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Ultimate Resource For Biden’s Infrastructure Plans And It’s Impact On The Crypto-Currency Industry

White House Unveiled As Puppet Master As New Amendment Threatens Crypto Industry. Ultimate Resource For Biden’s Infrastructure Plans And It’s Impact On The Crypto-Currency Industry

Last night (8-5-2021) at the 11th hour, a new competing amendment was dropped disastrously, and given the full weight of force by no less than the White House itself. We find ourselves in a much tougher spot than we were at this time yesterday. Here’s how we got here.

 


 
 

Related:

China Outspends US When It Comes To Building The World’s Infrastructure

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The Future of Water Is (And Toilets) Recycled Sewage, You’ll Drink It And You’ll Like It???

The Future of Power Is Transcontinental, Submarine Supergrids

Trump’s LACK Of Infrastructure Investment Is Putting American’s Lives At Risk

Cost of Infrastructure Fixes Is Going Up While Trump Procrastinates

Trump Administration To Try Again To Fulfill Infrastructure Pledge

 

Last week, a last-minute provision was added to the infrastructure bill that would change tax reporting requirements in crypto by effectively reclassifying every actor and entity involved in crypto transactions, even and especially perhaps, noncustodial actors like miners and validators, as brokers, responsible for sending customer information to the IRS.


 

The problem is that miners and validators don’t have access to any customer information. So by operating at all, they would be operating illegally.

 

The goal of the provision was to get $28 billion in tax revenue that could go to offset the cost of the bill. That number coming from the opaque black box estimates of the Joint Committee on Taxation, the crypto industry immediately spun into a frenzy given that these reporting requirements would literally be impossible.

 

 

Opponents of this space tried to productively say that everyone was just complaining about taxes, even though that was completely, utterly and patently false. The people who wrote the provision, Rob Portman, specifically, a Senator from Ohio, insisted that he didn’t mean to target those folks, the miners, the validators, and that we shouldn’t be worried that we should, in fact, just let them write this very comprehensive legislation to make it easier for them to do what they intend to do, which is institute reporting requirements for the real brokers, of course, the exchanges, etc.

The crypto industry, all of us here said ‘That’s insane. That’s not how the process of lawmaking works. You don’t get to say that’s not what we mean, but leave the letter of the law open to interpretation.’

The industry flew into a frenzy trying to change the language of the bill itself, and later trying to get an amendment that explicitly excluded the actors that those writers of the original provision kept saying they meant to exclude. Along the way, a number of allies revealed themselves.

Senators Pat Toomey and Cynthia Lummis on the Republican side of the aisle both made clear their opposition immediately, calling the proposal unworkable and an affront to innovation.

Some industry backers aren’t particularly worried that the bill’s language will sweep up the miners. For one, it could be modified when the bill heads back to the Senate for reconciliation in the Finance Committee, says Michelle Bond, CEO of the Association for Digital Asset Markets, a crypto industry advocacy group.

Moreover, it will then go to the Treasury Department and Internal Revenue Service in a rule-making process that will include public commentary. And it will be another two years before rules are implemented.


 
 

Perhaps more notable was the emergence of Senate Finance Chair and Democrat Ron Wyden, as a similarly vocal opponent of the amendment. In Wyden’s estimation, the issue of crypto tax reporting and invasion was an important one. But the way to legislate was not this last-minute provision that had the potential for wild overreach and wide ranging consequences to the industry. We’ll come back to Wyden and how much he upset the applecart in just a minute.

Over the first few days of this week, Wyden, Toomey and Lummis rallied to write an amendment that would make official what the original writer of the provisions again, Republican Rob Portman, kept saying was the case: that they weren’t interested in going after miners, software developers, validators and the like, yet somehow, when those folks produced an amendment that said exactly that, that just put into the amendment itself, the words that Rob Portman kept saying, that was beyond the pale.

The Joint Committee on Taxation said that the amendment would cause a $5 billion shortfall, which makes one wonder, how is it possible that the same people who said they didn’t want to include miners and validators, now were saying that by excluding miners and validators, there was going to be a $5 billion gap from what they had originally calculated.

It wasn’t just the Joint Committee on Taxation, however, that got huffy. We learned via Politico yesterday that anonymous senior sources at the White House were furious about the amendment, and that in general, they were mad at the crypto industry’s unwillingness to just roll over on this.

Their take seem to be the same as Rob Portman’s publicly, that of course, the provision wasn’t meant to cover people who literally couldn’t comply, but that by restricting what they can do, it’s going to be extremely challenging for them to implement this law. Unlike Portman, and because the source is anonymous, you can tell that the White House was a little more annoyed than Portman would lead on to being. So that’s where we were yesterday morning.

Interestingly, around midday, Senator Portman came out and said, hey, yeah, we should vote on this amendment. He tweeted, I agree with senators Wyden, Toomey and Lummis that we can do more to clarify the intent of the cryptocurrency provision and the Senate should vote on their amendment.

 

All in all, things were looking pretty positive until around 8pm. That’s when we got our second 11th hour surprise, a perfect pairing with the way that provision was announced in the first place last week, we learned that another amendment was being entered: this one by Portman himself plus Democrats, Mark Warner and Kyrsten Sinema. At 7:43, Coin Center’s Jerry Brito tweeted: “Wow, Senators Warner and Portman are proposing a last-minute amendment competing with the Wyden, Lummis, Toomey amendment.

It is disastrous. It only excludes proof-of-work mining and it does nothing for software developers. Ridiculous. Here’s all that excludes: and he included a screenshare of the relevant language. A), validating distributed ledger transactions through proof-of-work mining or B), selling hardware or software the sole function of which is to permit persons to control a private key used for accessing digital assets on a distributed ledger.” Brito continues: “If this passes, this is the U.S. Congress picking winners and losers.”

At 9:51 last night, we got confirmation of what it had been starting to feel like for a while, that the real power behind this counter push was coming straight from the White House itself. The Washington Post’s Jeff Stein tweeted: “Late breaking: White House is coming out formally in support of Warner, Portman, Sinema crypto amendment implicitly against the Toomey, Wyden, Lummis plan.”

At 10:04pm, White House Deputy Press Secretary Andrew Bates released this statement. Quote,

“The administration is pleased with the progress that has yielded a compromise sponsored by Senators Warner, Portman and Sinema to advance the bipartisan infrastructure package and clarify the measure to reduce tax evasion in the cryptocurrency market. The administration believes this provision will strengthen tax compliance in this emerging area of finance and ensure that high income taxpayers are contributing what they owe under the law. We are grateful to Chairman Wyden for his leadership and pushing the Senate to address this issue. However, we believe that the alternative amendment put forward by Senators Warner, Portman and Sinema strikes the right balance and makes an important step forward in promoting tax compliance.”

 

 

Coin Center’s Brito again summed up the utter confusion, “The White House is endorsing proof-of-work over all other consensus mechanisms to be enshrined in law. WTF is going on?” Jake Chervinsky put it even more succinctly, “Long story short, I’m about to get robbed by my own senator.”

The White House’s involvement was further confirmed in the morning by the Washington Post, as they reported the pressure had come all the way up from Treasury Secretary Janet Yellen herself. She apparently had spent the last two days lobbying directly including talking directly with Ron Wyden. Clearly, someone is still salty about that Buy Bitcoin photo.” Jake Chervinsky tweeted further on this saying: “Word in DC is that this whole thing was Treasury’s idea.

 

 

 

They don’t like what we’re building and their solution is to obtain jurisdiction over noncustodial actors. They tried this via FinCen’s proposed rule last year and failed. Now they’re trying again. Problem is, they might succeed this time. Portman, Warner is DC gamesmanship at its worst, but I have to give it to them. It’s a nifty political trick. Although the amendment is garbage, Senator Warner’s involvement makes it bipartisan, which means dems can vote for it.”

There are lots of parts of this to dissect. Let’s talk first about the specifics of the bill. Simply put, what they think it says isn’t what it says. The first thing it excludes is validating distributed ledger transactions through proof-of-work (mining), but that’s not what mining is, it’s conflating two things. Here’s Nic Carter explaining in a tweet: “Just realized also that the text of this bill is technologically inaccurate. Proof-of-work does not validate transactions.

Nodes validate transactions by checking against rules, miners attach proof-of-work to well formed blocks to ensure continuity and linearity in the ledger. Validation does not equal proof of work. This is the equivalent of conflating a saying a bar of gold when taking delivery of a gold bar and the process of extracting gold from the earth, just different processes entirely.”

I point this one out to point out how well and truly the people writing this do not understand what they’re writing laws about. This is fundamental, basic stuff that you must understand if you are going to write binding laws about an industry. It also gets to a second point and one of my biggest sources of frustration over the past 18 hours, which is the “sometimes glib, sometimes gleeful” response of some Bitcoiners who are like ‘haha screw you Eth kids and shitcoiners,’ in their estimation this is somehow a big W for Bitcoin, because the only thing excluded is proof-of-work.

They see this and say, ‘See, we told you, proof-of-work over proof-of-stake. It’s right there in the law, Bitcoin wins.’ Let me be clear. This is a staggeringly, unfathomably idiotic, short-sighted take. First of all, the idea that this is some thoughtful, considered position, where Bitcoin supporters in the Biden administration and the Senate had considered all the available consensus mechanisms and decided to throw their weight behind proof-of-work is patently absurd.

This is fundamentally arbitrary compromise theater, picking the most narrowly defined exclusion they could find. And if you have any doubt of that, I again refer you back to the words of the amendment absolutely misunderstanding proof-of-work. Second, in the rush of this opinion group to rag on non-Bitcoin communities, they seem to be entirely missing the fact that this almost assuredly bans the Lightning Network. So I guess the Bitcoiners cheering this just don’t think anything being built with Lightning is important.

Third, the idea that this isn’t just a first step is ludicrous. Crypto was 100%. I mean, 100%, irrelevant to the vast majority of the lawmakers who will vote on this, until the Treasury Department and the Joint Committee on Taxation, a group that hasn’t had to show its math, by the way, randomly decided that there was $28 billion of unreported tax revenue that they could go scoop from us, not for nothing. Let’s keep in mind the tweet which said, “The best part about all of this is that we’ve never seen any evidence that there’s American crypto tax avoidance amounting to $30 billion.”

The point that I’m trying to make here is that if Bitcoiners think that somehow we’re immune to further attacks, I have an NFT of a bridge to sell you. Balaji Sreenivasan tweeted, “Make no mistake, this is a backdoor Bitcoin ban. Compliance is impossible. Their intent is to criminalize full nodes, Lightning nodes and most Bitcoin wallets,“.

The very next bill will include some ESG thing to attack that too.” Messari’s Ryan Selkis, meanwhile, says “Step one: ban proof-of-stake under the guise of tax compliance, step two: ban proof-of-work under the guise of environmental compliance, clever, likely effective back to war time, unfortunately.”

 

Now, one point of clarity, there are some Bitcoiners who are not as stressed because A), they believe that no matter what happens, Bitcoin will continue on. And that B), what matters really is Bitcoin’s use in places far outside of the U.S. What matters is that the network continues to offer them refuge from their local monetary regimes. My critique is not with this group. And in fact, I think they’re an important reminder who can help balance the intensity of this moment with a longer and more broad perspective.

There are others who find all of this wholly unsurprising, who have made the determination that government is beyond saving, so ‘screw you, I’m not going to call my senator.’ I don’t wholly agree with this perspective, but I respect it. Bitcoin represents an opt out for many, and that necessarily means that they’re not going to be lining up for a political battle with terms set by the U.S. government.

What I’m reacting to are those who are using their Twitter puppets to cheer this as a victory over non-Bitcoin assets, or who are glibly saying, ‘see, of course, Bitcoin is fine, they chose proof-of-work.’ Those takes are simply nonsense, ignorant of the reality of what’s going on.

But ultimately, of course, my beef isn’t with any of my fellow Bitcoiners, even the ones whose behavior I don’t love at the moment. My real critique is with a horribly broken political system. Here’s the tweet that sums everything up for me from Neeraj of Coin Center: “Making incredibly consequential technology policy through a last-minute tax amendment, on a must-pass bill, is insanity. The process itself is what’s so broken.”

Can you imagine an entire industry effectively outlawed with no debate? Because some senior staffers wrote an impossible provision in a completely disconnected law and shoved it in at the last moment. That is truly insane. It makes one ask, if this is happening here, what the hell is happening in every other big omnibus bill. I’m also frankly shocked at how many people I have seen say that we should chill out because we can trust the Treasury not to abuse the power its granting itself. Harvard professor and quintessential blue checkmark Jason Furman says, “The belief that this would lead to onerous information reporting requirements having nothing to do with the above like on miners.

This isn’t how the Treasury operates. They don’t try to squeeze blood from stones. They just wouldn’t do this.” What world does someone live in where ‘they just wouldn’t do this’ is a rational way to look at how laws are made. Laws aren’t about who writes them. They’re about who interprets them, even if he’s correct about this Treasury, which, given how aggressively they’re pursuing this, I don’t think there’s any goddamn reason in the world to think he is, laws aren’t about this Treasury, they’re about the next Treasury and the Treasury after that, and the Treasury after that, and so on and so forth until the end of time and guess what? The nature of power is that once it has been granted or one, it is extremely rare that it is then relinquished without just as much of a battle, if not more, as it took to win it.

So, where do we go from here? Well, there are a few perspectives. First, the nature of crypto is to iterate faster than regulators. I’ve seen a number of people say they’ll design proof-of-work into their protocols faster than the law can be implemented, and I believe them. Others pointed the validation will simply move offshore. And there is definitely something to the idea that crypto is like the water, filling in all the cracks, making it extraordinarily difficult, ultimately to regulate. Second, let’s not forget that this is not done yet.

The Senate has adjourned until Saturday, which means call your senators today. If you need help with that look up Fight for the Future on Twitter, they have a service that will help you get to your senator. Third, something that should be calming. This is a law that won’t go into effect until the earliest 2023. That means there’s still a ton of time to challenge this even if it does pass, both in Congress which has to ratify it and then through other forms of legal challenge as well.

Fourth, let’s take a moment to recognize the surprising especially to the powers that be amount of pressure this crypto industry has already exerted, from everything we’re seeing the Treasury and its allies were completely unprepared for how much pushback there was going to be. Indeed, part of their frustration right now is that they can’t believe that it’s us, this, in their minds, ragtag sandlot crypto industry that’s delaying their marquee legislation.

Were it me and I were a politician. I have to say, I might think twice about making an enemy of an extremely passionate, often ideological group, who has been part of one of the biggest and most rapid wealth creation processes in human history. But that’s just me. And look, it is clear that people are already organizing, particularly satisfying to my clearly explosive frustration was this tweet again from Messari’s Ryan Selkis who wrote: “I don’t have the temperament to testify in front of Congress, but I 100% have the temperament to help lead a decade-long vendetta against career politicians on the wrong side of the crypto agenda.”

Look, guys, this came out of nowhere, both times the provision itself and then this counter amendment. It was a blistering Sucker Punch. And yet, we still might win and if not, we’re going to come damn close. Imagine what happens when we actually organize.

 

Help us preserve financial privacy and independence in crypto. Make your voice heard! Call 517-200-9518 and you’ll be automatically connected to your senator.

Tell Them: 

“Hi, I’m calling to ask that you support Senator Toomey, Wyden and Lummis’ amendment to the cryptocurrency provision of the infrastructure bill (H.R. 3684). Toomey’s amendment will ensure that the provision does not dramatically expand financial surveillance, harm innovation, or undermine human rights. Policies that impact basic freedom and the future of the Internet should be debated carefully and should never be attached to must-pass bills. Thank you.”

 

Updated: 3-11-2021

Biden Is Betting His Whole Climate Agenda On Infrastructure.

With the latest round of stimulus, clean energy advocates have been told yet again that it’s not their turn.

Candidate Joe Biden rode into the White House promising to build back the economy after the devastation of Covid-19 with cleaner energy and a lower carbon footprint. The $1.9 trillion American Rescue Plan that President Biden signed into law today, however, does little in the way of fulfilling that pledge.

 



Harvey Pitt On Bitcoin Regulation SEC VS CFTC: Time: 25.20
 

That makes this the sixth pandemic stimulus package in roughly 12 months to put off significant action on clean energy and climate change mitigation, yet another sign of what many advocates now conclude is an opportunity wasted. The White House and Democratic leadership in Congress have said that low-carbon energy policy is still very much on the agenda, but that they’re aiming to load much of that into an infrastructure bill the Biden administration will put forward next.

 

Dividing the two priorities is risky, however, because an infrastructure bill with a heavy emphasis on climate mitigation could be even more contentious than the stimulus package. Polls showed widespread enthusiasm for this round of relief, yet the bill garnered not a single GOP vote in either chamber.

“Democrats felt very clearly that it was important to move quickly on rescue and that the contents be logically connected to the Covid crisis,” said Benjamin Salisbury, director of research for Height Capital Markets, a firm that does policy analysis for institutional investors. “They estimated that the risk of slowing or disrupting the rescue bill by adding other priorities was greater than the risk of waiting.”

Sen. Sheldon Whitehouse—one of the strongest advocates for climate action among Democrats in Congress—called the upcoming infrastructure bill “our primary opportunity to move green priorities. Green infrastructure and low-carbon technologies have enormous potential to create jobs.” The White House didn’t respond to repeated requests for comment on the stimulus bill.

Related:

Trump’s LACK Of Infrastructure Investment Is Put American’s Lives At Risk

Cost of Infrastructure Fixes Is Going Up While Trump Procrastinates

China Outspends US When It Comes To Building The World’s Infrastructure

The US Should Lead The World On Climate Change

In 2009, with the nation in the midst of its deepest recession since the Great Depression, Congress passed the American Recovery and Reinvestment Act, which delivered an $840 billion capital infusion to the U.S. economy, including $90 billion for renewable energy and other climate-friendly businesses. That investment has been credited with driving a rapid expansion in the sector, led by federal loan recipients such as Tesla Inc., and the creation of 3.4 million jobs.

As vice president, Biden presided over the implementation of that legislation, and those who were on his staff at the time say that the program’s success inspired his campaign promises on clean energy and job creation.

The idea that Covid stimulus packages would provide a once-in-a-generation opportunity to also address climate change took hold early in the pandemic. But despite lofty rhetoric, a recent study from the University of Oxford and the United Nations Environment Programme found that of the $14.6 trillion in spending announced by the 50 largest economies in 2020, only 2.5% has been for green activities.

House Speaker Nancy Pelosi held off on putting investments in green infrastructure into two relief bills last spring, especially given then-President Donald Trump’s hostile posture toward clean energy.

The stimulus bill passed in December is the only one to include major gains on climate, including an extension of tax credits for wind and solar projects and $35 billion in new spending on energy research and development programs. That measure also directed the Interior Department to allow more renewables on public lands and included an agreement to phase out hydrofluorocarbons, chemicals used in refrigeration and air conditioning that contribute to global warming.

Even that fell far short of the comprehensive investment in infrastructure and new clean power generation that would allow American to transition to a carbon-free electrical grid, a goal Biden has promised to achieve by 2035.

A June 2020 study from the University of California at Berkeley and GridLab, an energy consultancy, estimated it would take $100 billion in investments in transmission infrastructure alone to get the grid to 90% carbon-free electricity by 2035. Once completed, that would result in wholesale electricity costs 13% lower than today.

The power failures during February’s winter storm in Texas reignited calls from progressives for Congress and the White House to follow through on creating sustainable infrastructure. The devastation “highlights the need to transition to a renewable energy economy while investing in infrastructure and our communities,” tweeted Rep. Pramila Jayapal, chair of the Congressional Progressive Caucus, in late February.

Many environmental advocates point out that the new stimulus package isn’t entirely devoid of upside for the climate. It includes $100 million for the Environmental Protection Agency—half for environmental justice grants and activities to help communities disproportionately burdened by pollution, and half for air quality monitoring grants and other purposes.

There’s also more than $30 billion for mass transit systems that have seen ridership and revenue collapse amid the pandemic, plus an additional $1.7 billion for Amtrak.

That’s “enormously important” from a climate perspective, said J. Peter Byrne, faculty director of the Georgetown Climate Resource Center, an event for the university’s law school on Tuesday. “When we go back to traveling, we need to be attracted to public transportation in order to reduce emissions,” Byrne said.

Kevin Book, an energy analyst with investor research firm ClearView Energy Partners, said that the fiery partisan opposition to the Green New Deal explains Pelosi’s decision to punt again on including significant new energy transition funding. “Energy has become so polarizing that they had to leave it out” if they wanted stimulus to move swiftly, he said.

In spite of this latest missed opportunity, clean-energy advocates remain in lock-step with the administration’s strategy—largely, they say in private, because they have no alternative.

A coalition of nearly a dozen environmental advocacy groups, including the Natural Resources Defense Council, the Environmental Defense Fund, and the Sierra Club sent a letter to senators earlier this month supporting the stimulus bill that now awaits Biden’s signature.

But they also emphasized that the legislation was just a “first step” in the process of making the U.S. economy “stronger, more equitable, and more sustainable.”

Now It’s Biden’s Turn To Schedule Infrastructure Week

Like his two predecessors, the president may discover that building useful new stuff is harder than it seems.

With the American Rescue Plan signed into law, President Joe Biden appears ready to pivot to his next big idea: a recovery plan focused on infrastructure. And while the perennial concern about how to pay for it is already rising on Capitol Hill, members of Congress might want to worry a bit less about the how a bit more about the what and why.

Under President Barack Obama, for example, the federal government invested significantly in new streetcars, which now exist in many U.S. cities. These modern trolleys look cool. And because they don’t require tunnels, viaducts or other grade separation, they are relatively easy to build.

But in virtually every case, Obama-era streetcar lines got built by foregoing dedicated lanes. This avoided offending politically influential car owners while still allowing mayors to attend ribbon-cuttings and the Transportation secretary to tout the jobs created by all the new made-in-America trolley tracks.

Unfortunately, when you make a streetcar run in mixed traffic, all you’ve really created is an expensive bus. Except unlike a bus, a streetcar can’t go around obstacles. So as an actual transportation service, a streetcar is an inferior product to the humble bus, and drastically inferior to the cheap-but-controversial step of creating a dedicated bus lane.

The great difficulty of infrastructure projects isn’t just getting the politics right. It’s that the technical design details matter enormously, and tradeoffs are difficult to avoid.

Years ago, Washington embarked on the construction of the new Metro line, which after many delays and cost overruns will soon actually extend out to Dulles Airport. These kinds of airport connector projects are often a high priority for elites, who tend to travel a lot and thus have airport-centric views of the different cities they visit.

But these connectors tend to underperform in ridership, because linking an airport to a central business district doesn’t actually serve the most plausible market: the people who work at the airport and have to go there five days a week. According to one analysis, the AirTrain projects at JFK and Newark airports cost about $100,000 per weekday rider. At that price, the government could just buy each of them an electric car.

The real problem in Washington, however, isn’t the cost of the line to the airport. It’s that there is only so much capacity in the tunnel under the Potomac River. Adding the new trains has made it necessary to run less frequently the other trains that use the tunnel. That means this huge financial investment in transit — $5.8 billion and counting — has already resulted in worse service for some people.

Highways pose fewer technical challenges of network design, and the U.S. is consequently better at building them. But America has been building highways for a long time, which means that the highest-value routes were all built long ago. Incremental investment in highways now means marginal, sprawl-inducing extensions.

America would get more value from maintaining and upgrading existing infrastructure. But federal funding flows through state transportation departments, and governors like to cut ribbons on new roads, bridges and the like. A moderate increase in the pace at which potholes get filled doesn’t make for a good photo op.

None of this is to deny that the country has genuine infrastructure needs or that an injection of federal money could help with them.

A By-The-Mile Tax On Driving Gains Steam As A Way To Fund U.S. Roads

President Joe Biden’s drive to increase electric car use may unintentionally thwart his other urgent priority to restore the nation’s roads, bridges and transit systems by undercutting federal gasoline tax receipts.

That’s got U.S. Transportation Secretary Pete Buttigieg taking a serious look at an idea that’s drawn fierce opposition from privacy advocates and others: funding highway projects with a fee based on how many miles someone travels instead of how much gasoline they pump.

“Maybe more than at any point since the gas tax was instituted, it feels like so many different possibilities are on the table,” Buttigieg said in a recent speech to the American Association of State Highway and Transportation Officials.

Biden has promised to roll out a large infrastructure package that is expected to incorporate ideas to boost the nation’s transportation and clean energy sectors now that Congress has passed his Covid relief bill.

“It not only creates jobs, but it makes us a hell of a lot more competitive around the world if we have the best infrastructure in the world,” he said after a March 4 meeting with Democratic lawmakers on the infrastructure topic at the White House.

Transportation is expected to be a big part of — but not all of — the likely infrastructure plan and mileage fees are being raised as a way to pay for some or all of that in a way that accommodates the rise of electric vehicles that Biden also hopes to see.

A vehicle-miles-traveled fee has been studied in the nation’s capital for years though previous versions have encountered resistance about forcing drivers to place transponders in their cars to keep track of mileage. But states that have experimented with pilot programs have found ways around that by letting motorists report odometer readings electronically or in-person, using plug-in devices or recording mileage with a smartphone app.

With the Biden administration preparing to begin a push for an infrastructure package that is expected to dwarf the just-passed $1.9 trillion Covid-relief bill in size, transportation advocates in Washington are more hopefully than ever that the idea’s time has come.

“People are talking about it more than have in the past, which is a good thing,” Jim Tymon, executive director of the American Association of State Highway and Transportation Officials, said in an interview.

“The vehicle fleet is trending toward electrification and the Biden administration is going prioritize this,” he said. “That’s going to force their hands a little bit because you’re not going to be able to collect the same amount of revenue as you do from gas and diesel vehicles.”

A vehicle-miles-traveled program also would help close the yawning gap in federal highway funding that is estimated to be as high as $16 billion this year. That’s because the Highway Trust Fund, which pays for roadway and transit systems, is financed primarily through the federal gas tax, currently 18.4 cent-per-gallon.

That only brings in $34 billion per year while federal spending has topped $50 billion annually and has had to be supported by transfers from the general fund.

Last year, Highway Trust Fund receipts from the gas tax were down 9.4% over the previous fiscal year due to a reduction in driving because of the pandemic. The gas tax has not been raised since 1993, and there is little appetite in Washington for increasing it.

The push for plug-in cars is an additional complicating factor because fully electric vehicle drivers do not pay any gas tax. Several carmakers have pledged to produce all-electric fleets by the end of the current decade.

“The President’s made a commitment that this administration will not raise taxes on people making less than $400,000 a year,” Buttigieg said during an appearance on Bloomberg Radio’s “Sound On” show. “And so that rules out approaches like the old fashioned gas tax.”

During Buttigieg’s Senate confirmation hearing in January, he was asked how the administration would pay for an infrastructure program and mentioned a per-mile fee as one option.

“If we are committed to the idea of user pays, part of how you might do that is vehicle miles traveled,” he said. “But that raises concerns about privacy and there remains some technological questions.”

Washington has been mostly spinning its wheels on infrastructure spending for half the past decade, due in part to a reluctance to raise gas taxes.

A five-year, $305 billion transportation funding law was set to expire in 2020 but was extended until next year. The House passed a five-year, $494 billion surface transportation bill in July 2020, but the measure was not been approved by the Senate.

Greg Regan, president of the AFL-CIO’s Transportation Trades Department, said there is “more political will” for the Biden administration’s push for a robust infrastructure bill and there’s growing interest in an alternative to the gas tax.

“It’s a user-fee model that encapsulates electric vehicles, so it’s perhaps more equitable than the gas tax,” he said. “The headwinds haven’t changed. There’s still privacy concerns, but it’s not like isn’t being done in various states around the country. There are models that work.”

Phased In

Regan said any mileage fee program that’s included in Biden’s infrastructure bill will likely have to be phased in after another infusion of cash from other areas of the federal budget for the beleaguered Highway Trust Fund.

“You have to phase it in, maybe in three-to-five years after a one-time transfer,” he said. “The last time the gas tax was raised, it was part of a big budget bill. You’re not going to get a standalone vote on something like that.”

Representative Sam Graves, of Missouri, the top Republican on the House Transportation and Infrastructure Committee, said a mileage-fee could easily be substituted for the gas tax without using techniques that raise the thorny privacy issues that tanked prior versions of the proposal.

“It can be done right now with the technology that we have,” Graves said last month during an appearance at an American Association of State Highway and Transportation Officials conference.

Pump Formula

Graves suggested that for gas- or diesel-powered vehicles, a per-mile tax can be assessed through a simple formula at the pump.

“We take whatever you come with as the national average for miles-per-gallon, multiply that by whatever the VMT is going to come up to, let’s say a penny, and we just calculate it at the pump,” he said.

“It doesn’t take any new technology,” he said. “This isn’t about any GPS tracking devices or anything like that. This is just a formula at the pump very much like we’re doing now with the fuel tax.”

Graves suggested Friday that planned modernization of the U.S. Postal Service vehicle fleet could provide an opportunity to test a mileage fee program on a national scale because the some of new postal vehicles will be electric.

Adrian Moore, vice president of policy at Reason Foundation, a libertarian think tank, said a mileage fee would be a more equitable user fee than the gas tax because drivers of electric cars avoid paying anything. And those who can afford new, more fuel-efficient cars are paying less per mile than their counterparts who drive older cars.

The result, he said, is a system in which “those that can afford new technologies will be privileged to pay less than those who can’t afford it.”

The longest-running U.S. mileage tax program started in 2013 in Oregon, where drivers who join OReGO, as the program is called, are charged 1.8 cents per mile for trips that take place on the state’s roads.

Participants are given the option of using a GPS device to record their miles or using a non-GPS option that tracks usage based on the mileage odometers of cars.

In return for participating, the drivers are offered a tax credit reimbursing them for the 36-cent-per-gallon Oregon gas tax that they pay on fill ups. Drivers in the program receive regular statements of their road charges based on the reported miles, which also show their fuel tax credits.

In Washington state, a newer pilot program allows drivers to choose between four methods of tracking mileage, including pre-paying for an estimated number of miles that will be driven annually, reporting mileage based on odometer readings either electronically or in-person, using plug-in devices that in some cases contain GPS systems or recording mileage with a smartphone app.

California, Delaware, Hawaii, Minnesota, and Missouri also have federally-funded mileage fee pilot programs.

Representative Pete DeFazio said legislation he’s supported in the past paid for some of the pilot programs.

“I continue to support this approach,” DeFazio, an Oregon Democrat who chairs the Transportation and Infrastructure Committee, said in a statement. “We need to learn from these tests, including about how revenue gets collected and how we address privacy concerns, before we take any additional steps at the federal level.

