Tax Notes contributing editors Robert Goulder and Joseph J. Thorndike look at Robert F. Kennedy Jr.’s cryptocurrency tax proposal, all in 5 minutes.
This transcript has been edited for size and readability.
Robert Goulder: There’s a presidential election subsequent 12 months, and a number of the candidates are already teasing us with tax proposals. One of many candidates on the Democratic facet is Robert F. Kennedy Jr., the newest member of that iconic American household to enter the political fray. He is come out with a really attention-grabbing tax proposal regarding cryptocurrency.
I am Bob Goulder with Tax Notes. Along with my colleague Joe Thorndike we will dissect RFK Jr.’s proposal and work out what it is all about.
Joe, let me ask you: Why is candidate Kennedy speaking a lot about crypto?
Joseph J. Thorndike: Nicely, Bob, Kennedy talks lots about crypto. He speaks at crypto occasions. He talks about crypto on podcasts. He accepts marketing campaign contributions in crypto, and now he desires to remake the greenback as a cryptocurrency. He is a political crypto bro, the primary one to get actual consideration within the nationwide media. I do not assume, although, that it is essentially the form of consideration you need.
Because it occurs, Kennedy additionally appears to be a crypto investor. Again in Might, he spoke at Bitcoin
BTC
So in keeping with his marketing campaign, he really purchased that bitcoin after he made that assertion about not proudly owning any and earlier than he filed the monetary disclosure, which I suppose means he did not really lie about it, however it means that he isn’t being precisely straight about it both. That disclaimer is meant to supply some reassurance that there isn’t any battle of curiosity, however then he went forward and created a battle proper after that. So not cool, or at the very least bizarre in my e-book.
Robert Goulder: Yeah, positively bizarre. What has he been saying particularly about crypto and taxes?
Joseph J. Thorndike: Nicely, it is attention-grabbing that Kennedy now owns some crypto as a result of he steered not too long ago that his model of crypto, bitcoin, ought to be exempt from capital good points taxes — at the very least when it is being transformed into {dollars} or fiat forex.
This can be a horrible thought for all kinds of causes. It could instantly assure that each transaction could be restructured to maximise alternatives for bitcoin capital good points. Our present tax system already incentivizes this habits by taxing capital good points at a decrease price than common earnings. Kennedy’s plan would make these distortions so, a lot worse. It could be a godsend, in fact, to anybody who owns bitcoin as a result of one of many main hassles assorted with any cryptocurrency is that you just pay capital good points or incur losses everytime you alternate it for any fiat forex or for different cryptocurrencies or once you purchase something with it. All these hassles would simply disappear, and folks might use their appreciated bitcoin to do something they need, purchase something they need, and pay no taxes on any of the good points they’d made on that large bitcoin stash that they had.
That is fairly engaging, and it will make bitcoin actually extraordinarily common. Not least with Kennedy himself as a result of, let’s keep in mind, he purchased that $100,000 or no matter price of bitcoin again in June. As an example he holds onto it by way of the top of his come-from-behind, shock-the-pundits marketing campaign that wins him the White Home. After which he convinces Congress to comply with by way of together with his tax-free-bitcoin plan. And since the markets are environment friendly, they’ve anticipated all that, and the worth of bitcoin has skyrocketed since June 2023. “President” RFK Jr. might then promote his bitcoin now valued at what, $1 million? As a result of, hey, it is cryptocurrency. Why not? And pay no tax on that $900,000 acquire. That may be fairly candy for him.
Robert Goulder: That may be a little bit bit too handy. OK, so I get the concept. A blanket exemption for one sort of economic asset most likely is not nice tax coverage, however let me simply push again simply to play the satan’s advocate right here. What about municipal bonds (munis)? They seem to be a monetary asset, they usually’re exempt from tax in a approach. Is there an analogy right here between what candidate Kennedy is speaking about and our remedy of munis?
Joseph J. Thorndike: Yeah, it is true that Congress has been giving a large free journey to municipal bonds for greater than a century. Initially, at the very least that was as a result of Congress thought it was constitutionally required to do this. However today I feel the exemption could also be as a lot about politics, custom, and inertia as a lot as anything.
However in any case, the exemption for municipal bonds is for the curiosity earned by these bonds. Any capital good points realized from promoting a municipal bond remains to be taxable, which makes {that a} a lot smaller loophole, a very totally different loophole. Plus crypto does not even have that constitutional fig leaf to make the entire thing appear legit.
Robert Goulder: There you may have it. The whole lot you wished to find out about RFK Jr., taxes, and crypto — all in 5 minutes. Thanks for watching.