The G7 summit in Japan saw President Biden reject a proposed debt ceiling deal put forward by Republican leaders citing doubts about its fairness towards crypto traders. During the press conference, President Biden declassified the terms of the proposal as “unacceptable.”
The discussion between Republican leaders and the White House focused on blocking cryptocurrency transaction mechanisms related to tax-loss harvesting, with the aim of preventing crypto traders from benefiting from losses to offset gains ultimately granting them a tax advantage.
Tax-loss harvesting technique is a method used by investors to decrease their tax liabilities. It involves selling cryptocurrency at a loss to counter gains made from crypto investments. To qualify for this deduction, it is required that the sold assets be replaced with similar assets within 30 days. This approach is not restricted to cryptocurrencies and is applicable to stocks and other suitable assets.
Moreover, the White House also recommended doing away with tax-loss harvesting for cryptocurrencies and imposing the same limitations on deferring taxes for real estate swaps. These recommendations would produce roughly $40 billion in tax income for the US government.
However, the Republican party rejected these proposals, with the House Speaker attributing the escalated US debt to the excessive spending of the current administration during the pandemic. Conversely, the White House argued that previous administrations’ tax cuts resulted in the current debt issue, asserting that revenue has been drastically impacted by these financial reductions.
Republicans are aiming to reduce the deficit by cutting spending by $4.8 trillion. This decision could impact federal agencies’ budgets. Failure to raise the debt ceiling may result in the US defaulting by June 1. Upon his return to Washington, DC, President Biden plans to discuss these issues with House Speaker McCarthy during his return flight from Hiroshima.
Compiled by Coinbold