United States President Joe Biden has reportedly rejected an agreement on a debt ceiling with Republican leaders who are allegedly in the crypto industry. During a press briefing, he said “I’m not going to agree to a deal that protects wealth tax cheats and crypto traders while putting food assistance at risk for nearly 1 million Americans.”
The alleged protections of crypto traders are based on tax loss harvesting. This involves selling a crypto at a loss in order to offset the capital gain from a crypto profit. To claim a loss on an asset, it must be sold and the proceeds used to buy a similar item within 30 days of the sale. The same mechanism can be used for stocks, other assets and even bonds.
Crypto investors use tax-loss reclaiming to lower their overall tax liabilities. The crypto industry has been able to stop tax losses being harvested by converting their cryptocurrency. A similar proposal would prohibit investors from deferring tax on real estate swaps. Both changes will add approximately $40 billion to the U.S. tax revenue.
Sources told the Washington Post that Republicans would reject the proposals. House Speaker Kevin McCarthy claims that the U.S. Debt Rise is a “spending problem, not a revenue problem,” citing the Biden administration spending excessively during pandemic. The White House blames tax reductions from previous administrations for the debt crisis, claiming that revenue has been affected significantly by tax reductions.
Spending cuts of $4.8 trillion would be needed to reduce the deficit, and this would have a direct impact on federal agency budgets. If Congress fails to raise its debt ceiling, it could default as soon as June 1. Biden and McCarthy will reportedly talk by phone on his flight from Hiroshima to Washington, D.C.
Since 1917, the debt ceiling has been the limit to how much the federal government may borrow in order to pay off its debt.