Updated: 4-13-2021

The Case For A Transit-First Infrastructure Plan

President Biden’s $2 trillion jobs plan would double the federal contribution to public transit. But to fight climate change and broaden access to opportunity, that won’t be enough.

Last month, the Biden administration released the American Jobs Plan to invest $2 trillion into infrastructure over eight years. It presents a once-in-a-generation opportunity to set a course for the future and mitigate existential threats facing the nation including climate change, structural racism, an escalating affordable housing crisis, an aging population, and an economy in tatters from the pandemic.

In its current form, the plan calls for an $85 billion investment in the nation’s transit systems, including $55 billion for maintenance, $25 billion for expansion and $5 billion to fulfill the mandate of the Americans with Disabilities Act. The funding would almost double the annual federal contribution to public transportation, which currently accounts for 17% of total transit spending.

These compounding crises are interconnected, and so is their solution. To expand access to jobs, health care, schools and other destinations that keep the economy running, the key is public transportation, which provides mobility for all while minimizing congestion, pollution and energy consumption.

But beyond this single line item, there is a momentous opportunity to fully integrate transit in a new paradigm of infrastructure planning. Biden’s plan calls for the modernization of 20,000 miles of highways, roads and main streets. What if that meant giving buses and trains dedicated lanes and signal priority? Also included are millions of new affordable homes, commercial buildings, schools, hospitals and federal buildings.

What if these places were built near transit stations? Planning for a transit-oriented future would multiply the social, environmental, and economic benefits of this historic investment. Here’s how.

Fixing Roads Means Making Room

The American Jobs Plan calls for $115 billion for road and bridge repairs, including $50 billion for what the White House calls “Fix it Right” road modernization projects. This means addressing maintenance needs before building anew, while ensuring that repairs are made “with safety, resilience, and all users in mind” according to the plan.

Those projects need to reconsider the amount of road space allocated to different transportation modes. Buses and trains can carry as many people as several blocks’ worth of cars. But transit vehicles that run in mixed traffic are subject to the same congestion as the cars that are causing it.

Ultimately, the only way to unclog our cities is to provide space for people rather than cars. “Fixing it right” by dedicating more lanes to transit gives travelers the alternative of a bus or a train zipping past grinding traffic. As my research at Georgia Tech with civil engineering professor Kari Watkins and our colleagues has found, such improvements can help shift more drivers out of cars and into transit.

For example, in Washington state, King County Metro works with Seattle, Bellevue, and other cities to improve speed and reliability through dedicated lanes, traffic signal changes and queue jumps at intersections. The improvements make streets safer for all users while saving transit vehicles precious time at each intersection.

These time savings add up to a faster and more reliable experience for passengers, which may explain why the bus agency was one of the few to experience a ridership increase in recent years. At the same time, making transit faster and more reliable lets buses and trains run more frequently and at a lower operating cost, leading to further gains in ridership.

Affordable Housing Means Housing Near Transit

Of course, transit is only viable for riders when it reaches the destinations they care about. This is why successful transportation and land-use policies must be planned together. The American Jobs Plan is an opportunity to do just that on a national scale — the first and potentially the last for decades to come.

How? Biden’s plan dedicates $213 billion to addressing the national shortage of affordable housing. This funding should be used to build and preserve units near transit. According to the American Automobile Association, owning and operating an average sedan costs $713 per month whereas a transit pass costs less than $100 in most cities.

By providing an alternative to vehicle ownership, equitable transit-oriented development — a racial-equity-focused model for siting or preserving affordable housing near public transportation — can address the housing and transportation affordability crises simultaneously. In one success story in Denver, Colorado, researchers found that over half of low-income households who lived in equitable TOD within a 10-minute walk from a transit station did not own a car.

The president’s proposal also calls for an end to exclusionary zoning laws such as limits on multifamily housing and parking minimums, which deplete land and construction funds that could otherwise be used for more housing. Biden proposes a “grant program that awards flexible and attractive funding to jurisdictions that take concrete steps to eliminate such needless barriers to producing affordable housing.” Combining those steps with a focus on equitable TOD would further maximize the impact of every dollar invested.

Transit-oriented housing would also benefit older people, for whom a major challenge to aging in place is the lack of affordable and age-friendly housing. Ensuring that new development is located near transit would help protect the independence of those who are losing the ability to drive, and would complement the $400 million dedicated to “expanding access to quality, affordable home- or community-based care for aging relatives and people with disabilities.”

Transit-oriented housing for older adults would also help curb traffic fatalities, especially pedestrian deaths, which have swelled in recent years among seniors.

Electric Vehicles Will Never Be The Answer

A centerpiece of Biden’s transportation infrastructure plan is electrification. The plan calls for $100 million in consumer rebates for electric vehicles and $15 billion to add 500,000 EV charging stations. Also included are $45 billion to electrify city and school buses.

Yet even if the U.S. eventually manages to electrify its entire vehicle fleet and transition towards 100% carbon-neutral energy, increasing the share of trips made by transit will continue to be a critical goal for the environment. Building batteries, wind farms, nuclear plants, and solar panels to power EVs — as called for by the Biden plan — requires the extraction of minerals located in biodiversity hotspots that are already in short supply.

Land use centered on cars, electric or not, also leads to the destruction of irreplaceable ecosystems by pushing urban boundaries further into what once were natural habitats. The loss of biodiversity contributes to the spread of pandemics, food insecurity, and climate change. Therefore, the environmental impact of dozens of electric cars is far greater than that of a single bus — especially one of the 50,000 electric buses included in the plan.

For decades, transportation and land use policies planned in isolation have maintained the status quo. As the interconnected challenges facing the nation reach their tipping point, the American Job Plan presents a last chance to change course. This chance is to not only to fix what we have but to imagine a better path. As Transportation Secretary, Pete Buttigieg recently tweeted, “You should not have to own a car to prosper in this country.” Taking this opportunity to integrate public transportation deeper into the fabric of society can lead to a more just, sustainable and prosperous future.

Updated: 4-15-2021

China Cracks The Trillion-Dollar EV Question

The key to wider electric-vehicle adoption is infrastructure investment. Washington could learn a thing or two from Beijing.

Despite all the optimism, there’s still a multi-trillion dollar barrier facing electric vehicles. It isn’t just the hefty cost of batteries, but also investing in charging networks and power infrastructure. Without the latter two, there isn’t much of a green future.

Several countries have announced fiscal stimulus plans focused on decarbonization. But few are targeting infrastructure — the backbone of electric-vehicle adoption — in a meaningful way. Most recently, the Biden administration said it’s going to put $100 billion toward upgrading its aging power grid systems and another $174 billion to build out half a million charging stations by 2030.

As my colleague Liam Denning has pointed out, the lion’s share of the spending will probably go toward consumer incentives to buy electric cars.

As commendable as these efforts are, they’re not enough. Charging isn’t just about peppering homes, highways and mall parking lots with facilities to top up. Entire power grids need to be upgraded, too.

It’s worth looking to China for how this should be done. Beijing’s strategy is to remove as many barriers to adoption as possible, and lower the cost of ownership by putting large amounts of capital to work, along with incentives for the private sector.

Ambitious national and local goals have served China well. The country had 1.68 million charging points at the end of last year, just over half of which are private and the rest public. While that’s below the 4.8 million original target, it’s far beyond what the U.S. has achieved at 72,000 at the end of 2019. China has one charging point for every five electric vehicles, compared with 20 in the U.S., according to BloombergNEF.

China has redirected its electric-vehicle subsidy efforts toward building out a vast network of charging stations, while cutting back on consumer-focused incentives. A plan unveiled last year boosted the emphasis on charging and battery-swapping stations. The state-run grid operator’s smart network is connected to over 90% of all charging piles.

This is the right way to achieve broader adoption. It is, however, a behemoth task, requiring massive capital expenditure. If policy makers around the world are bent on going green, this burden cannot be borne by potential drivers. Of the $14 trillion of global expenditure that’s required to upgrade power systems over the next three decades, about 14%, or close to $2 trillion, needs to go toward electrification in general, BloombergNEF estimates.

This requires upgrading existing connections, electrifying more energy consumption and creating supply for charging stations. Goldman Sachs Group Inc. estimates full adoption of green vehicles would need approximately $6 trillion of investment, of which half would go toward grids.

China had its own learning curve. Up until about a decade ago, most of Beijing’s investment in more efficient power grids was focused on transmission, or high voltage, rather than distribution, or lower-voltage supply to consumers. The latter accounted for just around 10% of investment.

Since then, the focus has changed, with an increasing amount – almost $300 billion between 2015 and 2020 – going toward upgrading networks. Last year, state media reported that China would invest close to $900 billion in grids over the next five years, including a focus on electric-vehicle chargers and smart infrastructure.

As China invests more, it has managed to bring down costs by increasing the scale of charging networks. A study in 2019 showed that, without subsidies, it cost over $300,000 to install a charging station in China. That compares to anywhere between $600,000 to $1.1 million just for plugs and other equipment in the U.S.

In the process, Beijing focused on the security of electricity supply and distribution, and ensuring neither consumers nor power systems are stressed. Given drivers tend to charge their cars at home, grids everywhere need to prepare for a future in which people get home from work and plug in overnight.

An uncharged car is useless to a driver, and the prospect diminishes the appeal of owning one. The average EV raises a household’s overall electricity load and tends to keep it there. For a driver, this makes such vehicles a poor substitute for an internal combustion engine car.

China is now trying to figure out how to manage electricity and power for vehicles as it upgrades grids. Last year, Shanghai undertook a pilot program to determine if the frequency and method of charging could be more flexible, or how power could be efficiently distributed.

Updated: 7-18-2021

Senate Infrastructure Bill Drops IRS Funding, Raising Pressure For New Revenue

Lawmakers, White House move to finish $1 trillion plan by midweek.

Lawmakers dropped plans to pay for a roughly $1 trillion infrastructure package in part by boosting tax-collecting enforcement at the Internal Revenue Service, a setback for the bipartisan measure ahead of a looming deadline for agreement.

The shift came after pushback from Republicans who were wary of granting the agency more money and power, Sen. Rob Portman (R., Ohio), one of the lead negotiators, said Sunday on CNN. Legislative aides from both parties confirmed the move.

The change means that the plan to strengthen the IRS to do more to collect taxes owed but not collected—a priority for President Biden —has stalled, at least for now. But lawmakers say it could be revived elsewhere, in a separate spending package pushed by Democrats.

The decision to exclude the IRS provision means lawmakers will have to scramble to replace it to complete the infrastructure package before a midweek deadline, and it casts new uncertainty over the talks.

Republicans and Democrats have spent weeks trying to negotiate an infrastructure deal, including funding for roads, bridges and broadband. But they have struggled with how to cover the cost without increasing the federal deficit, which has risen to record levels over the past few years because of tax cuts and pandemic-related spending. They have said the plan would be fully paid for with new revenue.

Lawmakers face the first test this week of whether there will be enough support to move forward with the infrastructure deal, along with a separate $3.5 trillion budget resolution supported only by Democrats.

That package includes provisions aimed at addressing climate change, expanded access to education and affordable child care and broader Medicare benefits. The two pieces of legislation together comprise most of the White House’s legislative agenda.

Senate Majority Leader Chuck Schumer (D., N.Y.) said last week that he would take the first procedural step Monday, setting up a vote Wednesday to begin debate on the bipartisan infrastructure bill. Democratic support for the infrastructure legislation, however, depends on the party coalescing by the same day around the $3.5 trillion budget resolution.

Both bills rely on fragile coalitions of lawmakers deciding to compromise. Republicans and Democrats were still working on details over the weekend and said they weren’t sure if they would meet the midweek deadline.

Sen. Bill Cassidy (R., La.) said on Fox News Sunday that meeting the Wednesday deadline was possible, but only if the negotiators agreed on provisions to pay for the plan.

“We need Senate leadership, Schumer, and the White House to work with us. Right now, I can—I can frankly tell you that they’ve not,” Mr. Cassidy said.

Mr. Portman, the lead GOP negotiator on the infrastructure deal, said they shouldn’t have a Wednesday deadline. “It’s more important to get it right than to meet an arbitrary deadline,” he said.

Lawmakers in the bipartisan negotiating group, including Sen. Jon Tester (D., Mont.) had said last week they were already looking at alternatives to the IRS provision to raise revenue. The process has been made difficult by Republicans’ refusal to raise taxes and Democrats’ unwillingness to raise user fees on lower and middle-income Americans.

Mr. Portman said Sunday that the new funding shortfall wouldn’t derail the overall package, adding that other potential revenue sources existed for the infrastructure plan. Among other options, lawmakers are considering delaying or repealing a Trump-era proposal to end rebates that drugmakers give to Medicare, a change that would save the government revenue.

The group of 11 Republicans and 11 members of the Democratic caucus reached a deal on a broad framework last month with the White House, but some said they wouldn’t vote to begin debate on the bill unless a more detailed agreement had been reached. Late last week, disagreements over the IRS issue tripped up lawmakers hoping to complete how the bill’s cost would be offset.

“We want to be able to collect the taxes that are due, but we also don’t want to harass individuals—and in between is a fine line we don’t want to cross,” said Sen. Mike Rounds (R., S.D.), a member of the bipartisan group.

“I don’t remember any of these efforts I’ve ever been involved in that are actually a straight line and get done quickly,” Sen. Mark Warner (D., Va.), a member of the bipartisan infrastructure group, told reporters Thursday.

The infrastructure bill will need 60 votes to advance in the 50-50 Senate, where liberal Democrats have said their support is contingent on the separate antipoverty and climate package securing unanimous support within their party.

Democrats plan to advance the $3.5 trillion package through a process tied to the budget that allows it to skirt the 60-vote requirement and pass with a simple majority, provided that they stave off any defections within their own ranks.

Senate Budget Committee Chairman Bernie Sanders (I., Vt.) had initially pressed for a $6 trillion package, and some centrists including Sens. Joe Manchin (D., W.Va.) had hoped for a bill no larger than $2 trillion.

Under a framework reached by the Democrats on the Budget Committee last week, including Mr. Sanders, the $3.5 trillion package would combine expanded access to preschool and affordable child care, broader Medicare benefits and programs aimed at addressing poverty and climate change.

Mr. Manchin and some other centrist Democrats said last week that they needed to review more details before committing to support the agreement. Mr. Tester said late last week that he would support at least moving forward with the process of crafting the budget resolution. Mr. Schumer said Senate Democrats have until Wednesday to decide whether they can coalesce around it.

“We need to address some very important issues in this country and I think there’s a real possibility that that $3.5 trillion can address some of those issues that aren’t addressed in this bipartisan infrastructure package,” Mr. Tester told reporters. “So I want to have a debate on it.”

House Speaker Nancy Pelosi (D., Calif.) has said she won’t bring up the bipartisan infrastructure bill until the broader budget package has passed the Senate, leading to some backlash from both sides.

“We urge our colleagues to support an alternative approach and recognize that supporting an infrastructure bill that authorizes new spending also enables the Democrats’ $3.5 trillion tax-and-spend budget,” a group of nine, conservative Senate Republicans said in a statement Thursday.

Meanwhile, some centrist House Democrats are urging Mrs. Pelosi to bring up the bipartisan infrastructure bill as soon as it passes the Senate.

“We strongly urge—and pledge to work with you to bring about—a House vote on this legislation before the August recess and without any unnecessary or artificial delay upon arrival from the Senate,” a group of 10 House Democrats said in a letter released Thursday.

Infrastructure Bill To Drop Tax Enforcement, GOP Senator Says

Bipartisan negotiators have dropped stronger tax enforcement from the $579 billion infrastructure bill that Democrats want to advance this week as Republicans seek to finalize how the plan will be paid for, a key GOP senator said.

Senator Rob Portman said further meetings are planned on Sunday. The increased funding for the Internal Revenue Service as a way to boost tax revenue was dropped after it emerged that Democrats intend to include the measure in their bigger budget bill that’s running on a parallel track, the Ohio Republican said on CNN’s “State of the Union.”

This week is shaping up as key for President Joe Biden’s agenda after Senate Majority Leader Chuck Schumer said he’s seeking to set up an initial vote on the infrastructure package on Wednesday. The continued search for new ways of paying for the spending, including possible changes to Medicare mentioned by Portman, will make meeting the Wednesday deadline difficult.

“We’re still working on it,” Portman said on CNN. “It’s more important to get it right than to meet an arbitrary deadline.”

Even without the tax enforcement provisions, there are other ways to finance the plan, Portman said.

“And in terms of IRS reform, or IRS tax gap, which is what was in the original proposal, that will no longer be in our proposal,” he said. “It will be in the larger reconciliation bill, we are told.”

The senators in the bipartisan group backed off the tax enforcement plan after the Congressional Budget Office declined to credit them with a projected $100 billion in net new revenue from a planned $40 billion increase in IRS funding.

Conservative groups mobilized against increasing tax enforcement in recent weeks, arguing it would lead to harassment of law-abiding ordinary taxpayers.

‘Crumbling Infrastructure’

Senator Bill Cassidy, a Louisiana Republican who’s also part of a core group of senators negotiating the bill, said how to pay for the measures remains a sticking point.

“It can absolutely happen, but you need the pay-fors,” Cassidy said on “Fox News Sunday.” “We can get it done, but if they refuse to cooperate on the pay-fors it’s not going to pass.”

Cassidy and Portman were among a group of senators who joined Biden at the White House in June to announce the deal was moving ahead.

The Senate is proceeding with a two-pronged approach to enacting Biden’s agenda, a $3.5 trillion tax and social spending plan, backed only by Democrats, and the bipartisan infrastructure bill.

Portman said the infrastructure talks involving 11 Republicans and 11 Democrats should be allowed to run their course and produce legislation “when it’s ready.”

“We have a situation now in our country where we do have crumbling infrastructure,” he said. “It’s hurting our efficiency, therefore our productivity and our competitiveness. China spends about three or four times more on infrastructure than we do, as an example.”

Biden said last week “we’re in good shape” on the infrastructure bill, though there might be “some slight adjustments of the pay-fors.”

“You got to remember, we have an agreement,” he said.

Updated: 7-28-2021

What’s In The $550 Billion Bipartisan Infrastructure Bill

The House Friday passed the bipartisan plan to spend an extra $550 billion to revitalize the nation’s transportation and utility infrastructure, mostly in the next five years, meeting a key goal of President Joe Biden: a large, bipartisan accomplishment.

With the Senate already having passed the legislation, it now goes to Biden for his signature.

House passage came after days of last-minute negotiations and delays resulting from friction between progressive and moderate Democrats. The progressives abandoned attempts to secure guarantees from the Senate on what they could pass in the larger tax and spending plan, which will rely solely on Democratic votes.

Here’s What’s In The Legislation:

Roads, Bridges

The bill spends $110 billion on roads, bridges and other major projects. This includes $40 billion for bridge repairs and replacement, as well as about $16 billion for major projects. It also would reauthorize the surface transportation program for the next five years.

Public Transit

The plan includes an extra $39 billion to modernize transit and improve accessibility. In addition, the deal would continue existing transit programs for five years as part of the surface transportation reauthorization.

Railways

The deal would allocate $66 billion to Amtrak for maintenance, to upgrade tracks in the Northeast Corridor and bring rail service — including high-speed rail — to other areas of the country.

Power Grids

The deal includes about $65 billion for power grid upgrades, including building thousands of miles of new transmission lines for renewable energy as well as research for new technologies like nuclear reactors and carbon capture.

Electric Vehicles

The bill would spend $7.5 billion to build a nationwide network of charging stations for electric vehicles to help accelerate the adoption of non-fossil fuel cars.

Electric Buses

The plan includes $5 billion for new school buses, although the program would allow half of that to go toward buses that run on natural gas or diesel. The plan also includes $2.5 billion for ferries.

Airports, Waterways

The plan would provide $25 billion for airport repairs and efforts to reduce congestion and emissions. That includes encouraging the use of electric and other low-carbon technologies. It would also invest $17 billion in port infrastructure.

Resilience, Climate Change

The legislation includes $50 billion to help communities mitigate climate change and ward off cyber attacks. The funds include money to protect against droughts and floods.

Drinking Water

The package spends $55 billion to improve drinking water, including dedicated funding to replace lead pipes and remove dangerous chemicals.

Broadband Internet

The plan would invest $65 billion in high-speed internet to ensure that every household can access reliable broadband service.

Environmental Spending

The bill has $21 billion dedicated for environmental remediation to address past pollution that harms public health.

The plan also includes $1 billion to reconnect communities that have been divided by past infrastructure projects, such as highways splicing through established areas.

Transportation Safety

The plan would spend $11 billion on transportation safety, including programs to reduce crashes and fatalities, especially for cyclists and pedestrians.

Revenue Raisers

Here Are Some Of The Major Ways That Lawmakers Said Their Plan Would Offset The Cost Of The Spending:

* Unspent pandemic relief funds appropriated in earlier legislation;
* Assumptions that the bill would generate additional tax revenue economic growth generated from the infrastructure improvements;
* Recouped unemployment benefits claimed by fraudsters and from states that ended enhanced benefits early;
* Delaying the Medicare rebate rule enacted under former President Donald Trump;
* Increasing tax reporting rules for cryptocurrency investors;
* Fees on government-sponsored enterprises;
* Spectrum auction sales and a Superfund fee on corporations that pollute.

 

Updated: 8-6-2021

White House Supports Only Minor Changes To Crypto Tax Proposal

The crypto community is rallying against an amendment to the U.S. infrastructure plan that maintains strict reporting requirements for developers and validators while exempting miners.

The White House has formally backed the much more limited of two competing amendments to the infrastructure deal in a late Thursday statement.

The statement by White House deputy press secretary Andrew Bates says that “the Administration believes this provision will strengthen tax compliance in this emerging area of finance and ensure that high income taxpayers are contributing what they owe under the law.” He continued:

“We are grateful to Chairman Wyden for his leadership in pushing the Senate to address this issue, however we believe that the alternative amendment put forward by Senators Warner, Portman, and Sinema strikes the right balance and makes an important step forward in promoting tax compliance.”

The crypto community is pushing back against amendments to the crypto provisions of the White House’s infrastructure plan — which seeks to raise $28 billion for infrastructure funding through expanded taxation on crypto transactions and impose new reporting requirements for crypto “brokers.”

On Thursday, senators Mark Warner and Rob Portman proposed a “last-minute amendment” to the infrastructure deal to exclude proof-of-mining and sellers of hardware and software wallets from the bill. However, the amendment’s wording suggests crypto developers and proof-of-stake validators would still be subject to expanded reporting and taxation that some have described as “unworkable.”

Hours later, Washington Post economics reporter Jeff Stein tweeted that the White House is formally supporting their amendment.

If accurate, that means the White House isn’t supporting a rival amendment proposed by senators Cynthia Lummis, Pat Toomey and Ron Wyden, who provided a much broader list of exemptions including for any entity “validating distributed ledger transactions,” entities “developing digital assets or their corresponding protocols,” as well as miners.

“By clarifying the definition of broker, our amendment will ensure non-financial intermediaries like miners, network validators and other service providers are not subject to the reporting requirements specified in the bipartisan infrastructure package,” Toomey tweeted.

Coin Center executive director Jerry Brito slammed Warner and Portman’s much more limited amendment as “disastrous,” accusing Congress of “picking winners and losers.”

The minimal amendment has received widespread condemnation from the crypto community, with many onlookers emphasizing that proof-of-stake networks and software developers will be caught by the new legislation.

A petition demanding citizens push back against the amendment has already gone live on FightForTheFuture.org, with the page slamming the law for “dramatically expand[ing] financial surveillance” and harming innovation.

On Monday, the Electronic Frontier Foundation (EFF) published an article criticizing the amendment for including developers who do not control digital assets on behalf of users in its scope.

Specifically, the EFF took aim at wording contained in the amendment that defines a cryptocurrency “broker” as any individual “responsible for and regularly providing any service effectuating transfer of digital assets,” asserting that “almost any entity within the cryptocurrency ecosystem [could] be considered a ‘broker’” according to the new definition. EFF added:

“The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users.”

Updated: 8-8-2021

Janet Yellen Has Been Lobbying Against Wyden-Lummis-Toomey Crypto Amendment

Senators had hoped to pass the bipartisan bill on Thursday night, but issues remained unresolved around the cryptocurrency regulations.

Senators Wyden, Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Pa.) proposed their amendment on Wednesday to ensure that miners, node operators, developers and other non-custodial crypto industry participants are exempt from the crypto tax reporting provision.

The White House is officially supporting a competing amendment sponsored by Senators Mark Warner (D-Va.) and Rob Portman (R-Ohio) that excludes proof-of-work miners from the reporting provision.

“We believe that the alternative amendment put forward by Senator Warner, Portman and Cinema strikes the right balance and makes an important step forward in promoting tax compliance,” the White House said in a tweet Thursday evening.

Senators had hoped to pass the bipartisan bill on Thursday night, but debate continued and issues remained unresolved around the cryptocurrency regulations.

Updated: 8-9-2021

Why Some Bitcoiners Don’t Care About Changing The Infrastructure Bill

Not many people would have guessed that the big, bipartisan infrastructure bill — a key priority for President Joe Biden — would be thrown into a tizzy over an amendment regarding crypto-industry taxation. And yet here we are. At issue is not the attempt at more rigorous crypto taxation per se, but rather some of the definitions regarding who is compelled to file what information to the government.

Defenders of the crypto industry have said that some of the reporting requirements would be impossible for certain entities (like miners) to comply with. Although there are many different factions within crypto, the industry is almost entirely united in fighting some of these proposed rule changes.

Almost is a key word here, though. Perhaps surprisingly, there are some hardcore Bitcoin maximalists who aren’t interested in pursuing a legislative fight to defend the industry against regulation.

On Twitter, Neeraj Agrawal, the head of communications at the crypto think tank Coin Center (a big entity leading the fight to change the rule), has expressed his frustration at criticism they’re getting from Bitcoiners.

So why would Bitcoiners lash out at entities that seemingly are fighting on their behalf? Basically, the hardcore Bitcoin maximalist types believe that they’ve spent considerable money, time and engineering resources in building a decentralized system that’s robust against state attacks.

Whereas other coins have zoomed up thanks to get-rich-fast yield-farming systems, and speculative dog tokens, Bitcoin is being built like a clock designed to tick for a thousand years, ready to withstand any kind of attack. Therefore legislative defense is seen as an implicit subsidy toward networks and coins that haven’t invested as much on antifragility.

A good representative of this view is Bitcoiner and Blockstream employee Grubles, who’s been loudly critical of Coin Center’s efforts. His pinned tweet is a link to an article that he wrote on how to send a Bitcoin transaction while offline. It’s a really interesting and entertaining read. It involves satellites and antennas and hardware wallets and text messaging.

There are not many people who would do this right now. But that’s not the point. The point is that, theoretically, it can be done. Bitcoin can be used in extreme conditions, when internet connectivity is scarce due to some disaster or other situation in which a person can’t just easily fire up the WiFi and click a few buttons.

And so again, the view is that Bitcoin has been engineered (maybe even overengineered) to withstand state attacks and natural disasters. And therefore any attempt to fight D.C. via the standard means only helps competitors that haven’t built up this robustness.

Years ago, Vitalik Buterin, the creator of Ethereum, accused Bitcoiners of harboring “mountain man fantasies.”

The above ethos from Grubles is basically what he’s talking about here. There are some who want to build a system in which someone out in the mountains can engage in transactions without any interference from a government or corporation. And there are some who want to build a new type of financial architecture, but stop short of survivalist fantasies, and are realistic about working within the system to create a new space for themselves. It’s a different philosophy.

Of course, the Bitcoiners themselves may be delusional or naive about their ability to withstand a state attack. For one thing, basically all of the money in the space comes from regulated exchanges that are largely at the mercy of the law. Without these regulated fiat onramps, the whole thing might just be a neat computer-science experiment. But regardless, the divide over the bill is revealing when it comes to the priorities of some in Bitcoin vs. the wider majority of the crypto space.

Updated: 8-10-2021

Senate Passes Bipartisan Infrastructure Bill

Roughly $1 trillion package is central piece of Biden’s economic agenda.

The Senate passed a roughly $1 trillion infrastructure package with broad bipartisan support Tuesday, advancing a central piece of President Biden’s economic agenda that would amount to one of the most substantial federal investments in roads, bridges and rail in decades.

With 19 Republicans including Senate Minority Leader Mitch McConnell (R., Ky.) joining all 50 Democrats to pass the bill 69 to 30, the legislation sailed through the Senate. The bill will face a more complicated path in the House, where Democrats have yoked the fate of the infrastructure effort to the passage of a broad $3.5 trillion antipoverty and climate effort.

A bipartisan group of 10 senators and the White House hashed out the agreement over weeks of painstaking negotiations. It both reauthorizes spending on existing federal public-works programs and pours an additional $550 billion into water projects, the electrical grid and safety efforts, among many other projects.

Lawmakers and presidents of both parties have said for years that they wanted to come together on a major package on infrastructure, though an agreement consistently eluded them. The Senate vote on Tuesday puts Mr. Biden on track to buck that trend.

“After years and years of infrastructure week, we’re on the cusp of an infrastructure decade that I believe will transform America,” said Mr. Biden, who thanked Republican senators working on the bill.

House Speaker Nancy Pelosi (D., Calif.) has said the chamber won’t take up the infrastructure bill until the Senate also passes the antipoverty and climate plan. That negotiation is challenging on its own and could take months, given uniform GOP opposition and Democratic divisions over its specifics.

Senate Majority Leader Chuck Schumer (D., N.Y.) launched the chamber into considering a budget outline for that $3.5 trillion proposal immediately after passing the infrastructure plan Tuesday. An initial procedural motion passed 50 to 49, entirely along party lines.

“To my colleagues who are concerned that this does not do enough on climate, for families, and making corporations and the rich pay their fair share: We are moving onto a second track, which will make a generational transformation in these areas,” Mr. Schumer said of the infrastructure bill and the antipoverty plan.

Many senators cheered the public-works legislation as a boon to the economy and as evidence that Republicans and Democrats can still work together on major legislation in Washington.

“It’s an issue where traditionally Republicans and Democrats have been able to come together and say, ‘We may disagree on taxes and healthcare and all sorts of other things, but on this issue of having strong infrastructure, we can come together,’” said Sen. Rob Portman (R., Ohio), the lead GOP negotiator of the deal.

Of that $550 billion in spending above previously projected federal levels, $110 billion would go toward roads and bridges, $66 billion to rail and nearly $40 billion to transit. A $65 billion infusion would fund expanded access to broadband, including by providing low-income households a $30 monthly voucher to pay for internet service.

The bill includes several measures aimed at avoiding the worst consequences of climate change, with $65 billion allocated for improving the electrical grid and energy production and nearly $50 billion set aside for making infrastructure more resilient to both cyberattacks and natural disasters like floods and wildfires.

