Opinion

WILFORD: Cryptocurrency Tax Hijinks Showcase How Desperate Senators Are For ‘Pay-Fors’

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Andrew Wilford National Taxpayers' Union Foundation
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At the eleventh hour, the Senate’s bipartisan infrastructure bill almost managed to sink itself over a provision that had no business being in there in the first place: new policy to regulate so-called “cryptocurrency” activities. It should be a sign to taxpayers that the bill’s supposed “pay-fors” are little more than budgetary sleight-of-hand.

The controversy started with the infrastructure bill’s inclusion of a provision to raise $50 billion by instituting new tax reporting requirements on cryptocurrencies. Critics argued that the legislative language was overly broad, with the potential to fall not only upon brokers but also upon miners and software developers.

If you’re wondering what a cryptocurrency provision was doing in the bill in the first place, that’s a good question. The unfortunate answer is that, in their desperation to be able to claim that the $550 billion legislation is paid for, the bill’s authors are scraping the absolute bottom of the barrel for offsets.

After all, new reporting requirements for cryptocurrency have been coming for some time. The Treasury Department was likely to pursue regulations helping it collect unpaid taxes on cryptocurrency soon even if Congress doesn’t direct it to do so. The only difference is that any revenue gleaned from it will be used to “pay for” this infrastructure bill, rather than used to pay down the $28 trillion national debt.

This trick of using sources of revenue that were probably coming in anyways and claiming them as offsets, even after the country just ran a $6 trillion deficit over the past two years, is repeated several times in the bill. Examples include the revenues from a Strategic Petroleum Reserve sale triggered by rising gas prices, proceeds from an upcoming 5G spectrum auction, and extending customs fees.

The biggest pay-fors in the bill are equally gimmicky. The single-largest offset is $210 billion in COVID-19 aid funds that went unused. Unused deficit-financed emergency aid funds shouldn’t count as cash that Congress can then go ahead and spend somewhere else. What’s more, $160 billion of this amount has already been included in the Congressional Budget Office’s baseline and shouldn’t count even as a nominal pay-for.

Once again, even the budgetary tricks used in the bill aren’t original. The bill’s authors likewise count $53 billion in unused funds for the federal unemployment subsidy that some states elected to end early.

All told, the National Taxpayers Union estimates that, despite ostensibly being “paid-for,” the $550 billion infrastructure bill will add $400 billion to the national debt. After two years of questions of the debt being set aside to respond to the threat of the pandemic, this is a worrying development.

Perhaps even more concerning for taxpayers is how difficult Congress found it to fund an infrastructure bill costing half a trillion dollars given the enormous size of the national debt. Even if Congress didn’t approve any new spending increases (supremely unlikely), the national debt is set to hit $40 trillion a decade from now. Taxpayers shouldn’t hold out hope that Congress can rein in out-of-control debt and deficits when it has to use every trick in the book to pretend to pay for $550 billion legislation.

As Congress celebrates a rare instance of bipartisanship, taxpayers should remember that there has been bipartisan support for spending now and leaving future generations to clean up the mess for years now. Using budget gimmicks to pretend to pay for legislation is just one of the few things both parties can agree on.

Andrew Wilford is a policy analyst at the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government.