Taxes are due in the US today, and this can be good or bad news, depending on your perspective. In the US, most taxes are used to build the military, to run the government, to fund public schools and to cover entitlements like Social Security, Unemployment and Medicare, veterans’ benefits, and housing, and to subsidize certain businesses like energy and agriculture. In a more voluntary society, taxes would be virtually nonexistent, replaced with fees to private organizations of your choosing. You’d be able to choose a security company to protect you, rather than being forced to pay into a government monopoly on police and military. You’d have the freedom to choose your own healthcare, or the sort of education you want for your children, and you’d choose whether to pay into charitable organizations or to support the individuals you want to help most, such as family, friends and your community. But that is not the world we live in, and government officials create policies that determine how your money will be spent.
Many people prefer this model, because it requires less personal responsibility and fewer decisions. You simply pay into a system, and that system decides how to allocate resources. Regardless of whether people prefer a more voluntary society, or one that is heavily governed, people in the US are required to pay their taxes under penalty of the law. To avoid these penalties, many people overpay their taxes. They have employers who deduct a percentage of wages earned based on known calculations and expected deductions. This is most of working America, and most of these people will get refunds in the coming months. Others have small businesses, work on 1099s, or invest, and some of those investors have money in Bitcoin and other cryptocurrencies. The question is, will the results of Tax Day 2018 produce an increase, or a decrease in investments in crypto?
It is likely that many existing investors in Bitcoin and other digital assets will err on the side of caution and overpay their taxes this year. There is still no consensus between the various regulators. The CFTC sees Bitcoin as a commodity, the SEC sees it as a security, and the IRS sees it as an asset. Erring on the side of caution, it is likely that many of these investors will see their profits dwindle. This will be disheartening for some people, who will no doubt pull back on future investments.
However it is also true that many other crypto-investors will use knowledgeable accountants who can find legal ways to protect their profits, and for these people, the profits will motivate additional investments.
Then of course, there are the millions of people who will receive refunds. Although it is just the government giving back part of what it has taken, many of them will see this as free money, after having based their budgets around the income they were allowed to take home on a regular basis. This number is substantial, and it follows that many of these people are at the very least curious about Bitcoin. Whether they choose to invest in crypto, rather than buying a new television or other asset will depend largely on the overall sentiment of the market. We are not financial advisors, but our layman’s observation is that Bitcoin saw a huge increase on the 12th, and it has been rising since then. In other words, market sentiment is good, Bitcoin has held above $8,000 and we may see further growth very soon.