Roughly $7.5 billion is dedicated to building additional charging stations for electric vehicles, while another $7.5 billion would help fund swapping out current school buses and ferries with lower-emission replacements.

“This bill will rebuild crumbling roads and bridges and tunnels across the country. It will provide clean drinking water in American homes and address harmful contaminants. It will increase connectivity in our communities to bring broadband to even the most rural parts of our country,” said Sen. Jeanne Shaheen (D., N.H.), one of the lawmakers who crafted the plan.

The exact infrastructure projects that the huge infusion of federal funds will benefit will largely be decided by states, according to Kevin DeGood, director of infrastructure policy at the Center for American Progress, a liberal think tank. That flexibility has drawn some criticism from progressives, who pushed for more stringent climate standards on the funds.

“What we would say is that this money doesn’t come with enough strings. It’s too much of a blank check to states, and there’s a history that suggests they’re not great at making smart decisions with federal dollars,” Mr. DeGood said.

R. Richard Geddes, the director of Cornell University’s Program in Infrastructure Policy, said the legislation could have included more provisions facilitating long-term private investments in infrastructure projects. Still, Mr. Geddes, a nonresident senior fellow at the American Enterprise Institute, said the breadth of investments would benefit the economy.

“It’s certainly historic in infrastructure terms. It’s at least a once-in-a-generation bill,” he said.

Negotiators struggled for weeks to agree on how to raise funds or find savings to cover the full cost of the package, a goal of both Republicans and Democrats in the talks.

The White House ruled out raising the federal gas tax or other similar fees on those who use infrastructure, which have historically been sources of funds for infrastructure spending. At the same time, Republicans opposed Mr. Biden’s plan to raise corporate taxes to cover the cost.

To meet both those demands, the Republican and Democratic negotiators decided to rely on repurposing existing Covid-19 funds, delaying a Trump-era rule on Medicare rebates and receiving funds from past and future auction sales of wireless-spectrum space. A series of accounting maneuvers, along with applying reporting requirements to cryptocurrency transactions, are also meant to defray the bill’s overall cost.

The Congressional Budget Office, the legislative branch’s nonpartisan scorekeeper, found that lawmakers’ payment efforts came up short, projecting that the package would add $256 billion to the federal deficit over a decade.

Republicans who opposed the bill cited its cost and relationship to the rest of the Democratic agenda as reasons.

“I’m not yet comfortable with the current pay-fors in this legislation nor am I comfortable with Speaker Pelosi’s continued insistence on tying passage of this bill to the Democrats’ $3.5 trillion reckless tax-and-spend budget proposal,” said Sen. Todd Young (R., Ind.). He had earlier supported the infrastructure efforts.

The negotiators said they disagreed with the CBO’s methods for reaching that conclusion.

Agreeing not to raise taxes on businesses as part of the bill wasn’t the only concession Mr. Biden made during the talks. The White House originally sought a $2.3 trillion infrastructure plan in the spring, proposing major investments like $400 billion to cover in-home care for elderly and disabled Americans and $213 billion for retrofitting and building affordable housing that aren’t present in the bipartisan package.

Other White House initiatives, like spending $45 billion to replace lead pipes or $20 billion to reconnect neighborhoods cut off by past transportation projects, were slimmed down in the bipartisan bill. The legislation provides $15 billion for replacing lead pipes and $1 billion for the neighborhood program.

Democrats might pursue some of those excluded measures, like the care for elderly and disabled Americans and raising the corporate tax rate, in the separate $3.5 trillion package focused on antipoverty and climate programs. Democrats plan to approve that bill through a budget process called reconciliation, which would allow them to pass it without GOP support.

The looming prospect of the $3.5 trillion bill—the other major plank of Mr. Biden’s economic agenda—fueled both opposition and support for the infrastructure package. Some Republicans have said it has driven them to oppose the infrastructure bill, arguing that passing it would open the door to Democrats taking on the $3.5 trillion package.

At the same time, some progressive Democrats who oppose elements of the infrastructure plan have said they would support it only if it enabled the party to move on to the $3.5 trillion bill.

While Mrs. Pelosi has said she would wait for the larger bill to pass the Senate, some moderate Democrats have demanded that the House take up the infrastructure bill as soon as possible, setting up a possibly contentious process in the House, where Republican support is less assured.

Still, the infrastructure bill has drawn a broad coalition of support both inside and outside the Capitol, including endorsements from major groups representing both business and labor.

Updated: 8-15-2021

Biden’s Infrastructure Bill Doesn’t Undermine Crypto’s Bridge To The Future

Some saw beneficial effects from the week’s legislative face-off. Still, “crypto and blockchain technology is at a significant moment.”

It was a topsy turvy week — “staggering,” a crypto veteran called it. One that saw United States Senator Ted Cruz and Senator Ron Wyden collaborate on behalf of the cryptocurrency and blockchain industry — albeit, in a lost cause. These events could eventually pave the way for future regulatory success, though it may not seem that way now.

To recap: The Biden Administration’s $1.2 trillion infrastructure bill was supposed to be all about roads and bridges but as the Senate vote approached, it also became about cryptocurrency taxation. Thanks to a last-minute provision added to the bill, which some crypto advocates warned could have dire consequences, the changes could drive BTC miners out of the U.S. and thwart future blockchain development.

“It will be a stunning loss for America and our ability to remain the innovation epicenter of the world,” warned venture capital firm Andreessen Horowitz.

A last-gasp compromise was reached with senators from both parties participating which briefly raised hopes, but any late changes to the bill required unanimous consent on the Senate floor. Alabama’s Richard Shelby scotched the effort, reportedly because it didn’t include his amendment for $50 billion in military spending — entirely unrelated to crypto taxation.

Thus, the infrastructure bill passed the Senate Tuesday with its proposal to generate $28 billion in tax revenues from crypto transactions largely intact, along with a definition of “brokers” subject to reporting regulations so broad that it could (potentially) include crypto miners, software developers, node validators and even those creating nonfungible tokens, or NFTs.

All Is Not Lost

Upon further reflection, the sky may not be falling. The legislation will now move to the U.S. House of Representatives which will have its own priorities and modifications, and the timeline for implementation is still some two-and-a-half years away, so anything can happen. There might even be some long-term advantages for the crypto sector that will come from that week’s tumultuous events.

“The developments over the past week were massively positive,” Peter Hans, managing director at digital asset management firm Arca, told Cointelegraph, adding: “This is now firmly on the radar of Congress, which means they are starting to learn beyond the tired narratives of energy efficiency and ransomware payments.”

The industry still has to be on its guard, however, because the language in the bill is “broad enough to have the potential to be significantly damaging,” according to Matt Hougan, chief investment officer at crypto index fund provider Bitwise, told Cointelegraph. Even if is does not necessarily “guarantee a dire outcome,” he went on to add:

“Parts are vague and the worst ramifications are unlikely to hold up in court. But, interpreted in certain ways, it could indeed have significant consequences, stifle innovation and limit the growth of the industry in the U.S.”

“A lot is at stake,” as Rocco Marchiori, a certified public accountant and vice president of risk management at Blockware Mining, told Cointelegraph. “Everyone working in this space wants clarity,” especially “a clear definition of a broker,” because brokers under the law will have reporting requirements that go beyond what is demanded of traditional brokers. The Coinbases of the world are prepared to file 1099 tax forms as required, said Marchiori, but not developers or transaction validators.

“Yes, the bill has already passed the Senate with the initial, very vague language and is on the way to the House,” Hans said, but the House will make adjustments and then a reconciliation process takes place with the Senate, “so nothing is final.” Either way, added Hans:

“[Senator Robert] Portman was clear in the intention of the language, as was [U.S.] Treasury [Department], so the implementation of the end language has almost no chance to be the draconian descriptions that you are seeing in the media.”

“Nothing will be implemented until the end of 2023,” according to Zachary Kelman, managing partner at Kelman PLLC and general counsel at Cointelegraph. Furthermore, he is doubtful that the troublesome language and flawed definitions will make it that far.
Grassroots effort “took everyone by surprise”

Despite the setback on the Senate floor, the crypto industry may not have come away empty handed. “It’s not a completely wasted effort,” said Winston Ma, adjunct professor at New York University School of Law and author of The Digital War: How China’s Tech Power Shapes the Future of AI, Blockchain and Cyberspace, told Cointelegraph. “The crypto industry’s arguments reflected in the legislative record could influence the IRS’s interpretation when the agency writes detailed guidance and implementation rules.”

The week had its share of oddities, too, including the spectacle of U.S. senators crossing party lines to forge a compromise on the bill’s cryptocurrency tax provisions, a rare sight these days. “Ultimately, U.S. regulators want sensible protections in place that foster innovation and growth. In order for real institutional investment, we need to see regulatory clarity, and this is the first step,” said Hans.

“The fact that a debate around crypto held up a $1 trillion bipartisan infrastructure bill is proof positive that there is a growing recognition of the importance of this industry to America’s future,” added Hougan, continuing: “The fact that the crypto industry was able to rally so quickly and massively to influence the political agenda says great things about the future.”

It was shown this past week that “this is a global group, and we cooperate quickly and effectively,” said Marchiori, while Hans added that the mobilization of the crypto sector and its lobbying thrust “was grassroots, and it took everyone by surprise.”

“Yes, there was hyperbole, as there always is in politics and lobbying,” continued Hans, “but this can serve as a catalyst to strengthen the lobbying efforts in DC. It also served as the catalyst to make politicians aware that they have constituents who care deeply about the asset class, and it is totally non-partisan. I honestly see no real negatives.”

“The crypto community is coming into its own” as a political factor, commented Kelman, and it wasn’t lost on any number of U.S. senators, either, that they might now draw considerable social media attention to themselves if they take a stand — or even just comment — on crypto and blockchain developments. “When’s the last time any Republican got positive attention on Twitter,” said Kelman, adding that Ted Cruz became practically a Twitter Crypto hero for the week.

Marchiori said that the crypto sideshow might have even been a sort of teaching moment for the nation’s top legislators. “It was for us too. We don’t usually get involved in politics. It was encouraging to see senators interested in what we’re doing. Also, it was bi-partisan in nature.”
Consider the bigger picture

It’s easy to lose sight of the fact, too, that the infrastructure bill contains provisions that are critical for American society — which includes, of course, a significant portion of the crypto and blockchain community. As John Wu, president of blockchain developer Ava Labs, said in a statement made available to Cointelegraph: “The infrastructure bill is bigger than crypto and DeFi. As controversial as this tax-reporting measure has been, it’s still in the industry’s best interests to support a sensible infrastructure bill that will improve the physical and digital world for everyone in the US.”

Moreover, this is arguably just a single skirmish in one theater of a larger conflict. “The battle lines are just beginning to be drawn in the war over how cryptocurrency will — or will not — be regulated,” Ma told Cointelegraph, adding:

“Surely, you will see the crypto industry using its proven power to fight another day — on increased securities law scrutiny from the SEC as well as other challenges to its industry.”

Overall, “Crypto and blockchain technology is at a significant moment, transitioning from proof-of-concept to a phase of mass adoption,” Hougan told Cointelegraph. “It’s precisely during this phase when regulators typically take notice of disruptive industries, and precisely during this phase where progressive regulation can unlock significant new economic growth and benefits for society.”

“This is a critical moment for the crypto industry,” agreed Ma: “Succeeding or failing to persuade lawmakers now will determine whether regulation allows the digital gold rush to accelerate or slows it to a sputter.” Hougan concluded: “The past week has been pretty staggering,” while also adding:

“Two years ago, people were talking about crypto as tulip bulbs. Two days ago, multiple U.S. Senators were debating the intricacies of proof-of-work vs. proof-of-stake consensus mechanisms. To say we’ve come a long way is an understatement.”

 

Members Of Congress Lobby Nancy Pelosi And Others To Amend Crypto Tax Definition

Anna Eshoo has urged the House to amend the language in the controversial infrastructure bill.

Representative Anna Eshoo has written to Speaker of the United States House of Representatives Nancy Pelosi on Thursday, expressing concerns about the controversial new mandate for crypto tax reporting.

In it, she urged Pelosi to amend the cryptocurrency broker definition in the Senate’s controversial infrastructure bill. Eshoo claimed that miners, validators and developers of wallets would be unable to comply with the crypto tax reporting requirements.

Last-minute additions to the bipartisan infrastructure deal saw lawmakers propose expanded cryptocurrency taxation to raise an additional $28 billion in revenue. It will impose additional reporting requirements on any crypto company or organization deemed to be a “broker.”

The disputed bill defines “brokers,” who must report certain transactions to the Internal Revenue Service, as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

Eshoo is among numerous U.S. lawmakers, such as senators Pat Toomey, Cynthia Lummis and Ron Wyden, who assert that miners, stakers, validators, software developers and hardware manufacturers should not fall into this broadly termed category. In the letter, she stated:

“In the decentralized system of cryptocurrencies, these individuals and entities do not know who the buyers and sellers are and would be unable to comply with the broker requirements.”

The wording of the bill isn’t finalized yet, and the latest text still needs to clear the U.S. House of Representatives, and several House members have already called for changes.

Representative Tom Emmer, who introduced the Security Clarity Act in mid-July, alongside his co-chairs on the House’s bipartisan Blockchain Caucus, circulated a letter on Monday to fellow representatives that urged updates to the language.

“Cryptocurrency tax reporting is important, but it must be done correctly. We must prioritize amending this language to clearly exempt noncustodial blockchain intermediaries and ensure that civil liberties are protected.”

Eshoo is largely in agreement, stating that tax evasion should be addressed, before adding, “The House must amend the bill to meet this goal without stifling innovation in a nascent industry by imposing unworkable regulations.”

On Tuesday, the bill was passed without clarification on crypto or any amendments after a single senator had objected to amendments being voted upon.

Members Of Congress Lobby Nancy Pelosi And Others To Amend Crypto Tax Definition

Anna Eshoo has urged the House to amend the language in the controversial infrastructure bill.

Representative Anna Eshoo has written to Speaker of the United States House of Representatives Nancy Pelosi on Thursday, expressing concerns about the controversial new mandate for crypto tax reporting.

In it, she urged Pelosi to amend the cryptocurrency broker definition in the Senate’s controversial infrastructure bill. Eshoo claimed that miners, validators and developers of wallets would be unable to comply with the crypto tax reporting requirements.

Last-minute additions to the bipartisan infrastructure deal saw lawmakers propose expanded cryptocurrency taxation to raise an additional $28 billion in revenue. It will impose additional reporting requirements on any crypto company or organization deemed to be a “broker.”

The disputed bill defines “brokers,” who must report certain transactions to the Internal Revenue Service, as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

Eshoo is among numerous U.S. lawmakers, such as senators Pat Toomey, Cynthia Lummis and Ron Wyden, who assert that miners, stakers, validators, software developers and hardware manufacturers should not fall into this broadly termed category. In the letter, she stated:

“In the decentralized system of cryptocurrencies, these individuals and entities do not know who the buyers and sellers are and would be unable to comply with the broker requirements.”

The wording of the bill isn’t finalized yet, and the latest text still needs to clear the U.S. House of Representatives, and several House members have already called for changes.

Representative Tom Emmer, who introduced the Security Clarity Act in mid-July, alongside his co-chairs on the House’s bipartisan Blockchain Caucus, circulated a letter on Monday to fellow representatives that urged updates to the language.

“Cryptocurrency tax reporting is important, but it must be done correctly. We must prioritize amending this language to clearly exempt noncustodial blockchain intermediaries and ensure that civil liberties are protected.”

Eshoo is largely in agreement, stating that tax evasion should be addressed, before adding, “The House must amend the bill to meet this goal without stifling innovation in a nascent industry by imposing unworkable regulations.”

On Tuesday, the bill was passed without clarification on crypto or any amendments after a single senator had objected to amendments being voted upon.

Treasury Seeks To Quell Fears Crypto Tax Rules Are Overly Broad

The U.S. Treasury Department is set to clarify that only cryptocurrency companies it considers brokers will need to comply with proposed IRS reporting requirements, aiming to quell concerns over a provision in the bipartisan infrastructure bill passed by the Senate.

Other firms key to the nearly $2 trillion crypto market — from developers and miners to hardware and software providers — won’t have any new requirements, so long as they don’t also act as brokers, according to a Treasury official.

The Treasury’s guidance won’t grant blanket exemptions based on how firms identify themselves and instead will focus on whether a firm’s activities qualify it as a broker under the tax code, the official said on condition of anonymity to discuss internal deliberations.

The guidance, which could be made public as soon as next week, is an attempt to address concerns in the cryptocurrency industry that the $550 billion infrastructure bill would require a host of companies with ties to digital assets to report data to the Internal Revenue Service that they don’t have. The tax provision, estimated to raise $28 billion over a decade, was included in the legislation as a way to help pay for new investments in roads and bridges.

The Treasury’s directive is crucial because lawmakers who want to revise the bill’s language in the House are unlikely to succeed, since altering the crypto section could open up the whole legislation to additional revisions.

House Speaker Nancy Pelosi has said she’ll bring up the bill for a vote when President Joe Biden’s $3.5 trillion social spending and tax plan is also ready for consideration, which could be months from now.

The Senate-passed bill has caused significant heartburn in the cryptocurrency world, with participants saying Congress doesn’t understand the technology well enough to regulate it.

Senator Rob Portman, the Ohio Republican who drafted that portion of the bill, said on the Senate floor after days of debate over the issue that he thinks the legislation is clear, but added that that miners, entities who validate transactions and software developers for digital wallets should not be subject to the new tax rules.

Crypto industry players and advocates objected to what they called overly vague language, worrying it could subject too many companies to burdensome reporting requirements. The proposed law would expand the definition of broker in the tax code to include anyone “regularly providing any service effectuating transfers of digital assets.”

A bipartisan group of senators sought to pass a last-minute amendment to more narrowly target the new rules, but it was ultimately blocked with procedural moves.

The Treasury official said some of the industry’s concerns were valid but that much of the lobbying was aimed at limiting the Treasury Department’s authority to collect legitimate tax information. The department isn’t looking to go after businesses who don’t have transaction data, the official said.

The Treasury guidance would give more clarity about how it would apply the definition of a broker to entities that transfer digital assets on behalf of another person. The number of companies ultimately affected by the new reporting rules will depend on how aggressively the IRS implements the Treasury guidance.

The effort is also part of a broader push by the Treasury Department to crack down on tax cheats. IRS Commissioner Chuck Rettig has said tax evasion through the use of virtual currency is a key contributor to the growing gap between what’s owed in taxes and what the IRS actually collects.

In addition, more regulation is likely coming for the cryptocurrency community with prominent lawmakers, including Senator Elizabeth Warren, and regulators like Securities and Exchange Commission Chairman Gary Gensler both eager to address the emerging technology.

Settling Down

Some of the industry’s worst fears over the Senate bill may prove overblown.

“I don’t think people will notice much. Did everything die in crypto in the U.S. when Coinbase began 1099s a few years ago?” William Quigley, the co-founder of stablecoin Tether and blockchain platform WAX, referring to when the largest cryptocurrency exchange began issuing IRS forms in 2017.

“Those worries, though, I think have started to settle down a bit,” he said. “I think the IRS is going to take note of what the intent was that was expressed by these senators.”

The new reporting rules, if signed into law, won’t go into effect until 2023, giving the government and cryptocurrency companies time to update their systems to send the data prescribed in the law. It also gives the industry time to ramp up lobbying efforts.

“The crypto community got a strong wakeup call that it needs to highlight the benefits rather than let Washington dictate top-down,” said James Creech, a tax attorney who specializes in crypto. “Once you get identified as the source of the tax gap, you also get identified as something that needs to be cracked down upon.”

Mark Cuban Likens Shutting Off Crypto Growth To Stopping E-Commerce In 1995

Bitcoin proponent Mark Cuban is certainly unhappy with the tighter rules for crypto businesses introduced in the new infrastructure bill.

Leaders in the crypto industry continue to speak up as the bipartisan $1-trillion infrastructure bill, known for implementing tighter rules on crypto businesses and expanding reporting requirements for brokers, passed the United States Senate. Billionaire investor and Bitcoin (BTC) proponent Mark Cuban is one of them.

Speaking to The Washington Post over the weekend, before the bill officially passed the Senate, Cuban drew a parallel between the growth of crypto to the rise of e-commerce and the internet in general:

“Shutting off this growth engine would be the equivalent of stopping e-commerce in 1995 because people were afraid of credit card fraud. Or regulating the creation of websites because some people initially thought they were complicated and didn’t understand what they would ever amount to.”

Cuban is a vocal advocate for crypto and decentralized finance. The Dallas Mavericks owner is known for enabling the Mavs to accept Bitcoin, Ether (ETH) and Dogecoin (DOGE) payments for tickets and merchandise items.

He also argued in May that crypto asset prices are increasingly reflective of real utility and demand and that the day will eventually come when crypto is “mature to the point we wondered how we ever lived without.”

On Tuesday morning, the U.S. Senate passed the controversial bill in a 69–30 vote. The bill’s main focus is roughly $1 trillion in funding for roads, bridges and major infrastructure projects.

However, the bill caused serious concerns in the crypto community, as it will implement tighter rules on crypto businesses, expand reporting requirements for brokers, and mandate that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service.

Senator Pat Toomey, who was among the lawmakers who have written an amendment to the infrastructure bill to exclude certain crypto companies from the reporting requirements for brokers, said the new legislation imposes “a badly flawed, and in some cases unworkable, cryptocurrency tax reporting mandate that threatens future technological innovation.”

US Senator Claims Support For Crypto Amendments Despite Blocking Bill

Senator Shelby claims he supported the cryptocurrency provisions of the amendment to the infrastructure bill that his sole objection blocked from passing the senate.

On July 29, Cointelegraph reported that provisions had been hastily added to the infrastructure bill that sought to raise $28 billion through expanded taxation and impose stringent third-party reporting requirements for any entity deemed to be a cryptocurrency “broker.”

The provision’s broad language sent shockwaves across the crypto community, with onlookers noting that software developers, hardware wallet providers, miners and other network validators would likely be classified as brokers and required to report information on counterparty network participants that they are unable to collect.

Writing on Twitter on Tuesday, Senator Richard Shelby expressed support for the amendment put forward by senators Pat Toomey, Cynthia Lummis, Rob Portman, Mark Warner, Ron Wyden and Kyrsten Sinema, which would have exempted software developers, transaction validators and node operators from the third-party reporting requirements.

Despite his stated support, Shelby asserted he objected to the amendment over his dissatisfaction with the defense spending allocations contained in the legislation.

Shelby, the 87-year-old senator, whose sole objection led to the bi-partisan infrastructure bill passing through the Senate without amendment on Tuesday, has revealed he actually supported changes to the bill’s cryptocurrency provisions that his vote ultimately blocked.

The crypto community has slammed Shelby for his actions, with the comments to his post nearly exclusively populated with angry outpourings from crypto proponents.

Twitter user David Zell noted that Shelby’s largest donors from 2015 until 200 were commercial banks and firms representing the securities and investments sector, which donated more than $870,000 to Shelby over the period.

Jake Chervinsky, general counsel to Compound Finance, also criticized Shelby, highlighting that the senator is retiring at the end of his term.

Despite the popular amendment failing to pass the Senate, Chervinsky offered that it is “very unlikely” decentralized finance developers will be targeted under the infrastructure bill’s original language.

The bill must now pass through the House of Representatives, which is in recess until Sept. 20.

 

Updated: 4-1-2021

Biden’s $2.3 Trillion Infrastructure Plan Takes Broad Aim

Proposal would increase corporate taxes to pay for fixing roads and bridges, boosting research and tackling climate change.

President Biden unveiled a $2.3 trillion infrastructure plan centered on fixing roads and bridges, expanding broadband internet access and boosting funding for research and development, plus higher corporate taxes to pay for the package.

“It’s not a plan that tinkers around the edges,” Mr. Biden said during a speech in Pittsburgh, where he kicked off his presidential campaign. “It’s a once-in-a-generation investment in America.”

The Democratic president cast his plan as a fundamental shift in economic thought away from the small-government, tax-cutting approach embraced decades ago under Ronald Reagan, a Republican.

“Here’s the truth: We all will do better when we all do well,” Mr. Biden said, arguing that the pandemic had exposed longstanding inequalities in the country. “It’s time to build our economy from the bottom up and from the middle up, not the top down.”

He said his plan isn’t an attack on wealthy Americans. “This is not to target those who’ve made it, not to seek retribution,” he said. “This is about opening opportunities for everybody else.”

The president’s advisers say the Covid-19 pandemic has helped change American attitudes about the role government should play in their lives, making political space for unprecedented investments that could reshape the country.

The measure, which comes after Mr. Biden signed a $1.9 trillion coronavirus relief bill into law, is the first of a two-part economic plan that he hopes to move through Congress in coming months.

A second plan focused on child care, healthcare and education will be released in April. Combined, Mr. Biden’s economic proposals are expected to cost between $3 trillion and $4 trillion over a decade, according to people involved in the discussions.

Mr. Biden’s infrastructure proposal faces hurdles, including GOP opposition to significant tax increases, disagreements among Democrats about how to pay for the package and progressives’ concerns that it isn’t ambitious enough.

The infrastructure plan would cost roughly $2.3 trillion over eight years and be paid for over 15 years by raising the corporate tax rate to 28% from 21% and increasing taxes on companies’ foreign earnings. The tax changes would revamp or replace much of the international tax structure congressional Republicans established four years ago in the law signed by then-President Donald Trump.

Mr. Biden’s proposal includes $621 billion to modernize transportation infrastructure, $400 billion to help care for the aging and those with disabilities, $300 billion to boost the manufacturing industry, $213 billion on retrofitting and building affordable housing and $100 billion to expand broadband access, among other investments.

The plan, which requires congressional approval, calls for modernizing 20,000 miles of roadway; building 500,000 electric-vehicle charging stations; replacing the country’s existing lead pipes and service lines; repairing aging schools; expanding home care for the elderly and disabled; and investing billions of dollars in domestic semiconductor manufacturing. Mr. Biden also proposes mandating that more of the country’s electricity be generated from low-carbon sources, with a goal of eliminating carbon emissions from the power grid by 2035.

Mr. Biden’s plan stresses equity in access to jobs and transportation options, including $20 billion for a new program that would reconnect neighborhoods cut off by past transportation investments as well as research funding for historically Black colleges and universities. The plan calls for a national climate-focused laboratory to be affiliated with an HBCU.

The plan’s rollout will kick off months of negotiations between the White House and Capitol Hill, as well as a wave of lobbying by business and industry groups. White House officials acknowledged that the shape of the package could change as lawmakers—eager to put their stamp on it and score victories for constituents—offer up their own proposals. Mr. Biden’s advisers hope Congress will pass it this summer.

“I’m open to other ideas, so long as they don’t impose any tax increase on people making less than $400,000,” the president said.

Republicans and Democrats have struggled in recent years to pass major infrastructure legislation, disagreeing over how much to spend and how to finance it. Republicans are especially unlikely to agree to reverse the 2017 tax law that they supported enthusiastically.

Given likely GOP opposition, some Biden advisers and congressional Democrats are considering a budgetary maneuver to advance the measure without Republican support—as they did with the Covid-19 aid package—which would require almost every Democrat to stick together.

Keeping the party united could prove complicated as both moderate and progressive lawmakers jockey to see their favored issues addressed in the bill.

Reps. Tom Suozzi (D., N.Y.), Bill Pascrell (D., N.J.) and Josh Gottheimer (D., N.J.) said this week that they wouldn’t back any tax-code changes unless Congress restores the deduction for state and local taxes, which is now capped at $10,000 under the 2017 tax law. Democrats control the House 219-211, so they can lose no more than three votes on legislation that all Republicans oppose.

Progressives said the infrastructure proposal doesn’t meet the scale of the challenges facing the country, including climate change. Congressional Progressive Caucus Chairwoman Rep. Pramila Jayapal (D., Wash.) said on Wednesday that the package “can and should be substantially larger in size and scope.”

She noted that Mr. Biden had campaigned on spending $2 trillion over four years on climate and infrastructure-related projects, half the time frame outlined in his new plan. It “makes little sense to narrow his previous ambition on infrastructure or compromise with the physical realities of climate change,” Ms. Jayapal said.

Even Democrats who broadly agree with the Biden administration’s goals indicated they would seek modifications. Sen. Ron Wyden (D., Ore.), who leads the Senate Finance Committee, said Wednesday that he was preparing his own proposal to overhaul international tax rules.

Some Democratic activists who lined Mr. Biden’s route to the Pittsburgh event with signs are pushing for him to include a pathway to citizenship for essential workers who are in the country illegally. Julia Aviles Zavala, a member of immigration advocacy group CASA, said there was a connection between the two issues because some workers on infrastructure projects fall into that category.

A senior administration official said the type of spending outlined in the package has garnered bipartisan interest previously, adding that the president was open to ideas on structuring and financing the plan. Mr. Biden will hold his first cabinet meeting on Thursday, the White House said, where he is expected to discuss the infrastructure plan with his senior aides.

Senate Minority Leader Mitch McConnell (R., Ky.) said Mr. Biden called him Tuesday to discuss the plan, which Mr. McConnell said appeared to be only nominally about infrastructure. Mr. Biden said in Pittsburgh that he would invite Republicans to the Oval Office to talk about the proposal.

“If it’s a Trojan horse for a massive tax increase, put me down as highly skeptical,” Mr. McConnell said Wednesday at an event in Kentucky, adding that the proposal appeared to involve “not only significantly more borrowing, but raising taxes on the most productive parts of our economy. This is not a very bipartisan period we’re in right now.”

Sen. Kevin Cramer (R., N.D.) said he was open to working with Democrats on certain measures like expanding the Highway Trust Fund or easing regulations to lower the cost of transportation projects, but added that he thought Mr. Biden’s proposal went beyond just infrastructure.

“I worry that by using one of the most bipartisan policies in Congress as a tool for much more partisan goals like climate and taxes, President Biden will squander whatever remaining goodwill he has with Republicans,” Mr. Cramer said.

It is unknown how much of Mr. Biden’s coming healthcare and education package would be paid for through tax increases, but White House officials are weighing additional proposals.

The first package contains corporate tax proposals and none of Mr. Biden’s main campaign proposals to raise taxes on top earners’ individual income, capital gains, estates and noncorporate businesses.

Under the president’s plan, the corporate tax rate would rise to 28% from 21%, putting it halfway between the previous 35% tax rate and where Republicans set it in 2017. It would push the U.S. corporate tax rate back toward the top of the pack among major economies, a change that business groups are already warning would discourage investment.

“Policy makers should avoid creating new barriers to job creation and economic growth, particularly during the recovery,” Joshua Bolten, president and chief executive officer of the Business Roundtable, said Tuesday.

