘real property of the same kind,’ thus excluding cryptoassets. Following this reasoning, crypto is subject to capital gains tax, and the tax cuts promised by Trump would result in lower capital gains taxes for crypto traders and investors.
Donald Trump’s evolving relationship with the cryptocurrency sector
Meanwhile, the former president has recently expressed his acceptance of crypto. He promised to support crypto companies that he believes are leaving the US due to ‘hostility towards crypto,’ allowing them to operate in the country. He also mentioned accepting crypto contributions to his campaign.
Remember, Trump’s stance on cryptocurrencies has gradually shifted. He moved from labeling Bitcoin as a ‘scam’ to launching his collection of non-fungible tokens (NFTs) known as Trump Digital Trading Cards, and eventually to being more open about transactions using Bitcoin and other cryptoassets.