Democrats contend that the 2017 tax law cut taxes too deeply and contains several features that encourage companies to put profits and operations abroad. The Biden plan would reverse several of those.

Notably, the plan would set the minimum tax on U.S. companies’ foreign income at 21%, up from 10.5% today, and it would set that tax so it applies to profits earned in each country, rather than letting companies combine their income globally.

Administration officials said that would limit companies’ ability to book profits in tax havens, while businesses warn of complexities and unforeseen consequences.

White House aides said the proposal is paid for, but not in the way that Congress typically measures such things. It would take 15 years of the corporate tax increases to cover the one-time infrastructure expenses over eight years, though the tax increases would remain after that point.

Updated: 4-4-2021

Biden’s Infrastructure Package Is Designed To Boost Unions

Proposal aims to lift wages and includes many labor priorities, which business and GOP critics say would raise project costs, limiting increase in economic growth.

President Biden’s $2.3 trillion plan to invest in infrastructure, clean energy and caregiving over the coming decade would be a boon for construction workers, truck drivers, electricians and home health aides.

Both critics and supporters of the initiative say it will also benefit another group: labor unions.

Some business groups, employment law experts and Republican lawmakers say provisions aimed at bolstering union membership and expanding labor protections could increase costs, limit the number of projects that can be completed with the proposed funding and reduce the gains in economic growth.

For Mr. Biden, those provisions are key to ensuring the package creates millions of “good-paying union jobs of the future.” In 2020, just 10.8% of U.S. workers belonged to unions, half the share in 1983, but those workers earned a dollar for every 84 cents earned by nonunion workers.

“The president has made very clear that he wants to be the most labor-friendly president in history, and the steps that he’s taking in many different ways are designed to accomplish that,” said Michael Lotito, co-chairman of the Workplace Policy Institute at Littler Mendelson, an employment law firm based in San Francisco.

The Democratic administration’s plan includes spending on an array of industries over eight years. The proposal includes $621 billion to modernize transportation infrastructure, $300 billion to boost the manufacturing industry, $213 billion on retrofitting and building affordable housing and $100 billion to expand broadband access, among other investments.

Many of the new jobs are likely to be union positions, because the plan targets sectors that already have high levels of union participation, said Greg Regan, president of the Transportation Trades Department, a coalition of unions in industries such as aviation and rail transit.

Even within those industries, a minority of workers are union members, including 20.6% of utility workers, 17% of transportation and warehousing workers and 14.3% of telecommunications workers, according to 2020 Labor Department data.

“There is a very glaring need for this type of big investment, and if done with the right policies—in many ways, existing programs already have them—that will not only improve our transportation systems across the board, but also build union jobs and middle-class jobs,” Mr. Regan said.

Bill Spriggs, chief economist at the AFL-CIO, said implementation of the package, particularly for construction projects, should gravitate toward unions if the goal is to promote racial equity—a stated priority for the Biden administration. Black workers are more likely to be represented by a union than other racial groups, according to Labor Department data.

The overall fall in union membership is a sign of the decline in power of organized labor in the U.S. and reflects slower employment growth in traditionally more unionized industries, such as manufacturing, transportation and utilities, compared with healthcare and other services.

Economists have pointed to the decline as a reason why wage growth in the U.S. was relatively soft in the years leading up to the coronavirus pandemic, despite low unemployment and steady hiring. Median weekly pay for full-time union members was $1,144 last year versus $958 for nonmembers, the Labor Department said.

Mr. Regan said provisions in the package—such as a measure that seeks to have more goods shipped on U.S.-flag vessels staffed by American workers—would also be a boon for union positions.

The package proposes tying federal investments to prevailing wages, echoing existing law that requires federal contractors and subcontractors on public works projects to offer workers pay commensurate with local wages.

It also includes a provision that would require employers benefiting from the plan’s investments “to follow strong labor standards and remain neutral when their employees seek to organize a union and bargain collectively.”

“It’s not just about getting people off the unemployment rolls, it’s about getting people in good-paying jobs so they can raise their families,” Labor Secretary Marty Walsh said in an interview with The Wall Street Journal on Friday.

Those provisions could benefit other sectors targeted in the proposal where union membership is slimmer, including among caregivers. Mr. Biden’s plan would allocate $400 billion in funding for long-term care for the elderly and disabled.

Leslie Frane, executive vice president of Service Employees International Union, estimated the caregiving provision could create close to a million new jobs and improve the jobs of current home care workers, a total of 3.2 million jobs in 2020, according to the Labor Department. Those workers are the lowest paid among healthcare sector employees, with a median wage of $28,060 last year.

Low pay and lack of benefits are two reasons the rapidly growing sector faces a labor shortage, said Ms. Frane, who added the Biden plan would make it easier to unionize and subsequently attract new hires. The changes would especially benefit women and women of color, who make up the majority of home care workers, she added.

There are potential drawbacks to the labor provisions, detractors said. They will likely raise project costs, meaning the government can’t build as much for a given dollar of spending, said University of Missouri professor Aaron Hedlund, who served as chief domestic economist for former Republican President Donald Trump’s Council of Economic Advisers.

“If we don’t build as much, that means we aren’t going to get as much economic benefit out of it,” Mr. Hedlund said.

Mr. Lotito said nonunion contractors may also be wary of bidding for projects that could open them up to a potential unionizing effort among their workers. “The big winners here are the union-building trades,” he said.

The package also would include legislation that would make it easier for workers to unionize and toughen enforcement of the National Labor Relations Act. The bill, known as the Pro Act, passed the House on a near-party-line vote with nearly all Republicans voting against it and faces an uncertain future in the evenly divided Senate.

Many GOP lawmakers say the Pro Act would stifle business and empower union leaders. While most Democrats support it, some centrist Democrats, such as Sen. Joe Manchin of West Virginia and Sens. Kyrsten Sinema and Mark Kelly of Arizona, haven’t signed on as co-sponsors.

The Biden package could also create some frictions in the labor market due to mismatches between the skills required for some of the new jobs and the skills of unemployed workers. The White House has proposed $100 billion in new training programs to help bridge the gap.

Ken Simonson, chief economist for the Associated General Contractors of America, said it was unlikely the package—which could take most of the year to make its way through Congress—would run up against an immediate worker shortage.

While construction employment hasn’t fully recovered last year’s losses, job growth in the sector has been much stronger than in most other industries, adding more than 100,000 jobs last month, and some construction firms report labor shortages. Training will be essential, Mr. Simonson said. For example, there are a limited number of tower crane operators who would be able to work on projects such as wind turbines.

It could take quite a while to find enough workers to do some of the jobs to be created by the package, Mr. Simonson said. “On the other hand, we think there will be a fairly long lead time to actually get these projects launched.”

Updated: 4-4-2021

What The U.S. Can Learn From China’s Infatuation With Infrastructure

Beijing’s building boom inspires awe in even the staunchest U.S. critics, but emulating it is a different story.

Even China’s staunchest critics express awe at its capacity to build bridges, railways and other infrastructure, feats of engineering made possible by a command-style political system.

President Biden is the latest American leader to invoke China’s accomplishments while pressing Congress to allocate spending for a far-reaching infrastructure program. He says more than $2 trillion to fix bridges and mass transit, modernize airports and refurbish neighborhoods, extend broadband internet coverage and replace lead piping is the cost to “outcompete China.”

Sleek airports, grand stadiums and stylized skylines captivate visitors to China. Infrastructure may be the most tangible—and admired—aspect of a modernization drive that in a generation transformed a poor country into the U.S.’s primary strategic and economic rival.

Donald Trump also entered the presidency highlighting China and pledging to rebuild America. “They have bridges that are so incredible,” Mr. Trump said at a 2016 rally.

“There’s a real China envy,” says Thomas J. Campanella, a historian who specializes in urban planning at Cornell University who used to live in eastern China. “The Chinese seem to be able to do this stuff we used to do.”

Emulating China is another story.

China’s leapfrogging—practically to bullet trains from bicycles—may have limited direct application to improving American infrastructure. The two nations have different needs and diametrically opposed political systems, starting with carte blanche for Chinese leaders to order up construction.

China’s proudest symbol is the Great Wall, a 12,000-mile fortification built over centuries, and the country’s leaders laud dams and bridges as human triumphs over a landmass that is two-thirds mountainous with 1,500 rivers.

President Xi Jinping studied chemical engineering, while his predecessor specialized in hydroelectric engineering and had succeeded an electrical engineer. The U.S. tends to elect lawyers as president, though Jimmy Carter, Herbert Hoover and George Washington had engineering backgrounds.

Mao Zedong, too, pursued construction projects like a double-decker road-railway bridge spanning the Yangtze River. But by the 1980s, the nation was broke and broken after decades of misguided state planning. Roads, railways and ports were in dire shape.

Spurred initially by international aid from U.S.-backed multilateral institutions, China started building in earnest, focusing on big projects that created jobs.

A card with bullet points that Mr. Biden clutched at his first news conference as president last week noted that China spends three times more on infrastructure than the U.S. Figures from the Council on Foreign Relations put U.S. spending at 2.4% of GDP, compared with 8% in China.

China claims at least a million bridges, including most of the world’s highest. Of the world’s 100 tallest skyscrapers, 49 are in China.

Bill Gates publicized a remarkable statistic in 2014: China had used more cement in the previous three years than the U.S. did during the entire 20th century. U.S. Geological Survey figures show China has sustained the pace since then, producing well over 2.2 gigatons of cement annually, compared with the estimate cited by Mr. Gates of 4.5 gigatons used in the U.S. in the 100 years to 2000.

China also produces more than half the world’s steel, last year 14 times more than U.S. production, according to the Brussels-based World Steel Association.

Even though China has sold more cars than the U.S. since 2009, it is nowhere near American-scale car ownership and the government has positioned rail as a viable option nationwide, with high-speed trains serving 98% of major urban areas and subways in many cities.

China’s expanse of high-speed rail, 23,550 miles, could link New York and Los Angeles more than eight times and Beijing intends to add 30% more track by 2025. New lines are being readied for next year’s Winter Olympic Games near Beijing and in remote Tibet, the last Chinese region to host high-speed rail since construction began in 2004.

Bullet trains that travel about 100 miles between Shanghai and Hangzhou hit speeds of up to 215 miles an hour, covering the distance in about 65 minutes. It takes more than an hour and a half to go about as far on an Amtrak route familiar to Mr. Biden, between Wilmington, Del., and Washington.

What the U.S. can learn from Beijing’s rail strategy—build it and they will come—is that infrastructure costs should be weighted in favor of broad societal benefits, rather than strict revenue projections, says Arthur Kroeber, founding partner at Gavekal Dragonomics, a China-focused research firm.

“It can be a spur to economic growth and it doesn’t need to be paid for directly,” he says.

China’s value proposition for high-speed rail included hard-to-measure payoffs like how industrial efficiency would enjoy a boost over decades as passenger trains got shifted off busy freight lines, Mr. Kroeber said.

Chinese mayors are motivated to build boldly since they expect job postings to new cities every few years, says Silas Chiow, China director for the American architectural giant Skidmore, Owings & Merrill who regularly meets town planners.

“Government officials are rewarded on how much improvement they can make physically,” says Mr. Chiow.

When Shanghai officials in 1991 invited World Bank urban planners to consider the feasibility of a subway, the visitors dismissed underground transit as doubtful considering the city sits in the basin of the Yangtze River, and they instead proposed buses, according to the bank’s official archives.

Shanghai went ahead anyway. Three decades later, its metro is one of the world’s longest and busiest, carrying more than 10 million passengers daily. Dozens of Chinese cities have followed suit.

Subways allow cities to expand to places with room to erect apartment towers, which in turn fosters homeownership. “It’s a win-win circulating system for their economy,” says Mr. Chiow.

Along the way, China also became a major producer of large boring machines that cut passages through rock and beneath rivers, as well as the world’s biggest maker of subway cars.

“We need a bit of China to be stirred into our game,” says Cornell’s Mr. Campanella, who urges American politicians to take a muscular approach to push project approvals as if it were an emergency and de-emphasize local impact studies.

“We’re overprivileging the immediately affected residents. What we don’t do is give requisite weight to the larger society,” he adds.

Unchecked development in China has spawned problems, however, including debt and underused systems. Construction dust in many cities rivals pollution from car exhaust and industrial activity.

Political graft tied to construction is common. So is thuggish behavior directed at the rare activists who challenge development plans.

In 2019, less than a decade after Beijing vastly expanded its main airport, it inaugurated the starfish-shaped $17.5 billion Beijing Daxing International Airport by architect Zaha Hadid, 50 miles away on the other side of the city.

China’s government has continually relied on infrastructure construction to endure economic rough patches, including after shutdowns associated with last year’s Covid-19 outbreak. The Washington-based Institute of International Finance puts Chinese debt at 335% of GDP, up from 200% in 2011.

“The usual playbook,” Capital Economics called China’s post-Covid infrastructure spending, saying in a recent report that building will spur near-term growth but “credit-fuelled and investment-led” activity ultimately “strengthens our conviction that growth will slow in the long-term.”

Conscious about pollution, debt and overbuilding, China increasingly emphasizes green infrastructure like wind farms, digital telecommunications and smart-road capabilities in anticipation of driverless cars.

Still, vanity, more than economic sense, appears to explain some recent projects, including a series of glass-bottomed skywalks linking mountains thousands of feet off the ground.

Beijing increasingly looks abroad for growth opportunities for its engineering and construction industry. President Xi’s Belt and Road Initiative envisions Chinese-made infrastructure for the developing world.

The infrastructure bullet-point card Mr. Biden gripped last week noted the U.S. was 13th globally in infrastructure quality, down from fifth place in 2002.

The ranking appears to be from a World Economic Forum global competitiveness report that put China’s infrastructure quality at 36th.

 

Updated: 4-5-2021

Biden Team Seeks Public’s Help To Beat GOP On Infrastructure

The Biden administration is aiming to corral overwhelming public support for its $2.25 trillion infrastructure plan, targeting Republican voters, independents, mayors, governors and local politicians to counter opposition from GOP lawmakers, according to White House officials and Biden allies.

It’s the same outside-of-Washington playbook President Joe Biden’s team used to successfully pass his stimulus $1.9 trillion bill last month — applied to an even larger spending proposal that already enjoys a head start in public support, polls suggest.

Biden’s aides and allies believe that just trying to persuade congressional Republicans to support what he calls a jobs plan is the strategy of a bygone era. Barack Obama’s presidency took that tack, when bipartisan negotiations over the Affordable Care Act with GOP lawmakers proved fruitless.

While Biden says he’s happy to work with Republicans, listen to their ideas and make adjustments, the White House doesn’t want to let the GOP slow or water down Democrats’ sweeping policy agenda. One White House official said the president is a realist about what happened during the Obama years as well as about the internal dynamics of the GOP in Washington and the pressures its individual members face.

Congressional Republican leaders quickly stated their opposition to Biden’s $2.25 trillion plan last week, calling it a hodge-podge of liberal aspirations and arguing that its corporate-tax increases would hurt U.S. competitiveness.

Broad Backing

But Biden aides and allies argue proposals like fixing roads and bridges, expanding broadband, boosting taxes on the wealthy and corporations and expanding affordable child care options are overwhelming popular with both Democratic and Republican voters. Biden plans a speech on Wednesday on the infrastructure program to ramp up the sales pitch.

In a White House memo sent on March 31 obtained by Bloomberg, senior adviser Anita Dunn wrote that the support for the Covid-19 relief bill remained “steady and popular” from its introduction to its passage.

Her memo signaled the White House hopes for the same success with the infrastructure proposal. It cited polling that shows spending on infrastructure is supported by more than half of Americans.

Biden’s team members “have pretty successfully re-positioned the idea of unity to mean a super-majority of the country supports what they are doing — the test is not whether you can get Kevin McCarthy to vote for it,” John Podesta, former counselor to Obama and former chief of staff to President Bill Clinton, said in an interview, referring to the Republican leader in the House.

However, passing the stimulus as the U.S. recovered from the pandemic and an economic downturn will likely prove far easier than Biden’s latest proposal.

The argument to the public is trickier, as the price tag is larger, and its elements are disparate — a combination of proposals to rebuild roads and bridges, increase broadband access, invest in clean energy and expand child and elderly care that is difficult to brand.

‘Incredibly Misguided’

“Raising taxes in the middle of an economic crisis is incredibly misguided,” said Senator Mike Crapo of Idaho, the senior Republican on the tax-writing Finance Committee. “Hastily changing the tax code purely for the purposes of raising revenue will bring back inversions and foreign takeovers of U.S. companies, cost jobs, shrink domestic investment and slow down wage growth.”

A new factor in the debate is resurgent U.S. job growth. The country added more than 900,000 jobs in March, more than economists had forecast, as coronavirus vaccinations accelerate and the economy reopens, a report showed Friday.

The administration will also need to accommodate the differing wings of the Democratic party. Even strong supporters expect negotiations to drag on for months, and they worry there is a limit to Congress’s appetite for huge pieces of legislation in the first year of the new administration.

Even so, one White House official said anyone arguing there is not as much urgency surrounding the infrastructure proposal should talk to a mayor or governor waiting for two presidential administrations for the investments now planned.

Aides have said they want significant progress on the bill by Memorial Day, late next month. Biden last week assigned Transportation Secretary Pete Buttigieg, Energy Secretary Jennifer Granholm, Commerce Secretary Gina Raimondo, Housing and Urban Development Secretary Marcia Fudge and Labor Secretary Marty Walsh to take on the role of emissaries for the infrastructure package.

The five Cabinet officials started their sales tour by phoning top congressional committee chairs and ranking members last week, holding calls with bipartisan governors and mayors and doing roughly 25 TV and radio hits at both the national and local level.

Outreach Efforts

Next week, the Cabinet members plan to hold a series of meetings with congressional committees once the lawmakers return from recess, said a White House official.

The administration has also been reaching out to progressive groups, labor unions, business leaders and business groups, a second White House aide said.

For the pandemic-relief bill, senior administration officials made dozens of appearances in local media and focused their efforts on key political battleground states like Ohio, Pennsylvania, Arizona and Georgia.

Biden visited Wisconsin and Michigan — states he flipped from Donald Trump to win the presidency — to make the case directly.

“Voters agree on many more issues than elected officials,” said Celinda Lake, who served as one of the top pollsters to Biden’s 2020 campaign and runs the polling firm Lake Research Partners.

Polling Data

Recent polling from Navigator shows at least 70% of Republican voters support increased funding for highway and bridge construction, new job-training programs, expanding broadband access and making childcare more affordable for families.

Half of Republicans surveyed in the poll said they support government investment in clean energy.

And polling by Morning Consult and Politico shows 54% of voters support Biden’s infrastructure plan with tax increases on corporations and Americans earning more than $400,000 — including 32% of Republicans.

“Even things that Washington Republicans treat as polarizing, like investment in clean energy infrastructure, has support among Republicans. This is not where we were a decade ago,” said Jeff Liszt, a partner at ALG Research, the top polling firm to the Biden campaign.

Mixed Messaging

Republicans have, meanwhile, shown they are not unified in their criticism of Biden’s policies.

After the Covid-19 aid bill became law without a single Republican vote in Congress, some GOP lawmakers nevertheless promoted provisions included in it that would help their constituents. In Mississippi, for example, GOP Senator Roger Wicker lauded spending to help restaurants and small businesses.

And there’s been little effort by Republicans to criticize that bill for adding to U.S. deficits and debt — a common attack from the GOP before Trump, who cut taxes and raised spending without focusing on the budgetary impact.

Biden’s allies interpret the lack of GOP message discipline as a sign that appealing to Republican voters and local leaders is a more important tactic than trying to persuade their Washington representatives.

“Immediately after the recovery act, we did not see Republicans talking about deficits and spending. We saw them talking about Dr. Seuss,” Liszt said, in reference to political battles over cultural issues. “That was not an accident.”

With the public-appeal plan in place, the White House is rejecting any suggestion of splitting off from the proposal a package of the more traditional infrastructure items, like roads, that could get congressional GOP votes.

“Let’s be very clear: all of these pieces are core to our nation’s infrastructure and they’re core to America’s competitiveness,” said White House economist Heather Boushey on Bloomberg TV Monday.

 

Why Biden’s Infrastructure Plan Is A Green Jobs Plan

Jobs vs. environment is an old trope whose time has passed.

“Once you put capital money to work, jobs are created.”

These are not the words of President Joe Biden, announcing his administration’s infrastructure plan in Pittsburgh on Wednesday.

Nor were they the words of Transportation Secretary Pete Buttigieg, standing on a train platform to announce expanded service, or of any of the administration’s economists charged with touting the virtues of the $2.25 trillion spending plan.

It was Michael Morris, then-CEO of Ohio utility American Electric Power, who uttered them on an investor call a decade ago. AEP was fighting an Environmental Protection Agency proposal to reduce mercury and other pollutants from power plants, citing the expense of creating jobs to install new scrubbers on smokestacks or build cleaner plants.

Morris, taking his fiduciary responsibility to the utility’s investors seriously, argued these new roles would come at a cost to AEP and were, thus, bad. What he did not question, and correctly so, was whether more investments would indeed create more jobs.

All that held particularly true in 2011 since the economy, slowly emerging from the Great Recession, was far from full employment. As Josh Bivens, an economist at the Economic Policy Institute, testified at the time in favor of EPA’s air toxins rules: “There is no better time than now, from a job-creation perspective, to move forward with these rules.”

The economy is once again far from full employment. That made the $1.9 trillion American Rescue Plan, passed last month, so important. It is also a clear point for passing the infrastructure package now, and for spending the money soon.

“Jobs versus the environment” is an old trope. There are indeed some real tradeoffs. When a tree cannot be cut to protect the northern spotted owl, the tree cutter is out of a job. Climate is different.

Cutting CO₂ isn’t about stopping economic activity, as last year’s Covid-19 lockdowns have vividly shown. Even the near-total lockdowns last April only decreased CO₂ emissions by around 17% per day compared to 2019 levels, around 7% for the entire year, with emissions bound to increase this year.

Re-guiding market forces toward fully decarbonizing economies implies more economic activity, more jobs, not less.

That does not mean that all jobs will stay the same. They won’t, and they shouldn’t. Biden’s infrastructure plan, for example, is projected to cost around 130,000 jobs in the oil, coal, and gas industry.

Providing these workers with a viable alternative must be part of the clean energy transition, and it is. Biden’s plan includes $16 billion to help retrain and employ fossil fuel workers to plug orphan oil and gas wells and clean up abandoned coal mines.

That comes on top of $10 billion to create a Civilian Climate Corps aimed at training the next generation, and many more programs with specific climate-related goals—both to cut CO₂ emissions and to fortify U.S. infrastructure to make it more resilient to climate changes already in store.

Then there are more far-reaching changes that a cleaner future will bring. An electric vehicle takes about one third fewer workers to build than a gas guzzler. That one-to-one comparison, however, misses dynamic effects, and international competition.

Much of the jobs impact does not come from one-to-one comparisons but from who produces the vehicles in the first place. China, for example, now dominates the global market for lithium-ion batteries. That domination stems from access to raw materials but also from its large domestic battery market. Creating such a market in the U.S. would also help build a domestic supply chain.

Many other parts of the infrastructure plan are even more directly linked to jobs, especially in building and construction sectors, which can hardly be outsourced across international borders.

It is also why this infrastructure package is perhaps the most durable of climate policies. The Reagan White House famously removed largely symbolic solar panels installed during the Carter administration, but most actual infrastructure investments are here to stay.

Short of large bipartisan majorities for CO₂ emissions cuts, this feature is important. Future administrations are not going to strip homes off their better insolation, or rip out bridges or train lines. It helps that weatherizing homes and building infrastructure goes hand-in-hand with more jobs.

 

Biden’s Grid Proposal May Be A Square Peg In A Round Hole

While tax credits helped solar and wind energy take off in the U.S., it is much less clear that it would have a similar effect on transmission lines.

When you have a fiscal hammer in the form of tax credits, perhaps everything looks like a nail.

President Biden’s infrastructure plan proposes some tried-and-trusted methods to spur clean-energy development such as a 10-year extension of existing tax credits for solar and wind energy. More interestingly, it introduces an investment tax credit for high-voltage transmission lines.

The goal is to incentivize the build-out of at least 20 Gigawatts worth of transmission. That is roughly the amount of transmission that could match the Texas grid’s very significant wind generation.

The administration is certainly looking in the right direction: To reach President Biden’s net-zero emissions goal by 2050, the U.S. will need to expand electricity transmission systems by 60% by 2030 and may need to triple it by 2050, according to research published by Princeton University in December.

That is because renewable energy-rich places such as the windiest regions aren’t necessarily close to population centers, where electricity demand is.

While the clean-energy industry probably won’t complain about a new subsidy, the tax-credit proposal is a bit of a head scratcher given that the real roadblocks to transmission lines have to do with permitting, much of which is in the hands of state and local authorities.

“For most transmission we need in the country, it’s not a cost issue or an access-to-capital issue, although transmission can be delayed because of cost allocation debates,” said George Bilicic, global head of power, energy and infrastructure at Lazard.

Tax credits were instrumental in helping wind and solar take off because funding really was a bottleneck to development. When tax credits were introduced for wind and solar in 1992 and 2005, respectively, the technologies were much more expensive than they are today and not fully trusted by investors.

By contrast, transmission line technology is well past middle age: Modern high-voltage transmission lines have been around since the 1950s.

In that vein, it is true that a tax credit for transmission could help offshore wind, still relatively new to the U.S., become more cost competitive, as Clarke Bruno, chief executive officer of transmission developer Anbaric Development Partners, notes.

Because there is no offshore grid, U.S. offshore wind projects all need to build transmission lines from scratch to connect to the shore.

The proposed plan also calls for a so-called Grid Deployment Authority within the Energy Department to “better leverage existing rights of way” along roads and railways. That would be a good first step, though eminent domain—the power of the government to take private property and convert it for public use—remains largely within state regulators’ hands.

While the Federal Energy Regulatory Commission has authority to grant natural-gas pipelines the right of eminent domain under the Natural Gas Act, there is no equivalent authority for electricity transmission under the Federal Power Act and little momentum in Congress to grant that provision.

The infrastructure plan is certainly a helpful indicator of what the Biden administration prioritizes. Soon, however, it will come to realize something that transmission line developers have known for a while: The devil is always in the details.

 

Updated: 4-7-2021

Amazon’s Jeff Bezos Supports Infrastructure Bill, Corporate Tax Hike

Amazon.com Inc. Chief Executive Officer Jeff Bezos said he supported investing in U.S. infrastructure and a hike in the corporate tax rate to help pay for it.

Weighing in as lawmakers debate the Biden administration’s $2.25 trillion infrastructure plan, the Amazon founder said his company backs “making bold investments in American infrastructure,” but stopped short of endorsing the president’s proposal.

“We recognize this investment will require concessions from all sides — both on the specifics of what’s included as well as how it gets paid for (we’re supportive of a rise in the corporate tax rate),” Bezos said in a brief statement posted to Amazon’s corporate blog site. “We look forward to Congress and the Administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness.”

Amazon traditionally shuns hot-button political issues that aren’t directly tied to its business to avoid alienating customers. But the company has been caught up in the debate about infrastructure and how to pay for it.

Just last week, Biden cited Amazon as an example of a company that didn’t pay any federal income tax, drawing a contrast with individuals unable to cut their tax bills to zero.

Jay Carney, a Biden staffer during the Obama administration who today leads Amazon’s lobbying and communications teams, addressed the critique on Twitter, saying that Amazon had reduced its tax burden with credits meant to incentivize spending on research and development.

Amazon historically has low profit margins, in part because it reinvests most revenue back into the company. This reduces the burden of corporate taxes based on profit, makes Amazon eligible for R&D tax credits and means a hike in such taxes would be less of a blow than to higher-profit corporations.

Still, technology companies like Amazon will likely pay more under the Biden plan.

Infrastructure investments would also help Amazon efficiently move goods around the country. Bezos has acknowledged in the past that the very existence of his company was predicated on massive public investments in the internet and the U.S. Postal Service.

Amazon has also received attention from the White House recently thanks to a closely watched union drive at a warehouse in Bessemer, Alabama. The administration released a video in which Biden said he supported the rights of workers to organize and encouraged employers to refrain from illegal interference in workplace campaigns, without mentioning Amazon by name.

 

Updated: 4-8-2021

There’s Another Way To Pay For Infrastructure Projects

Rather than raising taxes, we can finance bridge and road improvements by packaging and selling data on their usage.

It’s no secret that the roads, bridges, water and sewer systems that have shaped how our communities developed over the last century are, in too many cases, operating on borrowed time. Infrastructure is — after all — the collective of services that allows a society to function.

In its recently released infrastructure report card, the American Society for Civil Engineers (ASCE) counted more than 45,000 of the nation’s bridges as structurally deficient. Despite the poor condition of these overpasses, they carry 178 million trips every day.

While our drinking water system has improved in the past few years, there’s still a water main break every two minutes somewhere along its 2.2 million miles of pipes. Those are just two examples of the many U.S. infrastructure services that need to be fixed and future-proofed—and urgently.

It’s promising to hear that President Joe Biden is prioritizing infrastructure with a multi-trillion-dollar plan. To address the nation’s infrastructure needs by 2029, ASCE estimates the infrastructure finance gap between needs and available funding at $2.68 trillion across the multiple categories defined in the report card.

These include surface transportation, water and stormwater, energy, schools, inland waterways and ports, airports, solid waste management, levees and dams, and broadband, to name a few.

If we are going to truly tackle the scale and breadth of these challenges, we have to turn to new financing and funding models.

Typically, governments use a combination of public and private financing instruments to pay for major infrastructure projects.

The main public financing comes from municipal bonds that are funded by taxpayers or project-specific revenue streams, revolving loans and grants. The rest comes from private financing through public-private partnerships such as toll roads and other user-fee-based arrangements.

But neither approach will raise enough money to eliminate our roads’ potholes, make all of our bridges safe and deliver clean drinking water that every member of the public can trust.

The cost of borrowing enough is simply too high, or politically unpalatable, for cities and towns to collect in taxes. And the options on today’s menu of public-private partnerships won’t cover it in fees.

There is a better way. Based on my work with financing mechanisms that integrate performance or structural health metrics, there are ways to unlock new revenue streams for projects, tie the cost of borrowing to metrics (which lowers the risk), and decrease the cost of infrastructure operations using smart contracts. These new financing opportunities don’t require raising taxes, making it easier for them to garner bipartisan support.

We can do it with smart city infrastructure, but replacing existing systems won’t be instantaneous. The race is on to define transformative practical applications in road design, solar energy, water distribution systems, solid waste and port management.

Financing With Data

Increasingly, our roads and bridges, drinking water and sewer pipelines, buildings, ports and hospitals are outfitted with sensors and other data collection systems. An urban internet of things is emerging, and its data have the potential to generate an incredible amount of added value.

We can harness this technology to deliver insights that will make financing more efficient and to develop the next generation of public-private partnerships.

Sensors can pull data on water flow, traffic congestion, air pollution and more—all of which can be processed to illuminate how to deliver services more efficiently and cost-effectively.

The data are attractive to insurance companies because they help to hedge risk, and to investors because the information can give rise to new revenue streams, or create value well beyond the infrastructure itself.

For example, sensors on roads and bridges can monitor deterioration as well as the impacts of trucking. These insights could be used to price a fee structure for logistics companies based on how they reduce lifetime use or maintenance requirements. Models like this are being explored in the Netherlands and Germany.

Rather than charge tolls, public agencies in those nations are considering farming out bridge portfolios to asset management companies that are collecting anonymized data on traffic volume, truck weights and structural health.

In turn, those companies can sell that data in derivative markets to materials suppliers, insurance companies, marketing firms and hedge fund investors.

In pilots that couple a new financing instrument with sustainability goals, utilities in Washington, D.C., and Atlanta, and Buffalo, New York, have issued “environmental impact bonds” for green stormwater infrastructure.

Rather than financing construction of more “gray” pipes at a fixed interest rate, they’ve tied the cost of these bonds to outcomes.

Sensors measure stormwater runoff, and the performance of the infrastructure can be quantified and translated into operational savings for the utility. In turn, the utility pays out some of the savings to investors.

Because the financial returns are uncorrelated to the broader market, interest from investors in this type of performance bond is ballooning.

The ‘Stock’ of Infrastructure

Indeed, just like data from smartphone apps create value, the data from physical infrastructure will lead to a new marketplace in which public infrastructure is a lot more attractive to private capital than it is right now. Data contracts can be securitized like mortgages, repackaged and resold in various business-to-business data markets.

 

Updated: 4-13-2021

Since When Does Government Have A Money Tree?

Don’t believe the assurances that higher taxes and low-interest debt servicing will contain the costs.

Someone, at some point, needs to pay for government spending.

Just because some politicians and advocates assume there’s a money tree for this purpose doesn’t make it so. Nor is it helpful for either side in the debate to talk in generalities, whether with reassurances that “the rich will pay,” on one hand, or with vague warnings that “higher taxes and larger deficits hurt the economy,” on the other.

In March 2020, Congress appropriately responded to the Covid-19 emergency by throwing fiscal caution to the wind.

But extraordinary measures were supposed to be temporary. Instead, many Democratic leaders got a taste of bigger government, and seem to like it. And measures like checks to households have proved very popular with voters.

The result? President Joe Biden signed a recklessly large stimulus that needlessly continues many lockdown-era measures. He is following that up with a push for over $2 trillion on infrastructure, in-home care for the elderly and disabled, and subsidies to the manufacturing sector.

He will soon propose trillions more for programs to benefit workers and families. Many in his party are pressuring him to go even further — for example, to cancel a large share of student loan debt.

Biden would raise taxes on corporations to pay for a portion of his infrastructure proposals, and will call for increases on individuals to cover some of his proposed benefits for families.

But corporate tax increases aren’t a free lunch. Sure, the owners of capital will bear most of the burden of the corporate tax, but workers will pay a price as well through lower wages. If U.S. competitiveness decreases as a result, our children and grandchildren will also pay through slower productivity growth and lower incomes.

Higher income taxes on individuals reduce incentives to save and invest. Less investment will reduce productivity growth, which in turn will lower wages across the board.

Programs like Biden’s child allowance — which will send a monthly check to the majority of parents — can be thought of as transferring money from childless adults to adults with kids. Taxpayers without children pay.

A new working paper released by the nonpartisan Congressional Budget Office studied the longer-term effects of financing a large and permanent expansion of government spending through higher taxes. Using a progressive income tax, a $1 trillion increase in spending reduces the level of GDP by 5% and after-tax wages by 10%, after 10 years.

A $2 trillion spending boost reduces wages by 20% and GDP by 10%. CBO’s analysis does not include the economic benefits of the spending, but isolating the effects of the higher tax burden needed to finance it is illuminating.

Larger deficits also aren’t a free lunch. Even at today’s low interest rates, government debt reduces private-sector investment by putting upward pressure on interest rates. A recent CBO working paper estimates that rates rise by 2 to 3 basis points for every 1 percentage point increase in the ratio of debt to GDP. Less investment leads to lower wages.

The U.S. could borrow to cover spending today and increase taxes in the future to pay down the debt. But raising income taxes — in this case, on future generations — has the drawbacks I previously discussed.

Alternatively, the government could allow for higher inflation to reduce the debt burden. But inflation operates as a tax by reducing the purchasing power of savings, hurting those on fixed incomes.

It is commonly argued that because the safe interest rate is below the economic growth rate, we can climb out of the red, because the debt burden grows more slowly than the economy.

 

China’s Commodities Binge Makes America’s Future More Expensive

The U.S. spending plan faces a big problem: Beijing got to all the raw materials first.

Fresh from passing a $1.9 trillion stimulus bill, U.S. President Joe Biden on Wednesday turned his attention to a similarly vast package of investment in infrastructure, and that means the U.S. is going to need more commodities.

There’s Just One Problem: China.

America requires steel, cement, and tarmacadam for roads and bridges, and cobalt, lithium, and rare earths for batteries. Above all, it needs copper—and lots of it.

Copper will go into the electric vehicles that President Biden has said he’ll buy for the government fleet, in the charging stations to power them, and in the cables connecting new wind turbines and solar farms to the grid. But when it comes to these commodities—and copper in particular—Washington is one step behind Beijing.

China was the first place the coronavirus struck, but it was also the first country in the world to start recovering from the pandemic. As the rest of the world went into lockdown and commodity prices plunged in March and April 2020, China went on a buying spree.

Chinese manufacturers, traders, and even the government approached the global commodity markets much as a shopaholic might approach a fire sale.

“They bought a lot last year, and I don’t believe it was solely for their industrial needs,” says David Lilley, a veteran copper trader who is managing director of U.K.-based Drakewood Capital Management. “It was also about building the strategic reserves of copper needed for their plans.”

China imported 6.7 million tons of unwrought copper last year, a third more than the previous year and a full 1.4 million tons more than the previous annual record. (The year-on-year increase, alone, is equivalent in scale to the entire annual copper consumption of the U.S.)

Traders and analysts reckon that China’s powerful and secretive State Reserve Bureau bought somewhere from 300,000 to 500,000 tons of copper during the price slump.

That already looks to have been a smart trade. In part thanks to China’s buying, copper prices have doubled from their March 2020 nadir to current levels around $9,000 a ton.

But some reckon copper and other commodities have much further to run. The combination of rebounding global growth and government largesse has bulls fired up.

Wall Street analysts enthuse about a new commodities “supercycle”—a period of above-trend prices driven by a structural shift in demand, comparable to the China-led boom of the 2000s or the period of global growth following World War II.

Oil skeptics say faster adoption of electric vehicles will inevitably mean less demand for crude. But for metals like copper, there’s less disagreement. Normally cautious traders are trying to outdo one another in their predictions for new record prices.

Mark Hansen of Concord Resources Ltd., a London-based trading house, sees copper blasting past its previous record high of $10,190 to trade at $12,000 a ton in the next 18 months.

Trafigura Group, the leading copper trader, thinks copper is going to $15,000. “This is as big a demand shift as the urbanization of China,” says Graeme Train, a senior economist at Trafigura.

The Chinese state has been investing huge amounts of money into infrastructure for two decades, so much that the country now accounts for around half of the world’s demand for many metals. This has also forced it to get smarter about its commodity purchases.

China’s copper smelters join together to handle negotiations with the world’s miners. Chinese entities, many of them state-owned, have bought mining operations everywhere from the Democratic Republic of Congo and Peru to Indonesia and Australia. In recent years, they’ve also been buying up international trading companies.

As for what might be called the commodities of the future, China is also ahead of the game. It’s the world’s largest producer by far of rare earths, critical in all kinds of high-tech applications.

It dominates the processing of the raw materials needed to make lithium ion batteries— lithium, cobalt, nickel, and graphite—which are the building blocks of the electric vehicle revolution.

While just 23% of the world’s battery raw materials are mined in China, 80% of their intermediate processing takes place in China, according to Simon Moores, managing director of Benchmark Mineral Intelligence, who has advised the White House on the battery industry.

In its latest five-year plan published in March, Beijing showcased how it will go about strengthening its system of reserves of energy and commodities, including through holding strategic stockpiles.

An official at the country’s reserves bureau set out Beijing’s views on commodity security in an article published in a Communist Party magazine last year: Stockpile a range of commodities.

That includes those in short supply, those for which there is high dependence on imports, those that exhibit large price fluctuations, and those produced in politically and economically unstable countries, the official wrote.

In the U.S., such security of supply has been of only peripheral concern. When Washington has paid attention to the geopolitics of commodities, its focus has been on the oil resources of the Middle East, and even that relationship has evolved as the shale revolution lessened U.S. dependence on imported oil.

Copper and other metals have been an afterthought. While Chinese copper demand has soared over the past two decades, in the U.S. it’s fallen, analysts at Macquarie Group Ltd. point out.

The proliferation of stimulus packages means that this is surely about to change. While the details of Biden’s infrastructure push remain to be haggled over in Congress, consultancy CRU Group estimates that $1 trillion of spending could necessitate an additional 6 million tons of steel, 110,000 tons of copper, and 140,000 tons of aluminum annually.

“China has been looking at vulnerabilities in its supply chain from top to bottom for a while, and growing its strategic reserves,” says Lilley, the copper trader. “I don’t think the West has even begun to think about it. There is still a casualness here about raw material supply.”

 

Updated: 4-23-2021

Bipartisan Group Backs Gas-Tax Increase As Option To Fund Infrastructure

Biden plan and rival GOP proposal have favored other revenue ideas.

A bipartisan group of House lawmakers endorsed a report that includes raising the gasoline tax as a possible way to pay for infrastructure spending, lending support to a measure that both Republican and Democratic proposals have avoided in the debate about how to cover the cost of an infrastructure package.

The report from the group of 58 lawmakers, dubbed the Problem Solvers Caucus, proposed indexing gas and diesel taxes to inflation, highway construction costs, fuel-economy standards, or some combination of the three in a report on infrastructure released Friday.

It lays out several possible fee increases, including a vehicle-miles traveled tax that would collect revenue from electric vehicles. Congress hasn’t raised the gas tax, which stands at 18.4 cents a gallon, since 1993.

While the bipartisan group doesn’t detail specific funding levels, it does call for federal investments in rail, water infrastructure and broadband. Closing the gap between taxes owed and taxes paid and creating a national infrastructure bank are among other revenue ideas the group lays out.

The report comes as President Biden seeks to advance his $2.3 trillion infrastructure plan on Capitol Hill. A group of Senate Republicans outlined a $568 billion proposal Thursday, advancing an alternative to Mr. Biden’s plan, which GOP lawmakers have criticized as too broad.

“The time is now for Congress and the administration to reach across the aisle, unite and boost investments in our surface transportation network that will move our transportation systems into the 21st century,” said Rep. Brian Fitzpatrick (R., Pa.), the co-chairman of the Problem Solvers Caucus.

Members of the Problem Solvers Caucus recently met with top White House officials to discuss infrastructure and other topics.

Rep. Josh Gottheimer (D., N.J.), another leader of the group, said he didn’t support raising the gas tax despite it being an option in the report.

“Personally, I’m against raising the federal gas tax. [New Jersey] has already taken that step, while other states haven’t. Instead, I support pay-for measures like closing the $1-trillion-a-year tax gap, which goes after tax cheats, and boosting public-private partnerships,” Mr. Gottheimer said in a tweet after the report’s release.

Figuring out how to pay for infrastructure investments is at the center of the early efforts to reach a bipartisan agreement. The White House has repeatedly said it is opposed to raising user fees like the gas tax to pay for infrastructure, arguing that it would disproportionately affect lower-income Americans.

The White House has proposed raising the corporate tax rate from 21% to 28% and increasing taxes on U.S. companies’ foreign earnings.

That plan has drawn opposition from Republicans and some Democrats, who instead favor relying on a more modest increase in the corporate tax rate, user fees or debt to finance the package.

The Senate Republicans in their outline out Thursday said they wouldn’t agree to any increase in corporate taxes, instead calling for using existing federal dollars and other user fees to pay for the plan. But they said they wouldn’t support raising the gas tax.

A bipartisan group of lawmakers in the Senate have also held a series of recent meetings to explore a possible compromise.

Several Republicans and Democrats from both chambers met in Annapolis, Md. with Maryland Gov. Larry Hogan, a Republican, to discuss infrastructure on Friday. Sen. Joe Manchin (D., W.Va.) said after the meeting that lawmakers should focus on a narrower definition of infrastructure, before turning to other elements of Mr. Biden’s plan.

“We believe we should take step by step,” he said. “The greatest need that we have now that can be done in a bipartisan way is conventional infrastructure,” he added.

While Mr. Biden’s plan dedicates $621 billion to transportation, along with $111 billion to water infrastructure and $100 billion to broadband, it also includes major swaths of funding for home care for elderly and disabled Americans, workforce training and manufacturing.

Republicans have said Congress should take up a narrower plan, and Mr. Manchin said Congress could address those issues separately.

With narrow control of the House and Senate, Democrats have the power to pass an infrastructure package without Republican support.

But a political desire to find a bipartisan agreement and the procedural limitations of passing legislation along party lines have pushed Democrats to try to first find a compromise with the GOP. Earlier this year, Democrats moved forward with a $1.9 trillion Covid-19 relief package after dismissing a roughly $618 billion GOP counteroffer as too small.

 

Updated: 5-30-2021

Biden’s Internet Plan Pits Cities Against Dominant Carriers

Industry has long opposed municipal broadband, but the idea has gained momentum this year with help from Washington.

After years of unhappy reliance on Comcast Corp. and other carriers, Pleasant Grove, on Utah’s Wasatch Front, is turning to a new broadband option: a municipally owned company called Utopia Fiber.

The choice follows a pandemic year that showed just how much households need fast, reliable internet connections for jobs, schooling, and medical care.

To reach homes that lack good service, or have none at all, President Joe Biden has proposed funding networks such as Utopia Fiber that are run by cities and nonprofits.

That’s not sitting well with Comcast, AT&T, Verizon Communications, and other dominant carriers, which don’t like the prospect of facing subsidized competitors.

Pleasant Grove shows why established carriers might be vulnerable. With 38,000 residents, it’s nestled between the Wasatch Range and the Great Salt Lake Basin, just south of Salt Lake City.

When it asked residents about their broadband, almost two-thirds of respondents said they wouldn’t recommend their cable service. Almost 90% wanted the city to pursue broadband alternatives.

“We could sit and wait for the private sector to do this—we just didn’t really know when that would be,” says City Administrator Scott Darrington.

Residents have complained of slow broadband, and Utopia’s fiber network holds out the promise of fast speeds that don’t lag as more households log on, Darrington says. It will also reach areas not served by current providers.

Utopia, owned by 11 Utah cities, builds the network and charges consumers $30 a month. To complete the package, they choose from a dozen other companies that offer internet and video service and charge about $35 monthly. That brings the tab near Comcast’s advertised rate of $70.

Comcast has invested “to keep communities like Pleasant Grove City reliably connected with the fastest broadband speeds available,” says Sena Fitzmaurice, a spokeswoman for the company. She says it offers fast service across the city.

Still, when the city council voted unanimously to approve Utopia’s $18 million build-out in April, the mood was a mix of giddy and vengeful.

“I’ll be your first customer that signs up and says goodbye to Comcast,” said one council member moments before the body voted. “I’m right behind ya,” another added.

The events in Pleasant Grove jibe with the rhetoric coming out of the White House. Biden says he wants to reduce prices and ensure that every household in the U.S. gets broadband, including the 35% of rural dwellers the administration says don’t have access to fast service.

To connect them as well as others languishing with slow service in more built-up places, the president wants to give funding priority to networks from local governments, nonprofits, and cooperatives.

Established carriers are pushing back against the proposal; they have long criticized municipal broadband as a potential waste of taxpayer funds, while backing state-level limits on it. Almost 20 states have laws that restrict community broadband, according to a tally by the BroadbandNow research group.

The carriers say the administration and its Democratic allies are calling for blazing upload speeds that have little practical use for consumers, who already get fast downloads for videos and other common web uses.

Assertions that Americans pay too much rest on faulty comparisons, according to NCTA-The Internet & Television Association, a trade group.

Government-owned networks “can be part of the solution in certain communities,” says Brian Dietz, a spokesman for NCTA, which represents the largest U.S. cable providers, Comcast and Charter Communications Inc. “There have been more failures than successes.”

That’s not the case, advocates for municipal networks say. “These models have the best chance of finishing the job of connecting America,” says Christopher Mitchell, director of the Community Broadband Networks program at the Institute for Local Self-Reliance. Local governments offer about 600 networks that serve about 3 million people, he says.

There’s “definitely a spike in interest” from cities in making their own broadband investments, says Angelina Panettieri, a legislative director for the National League of Cities.

Rules issued on May 10 by the Department of the Treasury seem to funnel the broadband portion of a $350 billion Covid-19 relief bill to rural areas. That’s “a little bit dispiriting” because it jeopardizes federal funding for new networks in cities and suburbs, says Kim McKinley, Utopia’s chief marketing officer.

The administration wants to help areas that are suffering the greatest lack now, regardless of location, says a Treasury official who wasn’t authorized to speak publicly. Republicans want to bar spending on municipal networks and have criticized Biden’s broadband plan as too expensive. In response the administration scaled back its plan to $65 billion, from $100 billion.

In the meantime, some cities that had been discussing broadband projects suddenly developed cold feet, McKinley says. She says Treasury’s rules may show the administration is shying away from challenging the largest broadband companies: “When was competition ever a bad thing?”

BOTTOM LINE – Households’ growing need for broadband is creating a challenge for established carriers from municipal networks vying for funding from the Biden administration.

 

Updated: 6-14-2021

Negotiate Now, Build Soon, Pay Later For US Infrastructure

Any deal on infrastructure should leave the argument about how to fund it for another day.

Here’s a modest suggestion for moderate senators looking to work out a deal on infrastructure spending: Don’t worry about paying for it.

The U.S. political system is less gridlocked and dysfunctional than many people think. But there are still profound disagreements between Democrats and Republicans about tax policy. Democrats look at a generation-long run of soaring income and wealth inequality and believe passionately that the most fortunate need to be paying more.

Republicans look at a generation-long slowdown in productivity and believe passionately that there need to be incentives for more investment.

My Bloomberg colleague Tyler Cowen denounced President Joe Biden’s plans for higher capital gains taxes as a fundamental abrogation of American values, which he says should include “valorization of wealth.” Most of my progressive friends thought that was just about the craziest thing they’d ever read.

This is a much wider gap than a disagreement about the ideal balance of funds between grants to state highway departments and grants for mass transit, or how much money should go to rural broadband vs. the nation’s electrical grid.

The good news is that, somewhat surprisingly, there is still no fundamental economic need to offset new spending with tax cuts or reduced spending elsewhere.

Despite a somewhat inflationary environment and a huge run-up in debt during the pandemic, the federal government’s borrowing costs remain exceptionally low, with 30-year bond yields at less than 2.5% and rates actually negative in inflation-adjusted terms.

Financial conditions like this probably won’t persist after the passage of Biden’s rescue plan, or be sustainable in the context of clearly rising nominal wages and prices. So it made sense for Biden to be talking about doing infrastructure spending in a way calculated to reduce the long-term budget deficit.

But the numbers don’t lie: Capital is extremely cheap at the moment.

And while it wouldn’t necessarily be wise for Congress to pour more short-term stimulus into the economy, it should work to identify worthwhile medium-term projects and just do them. Don’t worry about the money.

Historically low interest rates make the cost-benefit analysis of the economic and social effects of any given infrastructure undertaking very compelling.

Republicans are within their rights to refuse Democrats the tax hikes they crave, and to oppose any spending they regard as genuinely harmful. But a more healthy dynamic would see them coming up with their own projects to fund.

At least one important strain of Republican tax thinking comes from the exact same place as Democratic enthusiasm for public infrastructure — a sense that, in a world of soaring tech profits and low interest rates, America needs to do more to drive tangible investments in the physical world.

Rather than try to make Biden settle for a smaller bill and fight about how to pay for it, a wise Republican might offer Democrats more spending in exchange for making the Tax Cuts and Jobs Act’s business-expensing provisions permanent.

That would be a double-pronged attack on the problem of underinvestment in the physical world — generous outlays on both private- and public-sector investment.

Of course, moderate Democrats have been in the vanguard of the deficit-hawk movement since at least the 1990s, and they may find this idea alarming. But they should remember that the budget reconciliation process allows them to pass a bill on a party-line vote.

Squeezing infrastructure spending into a reconciliation framework the way progressives are advocating is very awkward. But the process is ideally suited to making tax changes; that’s what Republicans did to pass their 2017 tax cut, and it’s what Democrats could do to pass a tax increase next year if they deem it necessary.

In fact, an express track for deficit reduction was the original purpose of the procedure when it was devised in the 1970s. Using it for transformative legislation is a newer idea and it’s never worked very well.

For now, money is cheap and the parties might as well try to agree on something other than taxes. If spending becomes an issue later, then a tool exists to raise money later. In the shorter term, the path forward for Democrats and Republicans seems clear: They should agree to disagree about how to pay for stuff, and just start building it.

 

6-22-2021

A Fee for Miles Driven Would Be Hard to Impose

It might be easier if applied at first only to commercial trucks, and not right away.

Sadly but predictably, the climate and infrastructure legislation in Congress has run into trouble over how to pay for it. It no longer seems viable to avert this question altogether and use deficit financing for the climate investments.

Instead, we have a fresh debate over charging drivers a fee or tax based on vehicle miles traveled, something the Biden administration has rejected.

A vehicle-miles-traveled fee could raise significant revenue over the next decade, well into the hundreds of billions of dollars. And, outside the White House, it has politically diversified support, from Senator John Cornyn and Representative Garret Graves on the right to Representative Peter DeFazio and Transportation Secretary Pete Buttigieg on the left.

Yet a VMT tax is more complicated than it might sound. One question involves the effect it might have on the adoption of electric cars and trucks. Unlike the existing gas tax, a VMT would apply not only to combustion-engine vehicles, and many environmental groups oppose it for this reason.

A 2020 analysis by Lucas Davis and James Sallee of the University of California at Berkeley helps clarify the tradeoffs. Two different principles are in play. One of these holds that driving a car or truck on roads and bridges imposes a cost through wear and tear.

And as electric vehicles become more popular, the gas tax will do an increasingly poor job of discouraging excessive use and financing needed repairs and construction. More than a million electric vehicles have already been sold in the U.S., and rapid growth is expected — further eroding the base of the gas tax.

The countervailing principle is the need to discourage carbon emissions. A new tax that applies to electric vehicles could slow their growth in sales, thereby making the transition to net-zero emissions harder.

Davis and Sallee correctly note that the best approach for addressing both principles would be to combine a purchase subsidy with a usage tax.

“For example,” they say, “the U.S. federal $7,500 income tax credit for electric vehicles could be combined with a mileage tax” that applies to all vehicles. Since the federal purchase credit already exists, offsetting the marginal effect of a VMT fee would require increasing the electric vehicle credit.

(While we’re considering ideal but politically impractical policies, an even better combination would be a one-time tax credit for electric vehicle purchases, a VMT tax and a carbon tax.)

Another important question involves distributional equity. Some people fear that a VMT fee would be more burdensome for low-income households. However, a RAND analysis found that a VMT tax “would be no more or less regressive than fuel taxes, now or in the future.”

What’s more, as Davis and Sallee note, the gas-tax revenue lost because electric vehicles are not covered is “highly concentrated in a handful of states and is highly regressive, as most electric vehicles are driven by high-income households.”

Distributional concerns could also be addressed by allowing the VMT tax to vary depending on the characteristics of the vehicle, so that a higher rate would be charged for luxury vehicles.

Another challenge involves compliance, especially if a VMT fee it is to vary by location and time (or vehicle luxury). Joseph Kile of the Congressional Budget Office recently noted:

Such a framework would require that an electronic device that was either acquired by taxpayers or built into vehicles by manufacturers be used to track miles. Furthermore, the information logged by the device would need to be securely and accurately transmitted to the Internal Revenue Service … .

If the IRS did not have an effective and automated way to … verify that the miles reported were accurate, some taxpayers might underreport their mileage or fail to report any mileage at all.

If effective electronic data matching was not implemented, discrepancies would only be caught by auditing, which requires significant resources.

Many privacy groups are understandably concerned about the implications of having such tracking information available to the government.

 

Updated: 7-18-2021

Senate Democrats Agree To $3.5 Trillion Healthcare And Antipoverty Plan

Agreement determines scope of the party’s expected efforts on education, climate change, child care and host of other issues.

Democrats on the Senate Budget Committee agreed to roughly $3.5 trillion in spending for their broad healthcare and antipoverty plan, determining the scope of the party’s expected efforts on education, climate change, child care and a host of other issues while it has control of Congress and the White House.

Senate Majority Leader Chuck Schumer (D., N.Y.) announced the agreement Tuesday night after an hourslong meeting among White House officials and members of the committee, which is tasked with crafting the broad contours of the bill.

The $3.5 trillion price falls short of a $6 trillion package previously sought by progressives, including Sen. Bernie Sanders (I., Vt.), the chairman of the Budget Committee who endorsed the deal Tuesday night.

Democrats are pursuing a process tied to the budget called reconciliation to advance the bill through the 50-50 Senate without GOP support and avoid the 60-vote threshold typically needed in the chamber. With the top-line figures set, lawmakers will still need to craft the details of the policy provisions in the $3.5 trillion agreement.

“We are very proud of this plan, we know we have a long road to go, we are going to get this done for the sake of making average Americans lives a whole lot better,” Mr. Schumer said.

The legislation is also expected to ultimately include a series of tax increases on corporations and wealthy Americans. Sen. Mark Warner (D., Va.), a member of the budget panel, said its full cost would be paid for. A Democratic aide familiar with the agreement said it will prohibit tax increases on people making less than $400,000 and small businesses.

While the $3.5 trillion top-line falls short of progressives’ earlier calls, it is in line with President Biden’s roughly $4 trillion economic agenda, which he laid out in a pair of plans earlier this year.

Lawmakers are also working on a roughly $1 trillion infrastructure package, roughly $600 billion of which would supplement expected federal infrastructure spending, and Mr. Schumer said that together the two efforts would put the Senate on track toward approving the bulk of Mr. Biden’s plans.

The legislation Democrats are preparing is expected to mirror elements of Mr. Biden’s proposals, which called for an extension of an expanded child tax credit, universal prekindergarten and tax incentives for clean-energy investments.

Mr. Schumer said the Democratic bill would also expand Medicare to cover dental, vision and hearing care, a provision championed by Mr. Sanders and other progressives.

The fate of other progressive demands on healthcare remained unclear, including lowering Medicare’s eligibility age to 60 from 65, and empowering the government to negotiate the price of prescription drugs.

Mr. Biden is expected to meet with Senate Democrats Wednesday to discuss the plan, according to Mr. Schumer.

Raising enough revenue to cover the cost of the Democrats’ $3.5 trillion package will likely prove challenging for lawmakers.

Mr. Biden proposed increasing the corporate tax rate to 28% from 21%, tightening the net on U.S. companies’ foreign earnings and raising the top capital-gains rate to 43.4% from 23.8% to cover the cost of his roughly $4 trillion agenda over 15 years.

But many Democrats have opposed or expressed skepticism about several elements of those tax plans, likely lowering the total amount of revenue the party can agree to raise.

“I make no illusions of how challenging this is going to be,” Mr. Warner said Tuesday.

Deciding how to pay for the cost of proposed spending has plagued the separate, bipartisan infrastructure efforts for weeks, with Senate Republicans sounding fresh alarms about the financing of the roughly $1 trillion infrastructure package on Tuesday. Some GOP lawmakers have started questioning whether its cost would be fully covered as lawmakers tried to iron out the final details of that bill.

Eleven Senate Republicans have joined 11 members of the Democratic caucus to endorse the infrastructure agreement.

But some of those Republicans said that the agreement’s plan to raise funds from enhanced enforcement at the Internal Revenue Service may still prove problematic, depending on the scope of the new authority given to the tax agency.

Republicans have also raised concerns that the revenue measures, which also include public-private partnerships, may not ultimately cover the cost of the plan.

Those two issues could peel off Republican members of the group, which met Tuesday evening to work through the remaining questions, lawmakers said. At least 10 Republicans would need to join every Democrat for the infrastructure agreement to pass.

“Where we’re really going to have challenges when we meet is on the payfors. The tax gap concerns me somewhat in terms of the impact you could have on businesses,” Sen. Thom Tillis (R., N.C.), one of the Republicans who had previously endorsed the infrastructure framework, said referencing enhanced IRS enforcement.

Mr. Tillis also said that Democratic plans to simultaneously advance their larger antipoverty package could reduce Republican support for the infrastructure bill. House Speaker Nancy Pelosi (D., Calif.) has said the House won’t take up the infrastructure bill until the Senate also passes the broader Democratic package.

Throughout the bipartisan talks, figuring out how to pay for roads, bridges and rail had presented the biggest challenge.

Members of both parties had sought to cover the full cost of the spending, while at the same time avoiding raising user fees like the gas tax, a White House priority, and not raising corporate taxes, a Republican demand.

That left lawmakers relying on IRS enforcement and public-private partnerships, along with several measures like selling space on the wireless spectrum to finance the package.

Negotiators have expected official estimates from the Congressional Budget Office to possibly conflict with their own, and Sen. Angus King (I., Maine), who caucuses with Democrats, said the CBO had questioned some of their calculations on raising revenue for the plan. He said that the group was working through the issues.

“We want to have payfors, and we’ve got some good ones, CBO may not give us full credit,” said Sen. Rob Portman (R., Ohio), one of the lead negotiators. “There are some members who are looking for a CBO score.”

To receive a CBO score, lawmakers will need to craft the text of the legislation. Exiting a Tuesday meeting, members of the infrastructure group said they hoped to resolve the remaining issues in the talks by the end of the week. Staff can then turn to writing the text of the bill.

Sen. Mike Rounds (R., S.D.), who has also previously endorsed the deal, said he was concerned about the specifics of the enhanced IRS enforcement. While efforts to collect more taxes owed but not paid have gained bipartisan support, Republicans have opposed measures like additional reporting requirements.

“I think the IRS will be a bigger issue because it’s more direct in terms of whether or not it impacts a business’s ability, and whether or not it’s harassment or actually keeping the integrity of the tax system intact,” Mr. Rounds said.

Still, some Republicans who helped craft the initial framework said they were optimistic that the lure of infrastructure improvements would help carry the deal over the finish line.

“If we come up with good policies, then I’m comfortable we’re going to have the votes,” said Sen. Bill Cassidy (R., La.).

 

Updated: 7-29-2021

Senators Add Crypto Taxes To Infrastructure Deal To Raise $28B In Extra Revenue

U.S. lawmakers believe they can find $28 billion worth of infrastructure funding by expanding taxation on crypto transactions.

Last-minute additions to the bipartisan infrastructure deal in the United States Senate saw lawmakers propose expanded cryptocurrency taxation to raise an additional $28 billion in revenue.

The proposal will implement tighter rules on businesses handling crypto, expand reporting requirements for brokers, and mandate that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service.

Senator Rob Portman noted that Congress has expressed concerns regarding crypto reporting and taxation requirements for some time:

“Everybody’s been talking about the appropriate way to provide more reporting in particular and that leads to better compliance.”

The crypto measures were hastily added to the deal on Wednesday, following weeks of back and forth between the Republicans and Democrats.

Revenue from the new crypto taxes will be used to partially fund a $550-billion investment into transportation and electricity infrastructure.

The digital asset industry is already pushing back against the proposal, with Blockchain Association executive director Kristin Smith arguing that many of the firms that would be subjected to the new rules lack the capacity to collect the required information.

“We’re pushing every lever right now to change it,” she said, describing the proposed measures as “hugely problematic.”

The proposal comes as crypto assets are coming under increasing regulatory scrutiny in the United States.

On Tuesday, Acting Comptroller of the Currency Michael Hsu revealed that regulators are investigating the commercial paper reserves backing leading stablecoin Tether (USDT).

Tether has faced criticism for its opaque reserves and failure to deliver promised audits for roughly half a decade. In May, the firm disclosed a breakdown of its reserves that states USDT is 49.6% backed by “commercial paper.”

During a hearing on cryptocurrency before the U.S. Senate Committee on Banking, Housing and Urban Affairs held on the same day, law professor Angela Walch also called for greater oversight of the mining sector.

Walch highlighted the ability for miners to order blockchain transactions and siphon Miner Extractable Value as significant issues failing to make it onto the radar of lawmakers.

On July 19, U.S. Treasury Secretary Janet Yellen pushed for greater regulation governing stablecoins and stable token issuers during a meeting of the President’s Working Group on Financial Markets. The group expects to have issued draft stablecoin regulations in the coming months.

 

8-2-2021

Janet Yellen’s Treasury Likely Behind Surprise Crypto Bill

Rep. Tom Emmer of Minnesota also criticizes the updated bipartisan infrastructure bill aiming to raise $28 billion via crypto taxes.

How did a Democratic congressman with no prior public stance on cryptocurrency suddenly propose a comprehensive bill to regulate it without help from lawmakers who have been working on the topic for years?

One Republican reckons someone in the Biden Administration must have put his colleague up to the task.

Rep. Tom Emmer (R-Minn.) speculated Monday that Rep. Don Beyer (D-VA) proposed the sweeping bill on digital assets at the request of the Treasury Department.

“Don Beyer hasn’t been involved in this space at all that I know of,” said Emmer during an appearance on CoinDesk TV’s “First Mover,” “and all of a sudden he comes out with this proposal that will give the [Federal Reserve] complete control over creating central bank digital currency with all kinds of related authority to it.”

“Call me suspicious if you want, but I think that sometimes someone at Janet Yellen’s Treasury would call a long-time ally like Don Beyer and say, ‘Look, we really need to push back on these Republicans,’” said Emmer, a member of the Congressional Blockchain Caucus.

Emmer’s comments echoed those of fellow Republican congressman, Warren Davidson (R-Ohio), but on a different bill. Davidson claimed in a Bitcoin Magazine interview that the Treasury Department had a hand in the crypto-related language found in the $1 trillion, bipartisan infrastructure bill winding through the U.S. Congress.

Beyer, chairman of Congress’ Joint Economic Committee and a member of the tax policy-making House Ways and Means Committee, introduced his bill Thursday just as Congress was weighing the infrastructure deal cobbled together between a group of Democratic and Republican senators.

Critics of that proposal, which looks to gain roughly $28 billion in revenue from taxing the cryptocurrency industry, say its definition of what constitutes a crypto “broker” is too wide. Some revisions have been made to narrow that definition but many say it still goes too far.

When asked what revisions on the infrastructure bill he would recommend, Emmer replied that major infrastructure should not be paid for by taxing cryptocurrency as it is not related to the crypto space.

“This is a desperate attempt by a bunch of senators to try and find revenue from any source they can,” Emmer said of the plan.

A spokesperson for Beyer’s office didn’t respond to a list of questions from CoinDesk, including an inquiry on how the bill came together.

 

Updated US Infrastructure Bill Narrows Crypto Reporting Requirement

An updated draft of a controversial crypto reporting requirement clarifies that brokers “effectuate” transfers of digital assets, but stops short of explicitly excluding miners or other parties that don’t provide customer transactions.

An updated version of the U.S. Senate’s bipartisan infrastructure bill narrows the definition of “broker” for the purposes of crypto tax collection but stops short of specifying that only companies that provide services for customers qualify.

The bill, which is being debated by the Senate, funds around $1 trillion in infrastructure improvements across the country, and would be paid for in part by about $28 billion in taxes generated from crypto transactions.

An earlier version of the bill sought to do this by boosting information reporting requirements and broadening the definition of a “broker” for tax purposes to include any parties that might interact with crypto, including decentralized exchanges or other non-custodial service providers.

An updated version of the bill now specifies that only people who provide digital asset transfers would be treated as a broker, according to a copy of the draft bill obtained by CoinDesk and later posted online.

In other words, the language now does not explicitly include decentralized exchanges, but it also doesn’t explicitly exclude miners, node operators, software developers or similar parties.

“Any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person” is now included in the definition, according to the bill.

Where an earlier draft also said the bill provided for an “expansion” of the definition of the term “broker,” the current version provides for a “clarification” of the term.

At the heart of the issue is information reporting requirements. The initial version of the infrastructure bill did not propose new taxes on crypto transactions, but rather, proposed increasing the type of reporting that exchanges or other market participants must provide around transactions.

This means the bill would enforce existing tax rules on a broader set of transactions. It could be difficult for some types of exchanges – namely, decentralized exchanges – to comply, given there’s no clear operators that can provide this type of reporting.

Under the previous language of the infrastructure bill, other parties might also have gotten swept up in these rules, such as software developers, hardware manufacturers or miners who don’t send transactions to customers directly.

However, Sen. Rob Portman (R-Ohio), one of the lawmakers working on the bipartisan bill and the lawmaker who may have drafted the language, does not intend to capture these types of entities.

A spokesperson told CoinDesk that “non-brokers” would not have to comply with reporting requirements.

“This legislative language does not redefine digital assets or cryptocurrency as a ‘security’ for tax purposes, impugn on the privacy of individual crypto holders, or force non-brokers, such as software developers and crypto miners, to comply with [Internal Revenue Service] reporting obligations.

It simply clarifies that any person or entity acting as a broker by facilitating trades for clients and receiving cash, must comply with a standard information reporting obligation,” spokesperson Drew Nirenberg told CoinDesk.

When asked if the senator intended to publish this statement in the Congressional Record, another spokesperson said the statement was only for press purposes.

Clarifying intent in legislative history is one way Portman or other lawmakers could specify that DEXs, miners and similar groups would not be defined as brokers. Now that the bill is introduced, other Senators can also offer amendments to modify or strike the provision.

 

Updated: 8-4-2021

Help us preserve financial privacy and independence in crypto. Make your voice heard! Call 517-200-9518 and you’ll be automatically connected to your senator.

Tell Them: 

“Hi, I’m calling to ask that you support Senator Toomey, Wyden and Lummis’ amendment to the cryptocurrency provision of the infrastructure bill (H.R. 3684). Toomey’s amendment will ensure that the provision does not dramatically expand financial surveillance, harm innovation, or undermine human rights. Policies that impact basic freedom and the future of the Internet should be debated carefully and should never be attached to must-pass bills. Thank you.”

 

Updated: 8-4-2021

Just-in-Time Manufacturing? Not With Rickety U.S. Infrastructure

Tortured logistics at one factory in Pennsylvania reveal the economic toll of strained highways and ports.

Every vehicle that comes off the assembly line at Volvo Construction Equipment Corp. in central Pennsylvania is a test of America’s highways, rail lines, and ports.

And too often they let the company down—slowing the influx of global supplies that feed its main U.S. production facility, which builds wheel loaders, soil compactors, and other industrial vehicles.

During a stretch in April and May, bad traffic on nearby Interstate 81 delayed the arrival of steel plates from Georgia on three occasions. Such incidents send senior production controller Mike Middaugh to his computer to test alternative assembly schedules, given what parts the factory has on hand and what other deliveries might be accelerated.

“It’s very much a puzzle. You’ve got all these pieces,” Middaugh says. When he succeeds in rejiggering production, he can see the impact from his perch overlooking the factory floor.

Mechanical tuggers—a sort of powered cart—scutter around pulling vehicle frames off assembly lines as output is resequenced.

It all takes time and adds costs, if the flow of parts can even accommodate a switch.

Sometimes, after hours of poring over spreadsheets and testing multiple alternative scenarios, Middaugh finds the only answer is to stop production.

For an operation that relies on just-in-time deliveries of parts and materials, delays have at times halted the Volvo plant’s production for half or even a full day, according to the company, which is part of the Volvo Group.

At Volvo’s factory in Arvika, Sweden, which also makes wheel loaders, the company regularly schedules deliveries of German-made engines as little as one hour before the first engine in the shipment is needed, says Gustavo Casagrandi, a vice president and general manager of Volvo’s Shippensburg, Pa., operations.

“We could never do that here,” Casagrandi says. “We would have to be continuously stopping the line with 250 people not working.”

The disruptions showcase why business leaders and local officials across the country are hoping President Joe Biden and Congress can in coming months finally deliver a major infrastructure investment package, after years of political bickering in Washington that’s stymied previous attempts.

“It probably costs 5% to 10% of productivity,” Stephen Roy, president of Volvo CE’s North America region, says of infrastructure deficiencies. “We’re shutting the plant down. We’re idling the workforce.”

Biden, nicknamed Amtrak Joe for his long practice of commuting daily to Washington from Wilmington, Del., by train, has made upgrading national infrastructure a priority, highlighting the damage to American economic competitiveness from decades of underinvestment.

The U.S. dedicates 1.6% of gross domestic product to infrastructure spending, compared with an average of 2.9% among European nations, 3% by Japan, and 6.1% by China, according to the Group of 20 Global Infrastructure Hub.

The costs to productivity and corporate bottom lines have been clear.

* A quarter of U.S. bridges need significant repair or cannot handle current traffic, according to a 2018 report from the Department of Transportation.

* Traffic on interstates by tractor-trailer trucks surged 31%, measured per lane mile of highway in the system, from 2000 to 2019, according to TRIP, a transportation research group supported by insurance companies and businesses involved in improving or repairing transportation systems.

* Freight truck delays increased 77% from 2000 to 2019 in the nation’s 494 urban areas, according to the Texas A&M Transportation Institute.

* The trucking industry sustains $74.5 billion in direct costs annually from delays on the national highway system, showed a 2018 report by the American Transportation Research Institute, which is funded by the industry.

* Fifty-four percent of senior executives at middle-market companies say infrastructure deficiencies directly hurt their businesses, according to an April survey for the U.S. Chamber of Commerce.

Volvo’s Shippensburg facility is just off I-81, a crucial freight artery that runs from Tennessee to Canada, largely along the Eastern Continental Divide. Part of the Eisenhower administration’s historic highway-building program, I-81 was constructed in the 1950s and ’60s.

With only two lanes in each direction in most parts, the road often gets clogged, and dangerously short entrance and exit ramps contribute to frequent major collisions. These can snarl traffic for four hours or longer, according to Volvo.

I-81 is in part a victim of its own success. The route is close enough to densely populated East Coast metropolitan areas to serve as an attractive location for distribution centers.

Franklin County, which encompasses part of Shippensburg, has added 10 million square feet in distribution centers in recent years, with two more 2 million-square-foot warehouses planned to open by the end of the year, says Mike Ross, president of the local economic development authority. Each one becomes a hub for truck traffic.

“It’s our lifeblood, but in another sense it’s our albatross,” Ross says of I-81. “It’s a dangerous highway. There are life-altering accidents that occur on that highway every day. That then creates backups, which impact the movement of parts for companies like Volvo,” he says, adding that he spent two hours stuck behind one such accident on Mother’s Day weekend this year.

The 233-mile segment of I-81 in Pennsylvania in 2019 averaged almost 11 accidents a week that shut down a travel lane, and almost one a week in which the lane was closed more than four hours, the state’s department of transportation says. Things are even worse in Virginia, home to the longest stretch of the highway.

Its 325-mile section averaged more than 33 lane-closing accidents a week, according to the state’s transportation department.

Democratic Senator Mark Warner of Virginia, one of the negotiators on a bipartisan $550 billion, five-year infrastructure framework that’s been endorsed by Biden, anticipates some of his state’s share of the funding would go to improvements in its section of I-81, says his spokesperson Rachel Cohen.

Alexis Campbell, press secretary for the Pennsylvania Department of Transportation, says the same applies for her state.

Pennsylvania stands to receive $11.3 billion and Virginia $7 billion in federal highway aid under the bipartisan infrastructure bill, according to computations released by the White House.

The package would push federal infrastructure spending to the highest level as a portion of GDP since the early 1980s, when the build-out of the interstate highway system was being completed and federal grant programs for local water systems were winding down, says Adie Tomer, a senior fellow at the Brookings Institution.

“It really is historic in scale,” Tomer says. “We are going to be approaching New Deal-era investment at the federal level.”

But there’s no guarantee a bill gets passed by both chambers of Congress. Democrats are tying the bill to the fortunes of bigger, separate legislation to ramp up social spending, with that outcome uncertain.

It takes 1,574 parts to assemble a Volvo L90 wheel loader, a staple of the Shippensburg facility. Engines come from Germany, transmissions from Sweden, and the counterweights providing equipment stability and lifting efficiency from China.

The main chassis harness is made in Arizona, the hydraulic motors and pumps in Iowa. And the custom-fabricated steel plates that the factory’s welders use to assemble the vehicle frames come from Rome, Ga.

Components from each of 226 suppliers follow their own logistical paths. A thousand of them, from 17 countries, arrive via containers on ships at port cities including Baltimore, Charleston, S.C., and Los Angeles, then move overland.

Almost half of domestically supplied parts come from more than 250 miles away.

The logistics web was designed on the basis of just-in-time manufacturing, which aims to reduce waste and speed items through the factory, cutting costs.

In the factory’s 100,000-square-foot supply area, giant rows of shelves stack two stories high, and a large board with color-coded lights—flashing or steady—shows the status of every station on the assembly lines.

Employees move carts of components to stations as they’re needed, with the parts prearranged to minimize time lost.

Engineers sweat the details to shave away inefficiencies. Many millions of dollars depend on keeping components, particularly valuable ones, in stock for the least amount of time possible before they’re installed, while also avoiding disruptions in production.

For Middaugh, the production controller, the headaches don’t end with I-81. In June a shipment of fenders arrived at the Port of Baltimore five days late because of congestion a freighter had faced along its East Coast route. A separate shipment of hood covers came in four days late, for the same reason.

The nation’s 50 largest ports were handling 11% more cargo tonnage by 2019 than a decade earlier, according to the U.S. Department of Transportation. But investment in them hasn’t been sufficient, experts say.

Shipping channels need to be widened and deepened, berths for ships expanded, taller cranes installed for larger modern ships, cargo storage space added, and road and rail connections to ports improved to speed the transfer of freight, says Cary Davis, senior government relations director and general counsel for the American Association of Port Authorities.

The bipartisan infrastructure package would “make up for a generation of deferred investment in our trade infrastructure,” Davis says. “The U.S. hasn’t done a good job of keeping up with the growth in freight, both import and export.”

Volvo is resorting to bigger stockpiles—all the more so because of the added supply chain glitches caused by the pandemic, which have plagued the broader economy.

At the Shippensburg facility, forklifts recently cleared an employee break area on the factory floor to add another “buffer zone,” a place to temporarily store unfinished equipment when the production is disrupted because components aren’t on hand in time.

It’s the latest in a series of such moves. In late 2018, Volvo added three days to lead times for materials arriving in Baltimore because of growing congestion at East Coast ports. In 2019 it doubled its inventory of steel plates, to two days, because of the increase in highway delays.

Out on I-81, along with the other interstates that Volvo’s supply chain relies on, setbacks can be exponential. Federal safety regulations limit truck drivers to 14 hours on duty, with 11 hours of driving, before a mandatory 10-hour rest period kicks in. That compounds the impact of unexpected traffic delays.

“On a weekly basis, I will get two or three emails where the driver is out of hours and has to hold for their rest period,” says Mike Thomas, head of the logistics supply chain for Volvo Construction Equipment.

Another headache for Middaugh.

 

Updated: 8-5-2021

Lead Republican Behind Infrastructure Bill Negotiations Supports Crypto Amendment

The senator’s stance is somewhat surprising, given that he previously called the section on brokers in the proposed bill a “common-sense provision.”

Senator Rob Portman, one of the lead Republican voices for negotiations over an infrastructure bill in the United States Senate, said he supports an amendment clarifying the intent of a cryptocurrency provision.

In a tweet today, Portman encouraged his colleagues in the Senate to vote on an amendment proposed this week by Ron Wyden, Cynthia Lummis and Pat Toomey that suggests striking the definition of brokers in the infrastructure bill to no longer include developers, miners, or blockchain firms in the crypto space.

The senator’s stance is somewhat surprising given he has previously supported the language used in the bill, saying on Tuesday that the legislation “does not impose new reporting requirements on software developers, crypto miners, node operators or other non-brokers” and calling the section on brokers a “common-sense provision.”

Ted Cruz, the junior Senator from Texas still under scrutiny for his alleged role in the Jan. 6 attack on the U.S. Capitol, also reportedly put forth an amendment to strike the provision.

The bill, HR 3684, includes funding for roads, bridges and major infrastructure projects, as well as proposes implementing tighter rules on businesses handling cryptocurrencies, expanding reporting requirements for brokers and mandating that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service (IRS).

Majority leader Chuck Schumer is reportedly planning to attempt to keep the Senate in session — the government body is scheduled to be in recess from Aug. 9 — to vote on key amendments.

While the intent behind the bill seems to require crypto exchanges to report certain transactions, many lawmakers and opponents to the legislation immediately criticized the language, implying reporting requirements could potentially be extended to developers, node operators and miners.

According to digital rights advocacy group Fight For The Future, more than 9,000 activists have called to voice their support of the amendment proposed by Wyden, Lummis and Toomey.

Industry membership body Global Digital Finance also said they would welcome the clarifying language, noting 114 signatories from the crypto and blockchain space had attached their names to a letter expressing support for the amendment.

Jeff Bandman, A Board Member Of Global Digital Finance, Said:

“Assuming the amendment is approved, it would serve to raise revenues from appropriate actors, promote regulatory certainty and allow innovators to continue to develop new financial products, many of which could enhance financial inclusion in the U.S., without fear of unwarranted tax liabilities.”

The amendment would require 60 votes to be added to the legislation. With Portman’s support, the amendment may be more likely to receive Republican votes in a U.S. Senate split evenly along party lines.

Coinbase CEO Brian Armstrong Says Proposed Crypto Tax Rule Makes No Sense

The crypto exchange boss is the latest to decry plans to enact sweeping changes to cryptocurrency tax reporting in the United States.

Coinbase CEO Brian Armstrong is the latest crypto figure to come out against the wording of the proposed changes to cryptocurrency taxation in the United States.

Tweeting on Wednesday, Armstrong stated that the provisions included in the crypto taxation proposal could have a “profound negative impact” on the U.S. crypto space and could force digital innovation to move overseas.

As previously reported by Cointelegraph, amendments to crypto taxation rules were a last-minute addition to the $1-trillion infrastructure deal currently before the United States Senate.

The Coinbase CEO, like many other opponents of the proposal, faulted the broad language of the bill’s wording. According to Armstrong, the bill extends the definition of the term “broker” to anyone who facilitates a digital asset transfer.

Indeed, this broad-based definition has seen several critics of the bill saying non-crypto brokerage entities such as miners and software developers could be brought under onerous tax obligations.

“This makes no sense,” Armstrong tweeted, referring to the broad broker definition in the bill, adding, “Smart contracts, for instance, are not companies, and cannot be modified to collect KYC info or issue 1099s. They are simply software running on the blockchain that anyone can use.”

The Coinbase CEO stated that policymakers have a responsibility not to hinder innovation in America. Earlier in August, Galaxy Digital CEO Mike Novogratz panned politicians and regulators in the U.S. for failing to do their homework on crypto before enacting laws and regulations.

Armstrong called on U.S. crypto proponents to get behind amendments proposed by pro-cryptocurrency Senators such as Ron Wyden, Patrick Toomey and Cynthia Lummis, calling for a narrower definition of crypto intermediaries.

Before proposing the amendment, Senator Toomey had earlier called for miners and software developers to be exempted from the crypto tax reporting requirements specified in the bill.

Armstrong also joined the chorus of crypto proponents urging Americans to contact their elected representatives to push for the aforementioned amendments.

Three US Senators Propose Narrowing Crypto Tax Language In Infrastructure Bill

“While Congress works to better understand and legislate on issues surrounding the development and transaction of cryptocurrencies, it should be wary of imposing burdensome regulations that may stifle innovation,” said Senator Pat Toomey.

Lawmakers have written an amendment to an infrastructure bill in the United States Senate which proposes excluding certain crypto companies from the reporting requirements for brokers.

In an amendment from Oregon Senator Ron Wyden on behalf of himself and Wyoming Senator Cynthia Lummis, with the support of Pennsylvania Senator Pat Toomey, the U.S. lawmakers suggested that some of the provisions in the bipartisan infrastructure deal shouldn’t apply to developers, miners, or blockchain firms in the crypto space.

Specifically, the amendment proposes that the definition of a broker does not include anyone in the business of “validating distributed ledger transactions,” “developing digital assets or their corresponding protocols,” or dealing with mining software or hardware.

“By clarifying the definition of broker, our amendment will ensure non-financial intermediaries like miners, network validators and other service providers are not subject to the reporting requirements specified in the bipartisan infrastructure package,” said Toomey on Twitter.

He Added:

“While Congress works to better understand and legislate on issues surrounding the development and transaction of cryptocurrencies, it should be wary of imposing burdensome regulations that may stifle innovation.”

According to majority leader Chuck Schumer, the Senate is planning to vote on multiple amendments to the infrastructure bill, HR 3684, today.

Among other things, the bill proposes implementing tighter rules on businesses handling cryptocurrencies and expanding reporting requirements for brokers, mandating that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service (IRS).

However, the proposed amendment from Wyden, Lummis and Toomey could potentially strike down some of the reporting requirements, should crypto firms not be considered “brokers” in the bill. According to the trio, nothing in the proposed amendment has any effect on some of the existing laws governing cryptocurrencies, including the Securities Act of 1933 and the Securities Exchange Act of 1934.

Ohio Senator Rob Portman, one of the lawmakers behind HR 3684, said on Twitter yesterday that the legislation “does not impose new reporting requirements on software developers, crypto miners, node operators or other non-brokers.” Calling the section on brokers as a “common-sense provision,” Portman claimed that crypto firms simply “must comply with standard information reporting obligations.”

The Blockchain Association, Coinbase, Coin Center, Ribbit Capital and Square expressed their support for the proposed amendment today, releasing a joint statement that the infrastructure bill’s language on crypto “would place unworkable requirements on a nascent industry.” The companies suggested lawmakers get public feedback given the potential impact on the U.S. economy.

“Clarifying the provision to address our concerns would not affect the reporting requirements on crypto exchanges that operate on behalf of customers,” said the companies. ”We support sensible reporting requirements that are consistent with those that apply to traditional financial services.”

The U.S. Senate is scheduled to be in recess starting on Aug. 9, meaning it may be unlikely that all of the amendments to the infrastructure bill will be addressed — or the legislation itself will be passed — until it reconvenes in September.

 

Crypto Tax Exemptions Floated For $1T US Senate Bill

The carve-out would allow for miners, developers and node operators to be exempt from broker tax reporting purposes.

Senators Ron Wyden (D-Ore.), Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Penn.) want to ensure miners, node operators, developers and other non-custodial crypto industry participants are exempt from a crypto tax reporting provision in the U.S.’ infrastructure bill.

The bill, which seeks to fund $1 trillion in infrastructure improvements at least in part through widened tax enforcement on crypto entities, sparked backlash from the crypto community due to the possibility that it might broaden the definition of a broker to include non-custodial entities that don’t have customers nor provide those types of services.

Wyden and Lummis’ amendment, proposed Thursday, seeks to limit this definition specifically to trading platforms and similar types of entities.

The Amendment Said:

“Nothing in this section … shall be construed to create any inference that a person described in [the bill] includes any person solely engaged in the business of (A) validating distributed ledger transactions, (B) selling hardware or software for which the sole function is to permit a person to control private keys … or (C) developing digital assets or their corresponding protocols for use by other persons, such that such other persons are not customers of the person developing such assets or protocols.”

The amendment also includes a provision that the section on crypto brokers will not modify the Securities Act of 1933 or Securities Exchange Act of 1934, two major laws overseeing the federal securities markets.

The Senate is currently debating and voting on a number of possible amendments to the bill, which has bipartisan support in the upper house of the U.S. Congress. Another of these amendments, introduced by Sen. Ted Cruz (R-Texas), seeks to “strike” the provision, although the text of that amendment was not immediately available.

In a statement, Lummis said that the amendment is a first step to integrating crypto with the current U.S. economy, though “much more work needs to be done.”

“The digital asset and financial technology space is incredibly complicated, and we have spent long hours working in the Senate with industry stakeholders and with the Administration to find a way to effectively integrate digital assets into our tax code without harming the technology or stifling innovation.

I look forward to continuing this bipartisan work to bring our financial industry into the 21st century,” she said.

Wyden said that investors “failing to pay tax” through cryptocurrencies “is a real problem” and that he supports the overall thrust of the provision in requiring third-party reporting.

“Our amendment makes clear that reporting does not apply to individuals developing blockchain technology and wallets. This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe,” he said in a statement.

Sen. Rob Portman (R-Ohio), who likely introduced the original provision into the tax bill, defended the phrasing in a Twitter thread late Tuesday.

Meanwhile, in a joint statement, the Blockchain Association, Coinbase, Coin Center, Ribbit Capital and Square expressed support for the amendment, pointing to the original broad definition of “broker.”

“Clarifying the provision to address our concerns would not affect the reporting requirements on crypto exchanges that operate on behalf of customers. We support sensible reporting requirements that are consistent with those that apply to traditional financial services,” the statement said.

Blockchain And Cybersecurity

Separately, Lummis filed another amendment with Sen. Marsha Blackburn (R-Tenn.) that would task federal regulators with evaluating different tools to track illegal transactions made using cryptocurrencies.

The amendment would apply to a section on cybersecurity within the infrastructure bill.

If the amendment is adopted and the bill is passed, these federal agency heads, which include the Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets Control (OFAC) and FBI, as well as the Secretary of Homeland Security and Attorney General, would have 180 days to develop a joint agreement on what digital asset analytics tools can and can’t do, as well as possible improvements.

The agencies would also have to provide any recommendations on how they can mitigate any illegal activity occurring through the use of cryptocurrencies.

Lummis said cryptocurrencies could be used for both good and bad purposes, just as cash can.

“We need to ensure that agencies of jurisdiction have the strategies and resources to harness that built-in security to combat money laundering and other nefarious activity. This amendment will do just that, and I’m grateful to Senator Blackburn for working with me to make this happen,” she said in a statement.

The amendments still need to be voted on, and the Senate is expected to discuss these issues through the rest of the week. At the end of the amendment period, lawmakers will vote to actually advance the bill.

However, the overall process of passing the infrastructure bill into law is likely to take months. After the Senate completes its work, the bill will go to the House of Representatives, which will also discuss the bill before voting on it.

 

Updated: 8-5-2021

Crypto Rules In Senate Bill Eyed For Bipartisan Rewrite

Senators Ron Wyden and Pat Toomey are drafting a proposal to overhaul a cryptocurrency provision in the $550 billion bipartisan infrastructure bill that traders and investors have criticized as being overly broad and impractical.

The bipartisan duo’s more-targeted language would replace what’s in the bill the Senate is now debating — should their amendment get 60 votes on the Senate floor. It could also cause new problems for the legislation, which was the product of several weeks of intense negotiations between the White House and senators.

The Joint Committee on Taxation estimates the crypto reporting rules now in the bill would generate $28 billion in revenue, paying for roughly 5% of the bill’s total costs.

The Toomey-Wyden language may not generate as much revenue, a potential concern for senators who have demanded the bill be fully paid for.

Wyden, an Oregon Democrat, chairs the Senate Finance Committee and Toomey, a Pennsylvania Republican, is a senior member of the panel. The two each have a history of working on tax and technology issues.

“There is a sense that there are some opportunities that really provide a window for addressing what this technology is all about,” Wyden told reporters on Tuesday. “The text of the bill originally didn’t do that and there’s a group of us working together to get it fixed.”

IRS Reporting

Both senators have criticized the crypto language in the bill for failing to account for how the technology is used.

The current bill would require cryptocurrency exchanges to report more data to the Internal Revenue Service. The industry has said that the current language is too broad and would require some crypto participants, such as miners and software developers, to report data they don’t have access to.

“We’ve been trying to make sure the definitions reflect what really goes on in the digital asset world, and we didn’t think the previous amendment did that, and so this effort is to make sure that we’re really focused on the people who have the information,” Senator Cynthia Lummis, a Wyoming Republican who focuses on crypto issues, said.

Regulating virtual currencies has become an area of bipartisan concern as the value has exploded in recent years. Its use has also been tied to tax evasion, money laundering and other illicit activities.

Wyden said he is talking with Republicans who want to be involved, including Ohio Senator Rob Portman, who wrote the current language in the bill. Toomey said the talks are “constructive.”

Republican Senator Marsha Blackburn of Tennessee said she, too, is concerned about the cryptocurrency provision in the legislation.

She said Congress and federal regulators need to tread carefully so as not to create “undue due diligence” on individuals or other entities involved in transactions.

“This is an area where we need to view what type of light touch or appropriate regulation should be,” Blackburn said on Bloomberg TV’s “Balance of Power with David Westin.”

Toomey said he did not know when the amendment would be ready for a vote. Senate Majority Leader Chuck Schumer has said he hopes to pass the final infrastructure bill this week.

 

Updated: 8-6-2021

Infrastructure Bill Has Big Wins For Oil, Climate Advocates Say

While the new bill includes big wins on some priorities, it also contains provisions to prop up fossil fuels.

When negotiators released the more-than-2,700-page text of the infrastructure bill now inching its way forward in the Senate this week, they discussed it as a glass half full — the first, imperfect step toward greening U.S. energy and industry.

To many looking at it from outside the government, however, what’s in that glass has been polluted.

Many of the bill’s provisions are on the oil industry’s wish list. The proposed legislation has more than $10 billion for carbon capture, transport and storage — a suite of technologies fossil fuel companies hope will allow them to extend their license to operate for years, if not decades.

There’s also $8 billion for hydrogen — with no stipulation that the energy used to produce it comes from clean sources. A new liquid natural gas plant in Alaska won billions in loan guarantees, while other waivers in the bill will weaken environmental reviews of new construction projects, experts say.

“This infrastructure proposal is not a down payment on real climate action,” said Mitch Jones, director of Food & Water Watch Policy, a Washington accountability organization. “It is doubling down on support for climate polluters.”

The bill does address some major climate change priorities, with $7.5 billion for a network of electric-vehicle chargers, $21.5 billion to create an Office of Clean Energy Demonstrations and $16 billion for energy efficiency and renewable energy.

There’s money for resiliency projects and combating wildfires.

But that has done nothing to reassure the environmental lobby’s most progressive wing, which has grown increasingly concerned that the oil industry is co-opting the administration’s agenda.

Much of that anxiety has coalesced around support for carbon capture. Last month, hundreds of climate groups wrote an open letter calling on Biden to reject carbon capture as a “dangerous distraction” to eliminating fossil fuels entirely.

While the scientific consensus holds that carbon capture will be crucial to slowing atmospheric warming, many environmentalists fear it will also prolong the life of the fossil fuel industry, particularly in the U.S.

Currently, some 40 million tons of carbon are captured globally, the vast majority by energy companies for a process known as enhanced oil recovery, in which the gas is pumped back into the ground to force crude oil to the surface.

“EOR is disastrous for the climate, as it results in more oil extraction and more carbon emissions when that oil is burned,” the environmental groups wrote in their letter.

Frank Macchiarola, a senior vice president with the American Petroleum Institute, which represents oil and natural gas interests, disagreed.

He said in a statement that the group supports “the development of innovative technologies, like carbon capture and hydrogen, that will help achieve climate progress.”

He has allies in the climate advocacy world. Noah Deich, president and co-founder of Carbon 180, a group that advocates for carbon removal, said capture will be key to decarbonizing heavy industries such as steel and cement.

Deich understands the skepticism from climate groups, but doesn’t think the technology needs to enable oil production. “If done right, the bill could lead to a lot of carbon capture and recovery outside of the enhanced oil recovery space, and be a really good foundation for cleaning up heavy industry,” he said.

It’s not just carbon capture that irks the infrastructure bill’s critics. While there’s $5 billion to fund the purchase of clean-running school buses, half of that can be used for vehicles powered by cleaner-burning fossil fuels; those might be better for the environment than diesel, but not as clean as electric buses with no carbon emissions.

Even the funding for EV charging infrastructure includes $2.5 billion of that could go to support vehicles that burn natural gas and propane, both of which burn more cleanly than gasoline, but which still contribute to global warming.

“When you look at the energy provisions in this bill, they are they are a boon to the fossil fuel industry and a dismal failure from the perspective of the climate,” said Carroll Muffett, chief executive officer of the Center for International Environmental Law, a non-profit firm with offices in Washington.

The group is still working on a full accounting, but Muffett estimates that the bill includes more than $25 billion for technologies that are either “promoted or directly beneficial” to the fossil fuel industry.

President Joe Biden came to office promising a sweeping infrastructure bill that would create more environmentally friendly economy and power system while providing jobs. But it’s been a tough to get that agenda by a Senate that’s divided evenly between Democrats and Republicans. The bill could also face an uphill battle in the Democratic-controlled House of Representatives, where key players such as Transportation Committee Chair Peter DeFazio have already said it falls short on addressing the climate crisis.

Senate Democrats and the Biden administration have dealt with the discontent by saying they will use a separate budget bill that will require only 50 votes to enact more sweeping measures.

“While the bipartisan infrastructure package does not address the climate crisis at the scale and scope we need, I believe we will have an historic opportunity to meet this moment through the budget reconciliation process,” said Senator Ed Markey, a Democrat known as a climate progressive and Biden ally.

“This will be a critical down payment on much more climate action in the months and years to come — both in Congress and at the ballot box.”

John Noel, a senior climate campaigner for Greenpeace, said the infrastructure bill’s shortfalls will spur advocates to focus on the companion measure.

“The reconciliation package needs to be the place where we challenge the power of the fossil fuel industry and all fossil fuel subsidies and, like, kick the industry into a managed decline,” he said. “The outrage at this bipartisan bill is our leverage to make it happen.”

Senate Sets Up Weekend Infrastructure Vote After Delays

The U.S. Senate is heading toward a weekend vote on its $550 billion infrastructure legislation, after Majority Leader Chuck Schumer’s attempt to rush passage late Thursday was thwarted by disagreements over cryptocurrency and other matters.

Senators huddled for hours on and off the floor to discuss final changes to legislation that numbers some 2,702 pages and has been the subject of weeks of negotiations with the White House. But agreement proved elusive and final passage of the massive bill got pushed until at least Saturday.

The bill is a key element of President Joe Biden’s agenda and the White House was directly involved in the negotiations. On Friday, he urged lawmakers to follow through, saying the legislation “would end years of gridlock in Washington and and create millions of good-paying jobs.”

Among the unresolved issues is how to modify a provision of the bill dealing with reporting requirements for cryptocurrency transactions for tax collections. The cryptocurrency industry said the original version of the bill unfairly targeted them and was too broad in scope.

Senate Finance Committee Chairman Ron Wyden and Republican Senators Pat Toomey and Cynthia Lummis proposed a narrower approach focused on those who conduct transactions on exchanges.

But Senators Rob Portman, a Republican, and Democrats Mark Warner and Kyrsten Sinema proposed an 11th-hour alternative endorsed by the White House. It would target some software companies and cryptocurrency miners.

“We believe that the alternative amendment put forward by Senators Warner, Portman, and Sinema strikes the right balance and makes an important step forward in promoting tax compliance,” White House spokesman Andrew Bates said in a statement.

Toomey said they were at “an impasse” on the issue.

Another pending amendment would allow state and local governments to use up to 30% of their unspent Covid relief funds on infrastructure projects.

GOP Senator John Cornyn of Texas, who sponsored the change with Democratic Senator Alex Padilla, said he bargained with the Biden administration on the change, which would free up between $80 billion and $100 billion for projects. But it has yet to be scheduled for a vote.

Schumer and Senate Republicans spent hours attempting to reach an agreement on how many other amendments would be considered before a vote on the legislation.

“We have been trying to vote on amendments all day but have encountered numerous objections from the other side,” Schumer said on the Senate floor just before midnight. “However, we very much want to finish important bill, so we will reconvene Saturday.”

Patience wore thin as the hours passed.

“Everybody’s in a bad mood in there,” California Democratic Senator Dianne Feinstein said as she left the Senator floor late Thursday night.

The infrastructure bill includes $110 billion in new spending for roads and bridges, $73 billion for electric grid upgrades, $66 billion for rail and Amtrak, and $65 billion for broadband expansion. It also provides $55 billion for clean drinking water and $39 billion for transit.

The Congressional Budget Office said Thursday that the bill would add $256 billion to the federal deficit over a decade, though negotiators say the nonpartisan agency didn’t give full credit for the package’s offsets.

The soonest the vote could be held under Senate procedures is Saturday. Many senators left Washington early Friday to attend the funeral of former GOP Senator Mike Enzi of Wyoming, who died last week following a bicycle accident.

Passage of the infrastructure package would set the stage for later consideration of Biden’s $3.5 trillion economic package, a partisan drive to overhaul policies on climate change, taxes, health care, immigration and other areas.

Senate Democrats will advance to the Senate in just a few days a fiscal blueprint that helps them trigger a Senate procedure that could short-circuit the filibuster and clear the economic package this fall with only Democratic support.

The infrastructure package still faces challenges in the House, where Democrats can only afford three defectors if Republicans vote in unison against the bill. House Democrats are divided over whether the package spends enough and many Republicans oppose the bill.

Speaker Nancy Pelosi reaffirmed Friday that the House won’t take up the infrastructure legislation until the Senate also passes a second, more sweeping economic package.

That linkage has been a central demand of progressive Democrats in the House, though moderates have been calling on Pelosi to relent. The House is currently on a recess until Sept. 20.

“We are not going forward with leaving people behind,” Pelosi said at a news conference.

 

Dueling Crypto Plans Pit White House Against Key Democrat

The cryptocurrency industry was braced for a big win in the infrastructure bill Thursday evening — a bipartisan amendment that would scale back proposed surveillance over digital asset transactions — but it’s now facing uncertainty after a last-minute competing plan popped up.

The conflict was one of several issues that cropped up Thursday night and stymied Senate Majority Leader Chuck Schumer’s attempt to get unanimous agreement among lawmakers to pass the $550 billion bipartisan infrastructure bill on an expedited timeline. The Senate adjourned just after midnight with a plan to resume Saturday to finish passing the legislation.

The two dueling factions aren’t composed of the usual Capitol Hill allies. Senate Finance Committee Chairman Ron Wyden, a progressive Democrat, teamed up with conservative Republicans Pat Toomey and Cynthia Lummis in working with the cryptocurrency industry to draft a change to the bill after criticism that initially proposed reporting requirements were too broad.

That amendment appeared set to pass, until Democrats Mark Warner and Kyrsten Sinema, along with Republican Rob Portman, offered up their own competing version.

That one included stricter disclosures to the Internal Revenue Service. The White House endorsed their version, causing chaos and confusion about which proposal will ultimately move forward.

The fault lines risk causing a rift between President Joe Biden’s administration and Wyden, who will be the most important figure in making sure Biden’s tax agenda can clear the Senate later this year.

The Blockchain Association, a trade group for the industry, mounted a last-minute pressure campaign in favor of the Wyden-Toomey-Lummis version. Wyden said they were making the case to colleagues that their version makes it “very hard for tax cheats, without discouraging innovation.”

The infrastructure bill would require that crypto brokers report transaction data to the IRS so the federal government can collect taxes from those trades.

Earlier this week, Wyden, Toomey and Lummis unveiled a change to the original text that would exclude entities including miners, software designers and protocol developers from the groups that need to report data to the IRS. The lawmakers said those groups don’t have access to the data the bill would require them to report.

The competing Portman-Warner-Sinema amendment wouldn’t grant quite so many exceptions. The White House, in a statement, praised this version for having stronger tax-compliance rules.

“We’re just trying to clarify the language in the bill, which we think actually is pretty clear,” said Portman, who helped draft the crypto provision in the original legislation.

White House Press Secretary Jen Psaki on Friday said that the administration is “grateful” for Wyden’s leadership on crypto issues, but reiterated that it prefers the alternative plan.

“I would just go back to the overarching objective here which is reducing tax evasion in the cryptocurrency market, and we feel that the compromise sponsored by Senators Warner, Portman, and Sinema is a good option,” she said.

The Portman-Warner-Sinema amendment is “the government picking a winner and losers in an otherwise competitive field,” Jerry Brito, executive director of Coin Center, said in a statement Friday.

“Tech policy of this magnitude is being done as a last-minute tax provision buried in a massive must-pass infrastructure bill. This is no way to make policy.”

The crypto amendments, which are mutually exclusive, could both be considered again on Saturday, but it’s unclear if they will each get a vote. It’s also not certain what happens if they both pass.

One possibility is that they would be added to the bill to be sent over to the House, with differences getting resolved in that chamber.

“We’re getting a variety of different opinions, including that both of them would go to the House,” Wyden said. “It’s not clear.”

The House does not have any immediate plans to begin considering the bill. Lawmakers are scheduled to be away from Washington until mid-September.

 

Updated: 8-8-2021

‘Bitcoin Fixes This’ — US Infrastructure Bill Would Add $250B To Debt Mountain

The hotly debated legislation is no surprise to hard money supporters, as Cameron Winklevoss says that it would “plunder” future generations.

The United States tax bill, which could hurt Bitcoin (BTC) and crypto holders, will “continue the plunder of future generations,” Cameron Winklevoss argues.

According to new estimates, the proposed Infrastructure Bill currently under discussion in Washington would pile on an extra quarter of a trillion dollars in debt.

Bill May Add $256 Billion In Debt

As the contentious bill makes its way through government, crypto voices continue to warn about a potential tax nightmare, which, they argue, can still be easily avoided.

As Cointelegraph reported, language in the Bill may place undue demands on hodlers and businesses alike.

An effort is currently underway from pro-Bitcoin senators and the crypto industry to change the Bill’s phrasing to reduce the future burden.

Nonetheless, the Bill in and of itself is a cause for concern on an economic level, Winklevoss said.

“The infrastructure bill is estimated to add another $256B to the federal budget deficit,” the Gemini exchange co-founder tweeted Friday.

“It will not be fully paid for. The plunder of future generations continues. Bitcoin fixes this.”

His words come the week after the Federal Reserve saw a new record on its balance sheet, which topped $8.24 trillion for the first time on July 26.

More broadly, central banks worldwide have favored the continuation of asset purchases regardless of future debt implications, flagging new variants of the coronavirus as the impetus.

“The wrinkle, now, is Delta: if Delta causes the labor market to heal much more slowly, then that’s going to cause me to step back,” Minneapolis Fed President Neel Kashkari said Thursday, quoted by Reuters.

Caution Over BTC Price Reaction

Short-term headwinds for Bitcoin are thus skewed by progress on the Bill, which was already forecast to be a major market force this week.

Traders were of mixed opinions on its market impact once passed, with popular Twitter account Pentoshi arguing that Bitcoin has already overcome more significant setbacks.

 

Other macro signals remain more muted, with the U.S. dollar currency index (DXY) treading water after recent volatility.

 

Updated: 8-16-2021

Nancy Pelosi Looks At Advancing Infrastructure And Budget Framework Simultaneously

Shift in tactics comes after moderate House Democrats demanded quicker vote on bipartisan infrastructure bill.

House Speaker Nancy Pelosi (D., Calif.) on Sunday asked a top committee to look at moving forward on a $1 trillion bipartisan infrastructure bill along with the $3.5 trillion budget framework in an effort to balance the demands of her party’s ideological factions.

The request came after nine centrist House members said Thursday they “will not consider voting for a budget resolution until” the House approves the infrastructure bill.

The threat complicated the timeline Mrs. Pelosi had previously set. She had said the infrastructure package wouldn’t move ahead until Senate passage of the $3.5 trillion antipoverty and healthcare legislation.

Progressives have demanded that the two move on parallel tracks to guarantee their priorities.

“I have requested that the Rules Committee explore the possibility of a rule that advances both the budget resolution and the bipartisan infrastructure package. This will put us on a path to advance the infrastructure bill and the reconciliation bill,” Mrs. Pelosi said in a letter Sunday.

Passage of such a rule is expected to move the infrastructure bill forward procedurally, but not pass it, according to an aide to Mrs. Pelosi.

The House will be back in session Aug. 23 to consider legislation.

But in a statement Sunday night, the nine centrist House Democrats indicated Mrs. Pelosi’s suggestion didn’t go far enough and they wanted to see the infrastructure bill passed before voting on the budget framework.

“While we appreciate the forward procedural movement on the bipartisan infrastructure agreement, our view remains consistent: We should vote first on the Bipartisan Infrastructure Framework without delay and then move to immediate consideration of the budget resolution,” the nine Democrats said in the joint statement.

The Senate passed the infrastructure legislation Tuesday and then the budget framework early Wednesday morning. That was the first step in what is expected to be a lengthy process that isn’t expected to get any Republican votes.

Democrats are planning to pass the budget package under a process known as reconciliation, which allows them to advance legislation with just a simple majority, rather than the 60 votes most bills require in the Senate.

Both chambers must pass an identical budget resolution to unlock the reconciliation process, enabling them to pass the larger budget package without GOP support.

Once both chambers have passed the budget outlines, Democrats in the House are expected to write and pass their version of the legislation first, according to aides, rather than wait for the Senate to craft the bill.

In the House, Democrats can afford no more than three defections on legislation opposed by all Republicans. If the nine Democrats who signed the letter all vote against the budget framework, they could block its passage in the House.

At the same time, the Congressional Progressive Caucus said last week that a survey of its 96 members showed that a majority would withhold their support for the infrastructure bill until the Senate has passed the larger budget package.

The infrastructure package, which passed the Senate with all Democrats and 19 Republicans, both reauthorizes spending on existing federal public-works programs and pours an additional $550 billion into water projects, the electrical grid and safety efforts, among many other projects.

The budget package is set to offer a federal paid-leave benefit, universal prekindergarten, two free years of community college and expanded Medicare to cover hearing, dental and vision care, among other provisions.

Democrats have said they also plan to allow Medicare to negotiate for lower drug prices and implement a raft of climate proposals, including a series of energy tax incentives and a program to push the U.S. to receive 80% of its electricity from clean sources by 2030.

They have said they intend to fully offset the cost of the proposal, but the ways in which they plan to raise revenue are themselves controversial, including increasing taxes on wealthy Americans and corporations.

 

Updated: 8-19-2021

Congress’s Crypto Tax Proposal Makes Perfect Sense

Ignore the industry doomsayers. New reporting requirements for digital assets are a good first step toward getting people to pay what they owe.

The infrastructure plan wending its way through the U.S. Congress leaves a lot to be desired. But one of its most bitterly opposed provisions shouldn’t be controversial: a measure aimed at stamping out tax evasion in the burgeoning world of cryptocurrencies.

For most investors in most kinds of financial assets, calculating tax is relatively straightforward. Taxable gains are summarized in a 1099 form that brokers give their clients every year. The Internal Revenue Service also gets a copy so it can verify tax returns.

In the realm of crypto, 1099s are rare. The rules were written before digital assets existed, and traditional brokers often aren’t even involved.

Trading occurs through a panoply of venues, including exchanges such as Coinbase and Kraken, providers of electronic “wallets” and automated protocols in the nether realm of decentralized finance. It’s hard for investors, let alone the IRS, to keep track of gains and losses.

Officials are all too aware of the problem. IRS Commissioner Charles Rettig sees lack of information on crypto as a major contributor to the gap between U.S. taxes owed and collected, which he estimates could be as large as $1 trillion a year.

In recent months, both he and the Treasury Department have asked Congress to let the government require regular reporting from the relevant intermediaries.

Congress responded by adding a section to the infrastructure bill now before the House of Representatives. The legislation extends reporting requirements to digital assets, and grants the government broad authority to decide which intermediaries must report, by defining “broker” as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

This language alarms lobbyists for the crypto industry and their political allies. They say it’s too broad, covering entities incapable of complying — such as wallet developers and the computers that maintain the public ledger (known as the blockchain) where transactions are recorded. This could kill innovation, they claim, sending business offshore and turning the U.S. into a digital-asset backwater.

These concerns are overblown. For one, the legislation is just the starting point. Treasury and the IRS would have to write rules specifying who will report and how, with a period for notice and comment. Treasury says it’s interested only in entities that perform broker-like functions.

Getting this right won’t be easy in such a rapidly evolving area, but that’s why a broad statute makes sense. Officials need ample leeway to adjust the requirements so they apply to entities that can provide the necessary information.

Consider decentralized exchanges, which some of the industry-proposed modifications to the legislation might exempt. They’re programmed to execute transactions automatically, and their developers can be hard to identify.

They do pose a problem — but it’s far too soon to say they can’t comply, or shouldn’t be made to comply, with reporting requirements. Exempting them could leave a channel for tax evasion wide open.

Ultimately, Congress will actually need to go further — empowering Treasury to exchange information with foreign authorities, for instance, and closing other avenues for crypto-based tax evasion.

But the proposed legislation is a sensible first step. It will make compliance easier for law-abiding taxpayers, and make life more difficult for the rest.

 

Updated: 8-23-2021

Coinbase Warns Infrastructure Bill’s Crypto Provisions Could Impact 20% of US Population

Coinbase’s global tax VP has slammed Congress for the controversial crypto tax provisions rushed into the infrastructure deal, warning the bill could impact 60 million Americans.

Lawrence Zlatkin, global VP of tax at Coinbase, has taken aim at the rushed cryptocurrency provisions added to Congress’ bipartisan infrastructure bill “at the last minute,” slamming lawmakers for hastily inserting amendments that could impact “60 million Americans.”

In a Saturday blog post taking aim at a Thursday, Aug. 19, editorial article from Bloomberg that praised the infrastructure bill’s crypto provisions, Zlatkin criticized the lack of opportunity for public discourse regarding the legislation, estimating that 20% of the United States population are invested in digital assets:

“Today, around 60 million Americans own crypto — roughly one-fifth of the entire U.S. population. Those Americans, and the entire crypto ecosystem, deserve more dialogue than midnight provisions inserted at the last minute.”

Zlatkin noted that outrage over the bill’s language extended beyond the confines of the crypto industry, noting estimates that the popular “public outcry” saw senators contacted by nearly 80,000 people within “just a few days.”

In particular, the Coinbase executive highlighted the broad definition of a digital asset “broker” included in the bill — which could impose strict reporting requirements on network validators and software developers who would be unable to comply with their obligations under the bill in its current form.

“As long as the statute says that software developers, miners, stakers must do the impossible, there is no lawyer who would advise them to risk operating in violation of laws whose penalties for non-compliance would easily bankrupt them,” he said, adding:

“This will harm innovation and stifle the potential of a hugely important technology at its earliest stages of development […] Tax policy should be thoughtful and deliberate. Broad overreach is a regulatory mistake.”

Zlatkin added that digital asset brokers should be subjected to the same third-party reporting requirements as mainstream brokerage firms.

The controversial infrastructure bill passed the Senate earlier this month, and onlookers are hopeful there may be opportunities to amend the legislation as it moves to the House for scrutiny in the coming months.

 

Updated: 8-24-2021

Biden Praises House Adoption of $3.5 Trillion Budget Plan

President Joe Biden on Tuesday tossed aside party divisions that nearly sunk his economic agenda and credited Speaker Nancy Pelosi’s “masterful” leadership in getting the fractious House Democratic caucus to adopt a $3.5 trillion budget resolution.

“The House of Representatives is taking a significant step toward making a historic investment that is going to transform America — cut taxes for working families, and position the American economy for long term, long term growth,” Biden said Tuesday at the White House.

A public rift between Democratic progressives and moderates threatened to derail Pelosi’s strategy for shepherding the budget framework and a separate $550 billion bipartisan infrastructure bill through Congress.

Biden, who personally called lawmakers in the hours before the vote, classified the divide as “differences, strong points of view” that are always welcome. The president later called Pelosi and House Majority Leader Steny Hoyer to congratulate them, a White House official said.

The 220-212 House vote put to rest, for now, the divisions as Democrats prepare to leave Washington until Sept. 20. But lawmakers will return to many of the same arguments under pressing fall deadlines to enact Biden’s sweeping agenda, keep the government open and raise the debt ceiling.

The Senate already cleared the budget resolution on a 50-49 party-line vote. Tuesday’s House vote clears the way for the reconciliation process, in which committees write the details of the budget framework into tax and spending legislation the House and Senate will vote on this fall. Using reconciliation means Democrats can push it through the Senate without the threat of a Republican filibuster.

 

Updated: 8-25-2021

Infrastructure Bill Set For A Vote By Sept. 27 With No Changes To Crypto Tax Provisions

The House of Representatives will vote on the controversial infrastructure bill without amendments to its cryptocurrency provisions by Sept. 27.

The controversial $1 trillion infrastructure bill will see a vote in the U.S. House of Representatives without any amendments to the crypto tax provisions by Sept. 27.

The vote was agreed to after the House narrowly approved the Democrats’ $3.5 trillion budget blueprint in a vote of 220 to 212.

Despite some initial pushback from moderate Democrats, the dissident voters were swayed after House Speaker Nancy Pelosi committed to pass the bill before Sept. 27. Pelosi stated:

“I am committing to pass the bipartisan infrastructure bill by September 27. I do so with a commitment to rally House Democratic support for its passage.”

In late July, last-minute cryptocurrency provisions were added to the infrastructure bill in a bid to raise a further $28 billion through expanded tax obligations for the crypto sector.

However, the loose language contained in the bill sent shockwaves across the crypto community and analysts believe it will impose stringent third-party reporting requirements on network validators and software developers who would be unable to comply with the newly mandated obligations.

The Senate appeared poised to pass compromise amendments to the bill that would specifically exempt network validators and software developers in early August, but owing to one dissenting Senator the legislation ultimately passed through the Congress without alteration.

However, a Treasury Department official has sought to offer the crypto industry a glimmer of hope, telling CNBC that reporting requirements will not be imposed on entities that are unable to comply.

The anonymous official indicated that the Treasury intends to conduct detailed research to understand which actors within the crypto sector can adhere to the new reporting requirement.

However, the official’s comments were of little comfort to Coin Center executive director Jerry Brito, who emphasized that the bill’s language currently requires reporting on transfers as well as trades.

Brito also highlighted that any crypto transaction valued at more than $10,000 will need to be reported to the Internal Revenue Service alongside personal information on the counterparty.

“I appreciate that it seems to be Treasury’s intention to get this right […] but please don’t accept the narrative that folks in crypto are overreacting about this provision,” he added.

Commenting on the lack of amendments to the infrastructure bill, executive director of The Blockchain Association, Kristin Smith, described the events as “unfortunate but unsurprising.”

“However, This Is Not The End Of The Process,” She Stated, Adding:

“The Blockchain Association, our 46 member companies and the newly-energized, nationwide crypto community will rededicate our energy to supporting technology-neutral, pro-crypto legislation and regulation — on this specific tax issue as well as broader crypto policy.”

 

Infrastructure Bill’s Cryptocurrency Measures Risk Pushing Criminals Further Underground

National-security officials agree on need for regulation but worry about casting too wide a net.

Tucked into a sweeping bipartisan infrastructure bill that passed the Senate earlier this month are measures intended to help provide what many officials say is badly needed regulation of the burgeoning cryptocurrency industry.

But some industry and national-security officials warn that the proposal could unintentionally push illicit cryptocurrency transactions into markets where the U.S. government has no reach, adding to the threat to American companies, government agencies and individuals.

The provision in the bill requires anyone handling cryptocurrency transactions to report gross proceeds to the Internal Revenue Service, along with the names and addresses of the parties.

It is intended to capture billions of dollars in tax revenue the IRS says is lost each year and would also give law enforcement and regulators visibility into a market in which bad actors can too easily operate anonymously.

Few dispute the need for disclosure of cryptocurrency transactions as a way to monitor potentially illicit activity. But the bill as written captures corners of the industry not focused on transactions, including everything from miners and stakers to producers of the hardware and software used in crypto markets.

Thus some intelligence and law-enforcement officials are joining industry leaders in warning policy makers against overly aggressive regulations that risk exacerbating national-security hazards.

Overregulation “may push illicit use and criminal actors deeper into anonymizing methods and corners of the internet that would make it more difficult for law enforcement,” said Jeremy Sheridan, assistant director of the U.S. Secret Service’s investigations office.

A bipartisan group of senators sympathetic to the warnings of overregulation introduced an amendment exempting tertiary businesses from the disclosure requirements by limiting disclosure requirements to brokers, but the Senate declined to adopt it.

The bill is now set to be taken up by the House, and a bipartisan group of representatives called the Blockchain Caucus say they will try to advance the failed amendment. (The blockchain is the technology behind cryptocurrencies.)

A rash of ransomware attacks in which international criminals demand payment in cryptocurrency have thrust oversight of the market into the national spotlight, spurring fears that cryptocurrencies have facilitated the work of terrorists, criminals and other bad actors.

That attention, along with a push by other major economies to roll out comprehensive crypto policy frameworks, has spurred a push in the U.S. to rein in the nascent markets.

But regulation has to be calibrated to spur innovation domestically and not push the market’s development out of the country, the current and former security officials warn.

“This is the most urgent national-security issue of our time,” said Sigal Mandelker, Treasury’s former undersecretary for terrorism and financial intelligence and now at Ribbit Capital, a venture-capital firm invested in crypto.

“The U.S. has to make a decision if it wants to be a center of…transformational technology that can bring many more people into the financial ecosystem,” Ms. Mandelker said. If regulations push innovation out of the country, she said, within five years, “the U.S. will really get left behind, and that is the threat here.”

The cryptocurrency market is evolving at such a pace that authorities say they are having difficulty using existing laws—many written decades ago—to protect against fraud, money laundering and other illicit activities.

Security officials and law enforcement rely on the ability to monitor transactions through banks, central banks and other regulated institutions.

Because cryptocurrency transactions happen outside such institutions and aren’t subject to the same reporting requirements, they don’t have the same visibility.

But poorly calibrated regulations or overly aggressive oversight not only risks flight to other crypto markets but also threatens a critical U.S. national-security advantage: the dollar’s dominance as the world’s reserve currency, some officials and industry figures say.

The U.S. leverages unprecedented power through the dollar with sanctions that cut off access to the world’s biggest economy. The more industry moves overseas and nations such as China create alternative financial systems outside of U.S. reach, industry and security officials warn Washington risks losing that power.

“Jurisdictional arbitrage is a real vulnerability,” said Ari Redbord, a former senior national-security official at the Treasury Department who is now at a company that analyzes crypto transactions across platforms.

The proposal in the infrastructure bill epitomizes those collective worries, many industry leaders and former security officials say. As written, the IRS reporting requirement could hit crypto businesses that don’t deal with customers, said Mr. Redbord.

Criticism of the proposal doesn’t mean national-security officials and industry leaders don’t see the need for regulation. Rather, said Ms. Mandelker, “We’re going to have to move swiftly, but we also have to act very, very smartly.”

Traditional finance largely relies on mediators such as banks to manage trillions of dollars in transactions every year. By requiring those financial intermediaries to know their customers and report suspicious transactions, and through extensive disclosures from the securities industry, the government has visibility into markets. Crypto markets haven’t been subject to the same requirements.

“We have a pretty strong regulatory framework around bank deposits, for example, or money-market funds,” Federal Reserve chief Jerome Powell told lawmakers last month. For cryptocurrencies, he said, “That doesn’t really exist.”

Stephanie Dobitsch, deputy undersecretary of the Office of Intelligence and Analysis at the Department of Homeland Security, and other senior officials have called for a comprehensive regulatory framework and new statutory authorities that would mandate similar requirements for cryptocurrency firms.

More regulation—and greater clarity about how existing rules apply—is needed to address the security vulnerabilities that come with an unregulated, mostly anonymous financial ecosystem, those people say.

“We have significant information and intelligence gaps about where that money is going and how it’s ultimately used,” said Ms. Dobitsch.

The Treasury Department has issued new guidance in recent years to that end, enabling the Secret Service, the Federal Bureau of Investigation and the IRS to bust international child-pornography rings, freeze terrorist accounts and disrupt financing for North Korea’s nuclear-weapons programs.

Officials estimate they seized $2 billion in cryptocurrencies from terrorists and money launderers last year.

But illicit actors have taken advantage of the gaps in the regulation to stay anonymous, including by migrating to platforms offering direct transfers between parties, moving transactions overseas, and using cryptocurrency shell companies.

Security officials say the administration also must step up diplomatic efforts to build out a global framework for oversight.

The Treasury Department has in recent years outlined international standards through the global anti-money-laundering and terror-finance watchdog, the Financial Action Task Force.

But the FATF doesn’t have the power to force governments into compliance, and some former U.S. security officials are concerned that new proposals by the watchdog also overreach.

The issue must be championed as a diplomatic priority and through leadership summits, the former security officials said.

“We have to have a much bigger view of what our long-term objectives are and how we’re going to achieve them,” said Ms. Mandelker.

 

Updated: 8-26-2021

‘Don’t Kill Crypto’ Billboard Goes Up In Alabama In Advance Of House Tackling Infrastructure

“We want members of Congress to know that we’ll be watching them and that we won’t let them hide from their positions on this,” said Evan Greer.

Digital rights advocacy group Fight for the Future has publicly called out Alabama lawmaker Richard Shelby for preventing an amendment clarifying the role of crypto in the infrastructure bill to be addressed in the United States Senate.

Fight for the Future has used donations it received in cryptocurrency to place a billboard in Birmingham, Alabama asking lawmakers not to support measures it believes would harm crypto and blockchain firms.

Shelby, one of two senators representing Alabama since 1987, objected to the introduction of a crypto amendment to infrastructure bill HR 3684 that was under consideration in the Senate at the time.

“Senator Shelby’s constituents deserve to know that he derailed the [crypto] amendment just to stroke his own ego and demand more money for war,” Fight for the Future director Evan Greer told Cointelegraph. “We want to show elected officials that it is simply not okay to be ignorant about issues like decentralized technology and cryptocurrency.”

As it stands now, the infrastructure bill implements tighter rules on businesses handling cryptocurrencies, expands the reporting requirements for brokers and mandates that digital asset transactions worth more than $10,000 be reported to the Internal Revenue Service.

Several senators worked together to propose an amendment aimed at exempting software developers, transaction validators and node operators as brokers while suggesting that tax reporting requirements “only apply to the intermediaries.”

However, Senate lawmakers did not allow Shelby to add his own amendment to the bill, which would have added $50 billion in defense funding in addition to the roughly $1 trillion for roads, bridges and major infrastructure projects. The Alabama senator later claimed he supported the crypto amendment but prioritized defense spending.

The infrastructure bill will now go to the House of Representatives, where lawmakers passed a nonbinding resolution to vote on the measure by Sept. 27.

Several House members have already said they are in favor of amending the provisions on crypto in the bill, but according to Fight for the Future, Representative Brad Sherman is one of the few voices opposing such an amendment — the lawmaker has previously called for a complete ban on cryptocurrencies in the United States.

Greer Added:

“There will be a number of opportunities in the coming months for the House of Representatives to fix the problematic crypto provision that was included in the infrastructure bill. We want members of Congress to know that we’ll be watching them and that we won’t let them hide from their positions on this.”

 

Updated: 9-8-2021

Here’s How The US’s Infrastructure Bill Crypto Tax Provision Might Be Implemented

The House of Representatives will vote on the infrastructure bill at the end of the month.

As the U.S. House of Representatives prepares to vote on the Senate’s $1 trillion bipartisan infrastructure bill, tax lawyers are waiting for the federal Treasury Department to issue guidance on the proposed crypto reporting provision it includes.

In August, the crypto industry came together in an intense effort to amend the provision in the sweeping bill, which appeared to broaden the definition of “broker” beyond cryptocurrency exchanges and similar types of trading platforms to potentially include miners, node validators and developers, among other types of entities that don’t facilitate transactions for customers.

Despite bipartisan calls to amend the bill, it passed the Senate in its original form on Aug. 11, and the House is now set to vote on the unamended bill on Sept. 27.

For instance, according to Nathan Giesselman, a partner at Skadden, Arps, Slate, Meagher & Flom LLP, the provision in its original form runs the risk of capturing someone who is not in a position to have the same customer information that a traditional broker might have, putting these individuals in a place where they cannot comply with the required reporting.

“They’d either have to cease their activities or accept non-compliance and run the risk of the associated penalties,” Giesselman said.

Alex Muresianu and Garrett Watson, policy analysts at the independent tax policy analysis group Tax Foundation, said the reporting requirements, as written, are “potentially unworkable.”

However, reports indicating the Treasury Dept. plans to clarify the definition of “broker” surfaced earlier this month. In one report from Bloomberg, an unnamed Treasury official said the department will stick to the definition of “broker” laid out in the Internal Revenue Code (IRC), and not target entities that do not fall under it.

The IRC defines “broker” as “(A) a dealer, (B) a barter exchange, and (C) any other person who (for a consideration) regularly acts as a middleman with respect to property or services” but excludes persons “with respect to activities consisting of managing a farm on behalf of another person.”

Although the industry’s hopes will soon hinge on Treasury’s own guidance on the provision, some U.S. tax attorneys are not completely convinced that the Treasury will follow through with narrowing the definition of broker, if the bill itself remains unamended.

“It sounds like good news but it’s not clear if what they say now is what they’ll actually do in practice,” said David Zaslowsky, partner at Baker & McKenzie and editor of the law firm’s blockchain blog.

‘You Never Know’

Earlier this year, Zaslowsky co-authored a report on how the Internal Revenue Service (IRS) is “aggressively pursuing” taxes on crypto transactions in an attempt to increase tax revenue.

According to Zaslowsky, the IRS’s intention was made clear by the very placement of a question about crypto transactions at the top of the individual tax return form.

With the new provision expected to help raise $28 billion within 10 years, the intention of the IRS to raise more revenue and combat tax evasion remains the same.

“It is definitely the view of the Treasury that not everyone is reporting to them that should be,” Zaslowsky said.

Under the proposed provision, crypto exchanges will be required to continue issuing 1099 forms for non-employment income, Giesselman said, adding that he is unsure how many exchanges are currently reporting in a manner that complies with the proposed rules.

The uproar, however, was not over having trading platforms and exchanges that might not have been reporting properly be subject to new reporting requirements but over a broad definition that captured entities like miners, who don’t have the information being sought, Zaslowsky said.

He added that by using something close to the existing definition of broker, the former group would be captured but not the latter, and there would then be increased revenue to the Treasury.

“But is that really going to happen? That’s the concern, isn’t it? You never know,” Zaslowsky said.

What About NFTs And DeFi?

Giesselman predicts that, in practice, crypto exchanges will be the main focus of the new reporting requirement.

Shehan Chandrasekera, head of tax strategy at CoinTracker, agrees.

“I think that the Treasury is going to apply the broker rules strictly for cryptocurrency exchanges. That involves centralized exchanges like Coinbase, and could also involve decentralized exchanges like Uniswap,” Chandrasekera said.

Although the reporting requirement will cover exchanges, Giesselman also said that the scope of how far regulators go beyond these trading platforms remains uncertain.

“Is this going to pick up an enterprise that decides to mint its own stablecoin, mint its own cryptocurrency, their own [non-fungible tokens] and sell those in the market? Will these be caught?” Giesselman said.

Erin Fennimore, global head of information reporting at crypto tax software provider TaxBit, said that under the current infrastructure bill both NFTs and decentralized finance (DeFi) would be covered as “brokers.” Joe Guagliardo, technology and blockchain partner at Troutman Pepper, agreed with Fennimore, saying the inclusion of NFTs in the definition is not up for debate.

Enforcement

The law, as currently drafted, will not take effect until after 2023.

“So all of that is down the road. But the problem comes back to the fact that if the definition is broad enough to cover parties who, because of the way they operate, do not have the information that they are required to report, you’ve got a problem,” Zaslowsky said.

Giesselman feels the enforcement of the law will play out similar to that of the Foreign Account Tax Compliance Act (FATCA), which came into effect back in 2010. FATCA sought to combat tax evasion by U.S. persons holding assets and bank accounts offshore, and required financial assets held abroad to be reported to the IRS.

But the initial FATCA requirements were notoriously complicated where everyone decided there was a problem here with a lack of information that needed to be fixed, Giesselman explained.

“Exactly how the [FATCA rules] should be written in an administrable way in the real world took a couple of years to get right. And there were rounds and rounds of comments. I think the Treasury tried very hard to listen to the input that was coming in,” Giesselman said.

According to Giesselman, if the bill becomes law, the Treasury could go in one or two directions when it comes to the crypto tax provision. In one scenario, the Treasury could release proposed guidelines for compliance (which do not have legal effect until finalized), and open it up for public comments.

Then the Treasury will consider the comments received, and maybe amend or clarify the proposed regulations before releasing final regulations.

In the other scenario, the Treasury could release proposed and temporary regulations (which are generally identical). But in this instance, the temporary regulations are legally effective immediately, Giesselman explained. Then, there will be a comment period, and the final regulations are issued, perhaps in amended form.

Given the 2023 proposed effective date, Giesselman says we could see the initial rollout taking either route, and it would depend on how long it takes the Treasury to get the guidelines ready.

“If that took until late 2022, we might expect the second pathway to be used (so that the temporary regulations are effective by the time the law goes into effect), whereas if they could get out proposed regulations early in 2022, we might expect the former route,” Giesselman said in an email.

In yet another scenario, the Treasury might also take a similar approach it used for certain provisions of the Tax Cuts and Jobs Act of 2017 which sought to reduce tax rates for businesses and individuals, Giesselman said.

The Treasury might issue a Notice that describes in detail certain key rules that regulations will contain when issued, and allow taxpayers to rely on these rules until regulations are finalized.

“If, for example, there was a strong desire to limit the scope of who is viewed as a broker, that might well be done via a Notice while the overall package of guidance proceeds at a slower pace,” Giesselman said.

Regardless of how the Treasury interprets the term “broker,” Fennimore indicated that change is inevitable.

“While this is a procedural shift, it is not ‘unworkable.’ It involves implementing processes and procedures, along with technology, to facilitate the collection of the required information to report forward to the IRS. The best advice would be to start preparing sooner rather than later,” Fennimore said.

 

Updated: 9-19-2021

What the Infrastructure Bill Would Help Fix First

Improvements to roads and bridges would aid industries from energy to food manufacturing; ‘It’s more than just an intersection’.

Transportation officials across the U.S. are gearing up for a potential cash infusion from the infrastructure bill, planning to speed up repairs of century-old bridges, fix rural roads battered by heavy trucks and overhaul a key distribution route for hot dogs and rice cakes.

The Senate passed the roughly $1 trillion bipartisan measure backed by President Biden in August, and a House vote is expected later this month. The bill includes $110 billion in new funding for roads, bridges and major projects over five years, as well as $66 billion for rail and $39 billion for public transit.

If the infrastructure bill passes, drivers should see some ramp-up next year but probably won’t notice major changes until 2023 because of the time required for design work and other early steps, said Alison Premo Black, senior vice president at the American Road and Transportation Builders Association.

“You’re going to see projects that either weren’t going to get done, or weren’t going to get done for another five or six years, that might get done in the next two years,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.

Typically, federal funds provide about half of what states pay for highway and bridge projects, though there is a wide range among states. The bill would generally raise funding by about 30%, with states able to compete for more.

The infrastructure bill would give Rhode Island about $300 million a year over five years, more than $60 million above recent yearly levels. Rehabilitating old bridges has been a priority, said Peter Alviti, state transportation director, and a funding boost would allow the agency to accelerate projects now slated for 2025 or 2026.

Of Rhode Island’s 777 bridges, 19% are rated deficient, the third-highest percentage in the nation. That designation doesn’t mean a bridge is at risk of failing, but that at least one component, such as the deck, is in poor shape.

“Structurally deficient bridges are not only expensive to fix now, they get increasingly more expensive the longer they stay deficient,” Mr. Alviti said.

The state could immediately begin designing fixes to a 52-year-old bridge on Route 1 in North Kingstown, rather than waiting until 2025 to get the $17 million rehab going, Mr. Alviti said. The structurally deficient bridge links Naval Station Newport to Quonset Business Park, home to more than 200 companies.

Route 1 handles steady truck traffic from the business park, said Steven J. King, managing director of park operator Quonset Development Corp.

The city of Woonsocket, R.I., has five older bridges in need of repair at a cost of $32 million, and state officials say design work could start right away if the bill passes. Two bridges dating to 1903 are structurally deficient, while the others were built in 1958. City officials say the bridges are vital for trucks operated by local companies, including a textile mill and a plastics manufacturer.

“They cannot continue to deteriorate,” said Mayor Lisa Baldelli-Hunt. “They’re critical bridges for manufacturing.”

In Missouri, the infrastructure bill and a recently approved state gas-tax increase could lift annual capital funding for roads and bridges from about $1 billion a year to $1.5 billion over five years, said Patrick McKenna, director of the state Department of Transportation.

He said that would put within reach all $3 billion of wish-list projects that officials have labeled high priorities. Those include plans to replace bridges, widen highways and improve safety by adding acceleration and deceleration lanes, he said.

“Sometimes it’s as simple as an interchange that supports the potential development of a truck stop,” he said.

Mr. McKenna said it is highly likely the state would revamp the junction of Interstate 70 and state Highway 63 in Columbia, with construction starting as early as mid-2023. Now, motorists must pass through stoplights to move between the highways, creating logjams.

Mayor Brian Treece said a cloverleaf would permit a steady flow of traffic between the highways. State officials say it is too early to discuss configurations for a project estimated to cost around $50 million.

Columbia, a growing city of about 125,000 residents, has added thousands of manufacturing and food-production jobs in recent years, Mr. Treece said. Locally made Oscar Mayer hot dogs and Quaker Oats rice cakes move through the junction, he said, as do many of the 14,000 people who travel into the city for primary medical care.

“It’s more than just an intersection,” Mr. Treece said. “It really has dramatic implications for healthcare, for food manufacturing, food processing.”

For Texas, the infrastructure bill would take federal funding from more than $4 billion a year to nearly $5.5 billion for five years, said Marc Williams, executive director of the state Transportation Department. The state’s 10-year plan has projects totaling $75 billion, including ones meant to ease urban congestion.

Because larger efforts take time due to planning and environmental reviews, he said the initial focus would be on projects that are ready, such as bridge replacements, maintenance work and safety initiatives like rumble strips and pedestrian signal upgrades.

He said some of the fresh funding could be put to use fixing rural roads damaged by the energy sector, including in Abilene, where wind farms have been built. “Those roads were not originally built to handle the extreme truck and equipment traffic that we see on them on a daily basis,” he said.

 

Updated: 9-22-2021

Microsoft And An Army Of Tiny Telecoms Are Part Of A Plan To Wire Rural America

With help from Washington, the 120 million Americans without high-speed internet access have their best shot in a generation at getting it—so long as they’re flexible on how.

As Elizabeth Bowles zooms down Route 65 in her black SUV, she’s pointing out possible “vertical assets” on the flat horizon of browned cornfields and the occasional Dollar General.

Out here in the Arkansas Delta, the rural area west of the Mississippi River, a vertical asset could be a tall flagpole, or a granary, or the smokestacks of a paper mill—anything high enough for Bowles’s scrappy broadband company, Aristotle Unified Communications LLC, to rig up with telecommunications equipment so it can zap the internet to far-flung customers. “See that water tank up above the pine trees?” she asks. “If you put a radio antenna on top, you can hit everything that it can see.”

Bowles is showing off her whatever-it-takes strategy for narrowing the digital divide between people with reasonably speedy internet access and those without.

This gap has remained stubbornly persistent for decades, even as the internet has become steadily more inextricable from daily life, business, health care, and education.

Research group BroadbandNow estimates that 42 million Americans have no broadband access, while a depressing 120 million people in the U.S. are without any connection fast enough to even call the internet, according to an October 2020 study by Microsoft Corp. These disparities are particularly severe among Black, Hispanic, Indigenous, and rural communities.

The Delta is what government officials refer to as a “high-cost area,” a remote spot with a sparse population, high poverty rate, and topography that makes everything complicated.

In denser towns, it’s more economical for Aristotle to deliver broadband over fiber-optic cables, the industry’s gold standard for speed and reliability.

But Bowles says it gets way too expensive in these parts. At about $9 a foot, she notes, every mile we drive deeper into the Delta would cost $50,000 or more to snake fiber through.

To augment coverage, Aristotle is turning increasingly to Citizens Broadband Radio Service (CBRS), a wireless spectrum historically used by U.S. Navy aircraft carriers for radar transmissions.

In recent years the Federal Communications Commission has opened a slice of this spectrum for commercial use, enabling Aristotle to beam broadband as far as 6 miles to distant Arkansans over signal stations—installed atop cell towers, barns, even a prison—that are sort of like massive Wi-Fi routers.

The network is fast enough to stream movies and costs a fraction of what fiber costs to build. “We are one of the poorest states in the country, and the Delta is the poorest area of the state,” Bowles says. “If we can solve the problem here, we can solve it anywhere.”

Although Bowles is an evangelist for so-called fixed wireless systems such as CBRS, she’s adamant that no single technology can solve the whole problem.

Fiber proponents believe unspooling cables to every address in America is the only “future-proof” option capable of handling pretty much any bandwidth-heavy application of tomorrow, a premise Bowles finds ridiculous given the price tag and the scale of terrain.

Silicon Valley, meanwhile, has long gone after unproven moonshots to blast internet to the masses, from Facebook Inc.’s solar-powered plane project (killed in 2018) to Alphabet Inc.’s stratospheric balloons (scrapped this year).

The messy reality on the ground in places such as Arkansas suggests that a mix of physical and wireless networks would be cheaper and more practical than some one-size-fits-all solution.

Now states are looking at the feasibility of everything from CBRS to Elon Musk’s Starlink satellites to 5G home internet depending on their geographic challenges.

Like Bowles, Vickie Robinson, general manager of Microsoft’s Airband Initiative, a philanthropic program to bring 3 million more rural Americans online by next July, says her team advocates making use of whatever technology is on offer.

“What’s going to give you the most bang for your buck? That should be the guiding principle,” says Robinson, who’s provided Airband grant money to Aristotle for several wireless deployments.

With the Biden administration pushing ahead with its infrastructure bill, including $65 billion in broadband-related subsidies in the plan that passed the Senate, there’s a great debate playing out over which technologies the U.S. should bet on.

Tom Wheeler, a former FCC chairman under President Barack Obama, is a fervent fiber-first advocate, but he acknowledges that the country will have to use every tool to connect the most isolated citizens.

“I don’t care if they’re using a string and tin can if they can get the right throughput,” Wheeler says of locations fiber can’t reach. “The question becomes, where do you draw the line?”

Around lunchtime during our Delta drive, Bowles pulls into Arkansas City, a dead-quiet town of 409 residents. Aristotle’s fiber presence ended nearly 8 miles back, the point at which its network switches to CBRS and hopscotches from antenna to antenna to reach customers wirelessly.

In a grass field behind the local post office, Bowles and Rick Hales, the mayor of Arkansas City, who incidentally works for Aristotle as its director of community partnerships, walk me to a 180-foot radio tower the company lit up earlier this summer.

“The first customer we turned on in the county was the county judge,” Hales recalls. “His wife called and said, ‘Rick, Netflix is running good!’ ”

Aristotle was able to expand this far sooner thanks to $31 million in grants stemming from the Trump-era federal stimulus package in response to Covid-19, which marked a major turning point in broadband investment.

In past decades the U.S. government’s efforts to close the digital divide were mostly sporadic and poorly funded.

In 1996, President Bill Clinton committed to wiring up every classroom and library by the new millennium; the Bush administration called for universal broadband by 2007; and President Obama set a goal of giving 20 million additional Americans coverage by last year. None of it was enough.

The pandemic exposed the consequences of such buck-passing. “Nobody gets it on that visceral level until their employees can’t work or their kids can’t do homework,” Bowles says.

That disparity was obvious in Arkansas City, where locals complain of past internet service from horrendously slow old-school satellite dishes and DSL connections, pricey cellular hotspots, or Vyve Broadband, a telecom that abandoned the town during the pandemic.

(Vyve President Andrew Parrott says that a pilot wireless system struggled in the area’s “excessive foliage” and that the company decided to discontinue service following a severe storm in April that damaged its equipment.)

Geoffrey Wright, an assistant superintendent for Arkansas State Parks, whose office is a stone’s throw from Aristotle’s new signal tower, recalls a half-dozen students who didn’t have internet at home frequenting the picnic tables outside last fall to use the facility’s taxpayer-funded AT&T Wi-Fi for remote schooling. He’d bring out a couple of fans to cool them in the 90F heat.

Wright says AT&T Inc. ran a fiber line to the parks center, but the company never offered residential service. “When the AT&T guy was here, I asked if he could run the line another 30 feet to my house,” Wright tells me.

“He essentially said, ‘Nope, can’t do it. We won’t get enough customers for it to be worth it.’ ” An AT&T spokesperson says, “Our decisions to build and expand our networks are based on capacity needs and demand for our services, nothing more.”

Bowles is a pro at writing grant proposals—“I crank ’em out,” she says—but the disconnect between Washington and rural Arkansas makes the task a bureaucratic pain.

The FCC’s broadband maps are notoriously inaccurate, because they rely on amorphous census blocks instead of address-by-address data.

If internet providers report service at just one home in a vicinity, the whole area is considered covered, which has forced Bowles to challenge the government’s false positives to be eligible for certain subsidies.

Microsoft, which analyzes national broadband data as part of its Airband Initiative, reported in 2020 that eight times as many Americans as the FCC then estimated didn’t have access to the internet at modern baseline speeds.

“The path to fiber is not dumping tens of billions of dollars into the market and building it halfway”

There’s also a strong sense that Beltway officials don’t grasp what it takes to install fiber in backcountry. Steven Porch, who doles out federal grants to state recipients as head of the Arkansas Rural Connect program, says that in rocky regions the trenching alone for cables could cost a quarter of a million dollars per mile, and stringing lines across telephone poles is risky with storms an ever-present threat.

He needs to include fixed wireless as an alternative when considering how to budget for connecting the entire state. “Do I spend over $1 million to get fiber to 15 people?” he asks. “Will those 15 people sustain that network?”

Bowles says it’s been “all hands on deck” to build the 133 signal stations now dotting the state, tackling the raft of unique Arkansas hurdles, from intense humidity and pine needles interfering with radio signals to electricity shortages at rustic antenna sites to dealing with land rights for installing equipment.

“One of the easements we’ve been waiting on is from a guy who’s been in Colorado elk hunting,” Hales says. “That’s not a big infrastructure problem—it’s a daggone huntin’ problem!” Even maintaining the network has been a particular challenge given the raccoons, hornets, and other creatures that burrow into its electrical systems. “We’ve fried quite a few squirrels,” says business development specialist Jonathan Duncan.

When Aristotle’s service went online in July 2021, Wright says his $60-a-month plan proved a godsend for family FaceTime chats and helped his wife manage her business from home. Jennifer Tice, owner of Mama Carol’s, a ribs-and-burgers joint across the street from the tower, became an Aristotle enterprise and residential customer.

“I’m just glad my security cameras are working,” Tice says, referring to a set of web-connected devices monitoring the restaurant. “And my son, he loves it. He’s an Xbox gamer, and if it’s down, he’s like, ‘Call Rick and see why the Wi-Fi isn’t working.’ ”

Of course, as Tice’s kid suggests, Aristotle’s system is not perfect. An administrator for C.B. King Memorial, a special-education school, says internet connections have been slow and inconsistent, to the point where the school has been unable to upload billing files online.

A weekday speed test shows the school at 35 megabits per second for downloads and 11 Mpbs for uploads, above the minimum broadband standard but below the 100/20 ratio government officials are moving toward.

(Bowles says that the company’s network can deliver 100/20 speeds, but that C.B. King had purchased a slower plan and Aristotle’s technicians concluded the school’s old computer software is likely causing the problems.)

Elsewhere, residents tell me they either weren’t aware of the service, can survive on DSL and 4G, or simply don’t see the point of the internet.

Still, considering that Aristotle only shuttered its dial-up service this past January—which the Little Rock-based company had been offering since 1995 for 50¢ per hour—the faster it can offer more connectivity options, the better for Arkansas. Other states will have to figure out their own blend of solutions.

In Alaska’s icy expanses, that might mean low-Earth-orbit satellites like the ones Musk and Amazon. com Inc. are pursuing will fill in fiber gaps.

In urban areas, shorter-distance 5G technology, similar to what Boston-based Starry Inc. deploys, could offer a boost where other solutions aren’t scalable. Alphabet is investing in optical systems that transfer huge amounts of data through the air using lasers.

Microsoft is betting that television white space, which uses idle TV channel signals to beam internet service, could play a role, too, though the technology is nowhere near ready for prime time. “If you want ubiquitous coverage, we have to use every technology available to us,” Bowles says.

If she had her way, Bowles estimates, Arkansas could close the digital divide in five years. It’d be extremely difficult, she admits, but far faster to roll out than fiber alone and drastically less expensive.

An oft-cited FCC analysis from 2017 projected that the U.S. could achieve 100% fiber coverage for approximately $80 billion. Microsoft Airband’s Robinson stresses that that forecast was based on the agency’s faulty data.

“It would be a dangerous proposition to use this finite amount of money [from Congress] to get fiber everywhere,” she says. “It won’t work, because you just don’t know where all the gaps exist.”

Of the $65 billion of broadband subsidies in the Senate’s infrastructure bill, about $42 billion is allocated for equipment and service deployments, a figure Bowles finds “absurd” if the U.S. plans to push for a fiber-everywhere approach nationally. “The path to fiber is not dumping tens of billions of dollars into the market and building it halfway,” she says.

Researchers at Tufts University have said a fiber-only network would cost the Biden administration at least $240 billion.

The financial distributions are particularly important, because infrastructure is only part of the problem. One important shift in the Senate’s bill is that it includes $14 billion in internet subsidies for low-income Americans, a focus on affordability that’s crucial to narrowing the gap.

The more efficiently a national network can be built, presumably the more money would be available for these sorts of subsidies.

For one of its grants, for example, Aristotle spent $1.9 million to deploy CBRS and a ring of fiber around the town of Hazen, bringing broadband to about 1,860 households.

Bowles says a fiber-to-the-home alternative would’ve cost $5.5 million, taken at least four months longer to construct, and covered just over 600 homes.

The federal government is in the process of updating its broadband map, which is likely to change the calculus of where infrastructure spending flows. If Arkansas pandemic stimulus allocations offer any preview, the $87 million in Trump-era grants were split 50% to fixed wireless and 46% to fiber, with some of the leftover funds going to coaxial cable.

A December 2020 state report said those funds are expected to cover 30,385 Arkansas homes out of the 44,874 households in the coverage footprint, a sign of how expensive this gap is to bridge even with a mix of broadband tools.

Inevitably, opinions on how to close the digital divide are available at gigabit speeds. Musk has said Starlink’s satellites can scale the gap, and cable and 5G players might claim they’ll eventually be able to deliver broadband at fiber speeds.

Shirley Bloomfield, the chief executive officer of NTCA-The Rural Broadband Association, an advocacy group representing 850 small telecom companies, has reviewed everything out there, but she still thinks fiber is the only real future-proof solution today.

Fixed wireless networks, after all, feed off fiber backhauls, the sort of physical broadband highways that link up the world’s internet exit ramps.

“We are pound foolish if we don’t use the right technology the first go-around,” she says of fiber. “I’m not saying you have to build it out to every igloo. But at the end of the day, and maybe it’s not the first year, but certainly in the first three to five years, it’s going to become a much better investment.”

The big concern among fiber hawks is that any alternative will consign the most disadvantaged populations, predominantly minorities and rural communities, to a slower digital lane. Bowles, however, sees a toolkit approach as the fastest way to getting more folks on the ramp to fiber speeds.

Eventually, she says, the mapped lines of transition from fiber to fixed wireless will move deeper, pushing fiber backhauls closer to the homes only wireless internet can reach now. Until Aristotle can afford to go under the pine trees rustling across the Arkansas Delta, Bowles has no choice but to go over them.

 

Updated: 10-2-2021

Biden Signs U.S. Highway Programs Extension Act Into Law

President Joe Biden on Saturday approved a 30-day extension of federal surface transport programs that ends brief furloughs for some 3,700 Department of Transportation employees.

The U.S. Senate passed the measure by unanimous consent earlier in the day. The maneuver follows this week’s delay in a bipartisan infrastructure bill that would have reauthorized the programs for five years.

The deadline for extending the surface transportation programs was Sept. 30. The lapse triggered the furloughs, though employees will have their missing pay restored under the extension bill.

While the department said last week it has funding on hand to keep programs running in the short term, a contingency plan showed that much of its work, including federal-aid highway programs, would be curtailed without an authorization.

 

Updated: 11-5-2021

8-Word Crypto Amendment In Infrastructure Bill An ‘Affront To The Rule Of Law’

A proposed bill waiting for vote in Congress contains a “dangerous” amendment.

Legal experts have warned that a section of the Infrastructure Bill, which is due for a vote on Friday, amends a part of the tax code and makes a failure by businesses and individuals to report digital asset transactions a criminal offense.

University of Virginia School of Law lecturer Abraham Sutherland said it is a separate provision to the controversial “broker” provision that attracted all the attention when the bill was in the Senate:

“It’s bad for all users of digital assets, but it’s especially bad for decentralized finance. The statute would not ban DeFi outright. Instead, it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply.”

Meltem Demirors, chief strategy officer of CoinShares, raised her concerns on Twitter about what she sees as the unconstitutional and anti-American nature of the amendment.

The amendment to section 6050I is a part of the Infrastructure Bill, which is scheduled to come to a vote in the House of Representatives on Friday.

Since 1984, section 6050I of the tax code has required businesses and individuals that receive either physical cash or a bank transfer in excess of $10,000 to file Form 8300 and report the sender’s personal information, such as name, address, and Social Security Number to the United States Internal Revenue Service.

The eight-word amendment in the new bill includes “any digital asset” in the definition of “cash.”

This raises obvious privacy concerns when applied to decentralized finance and cryptocurrency transactions and is unworkable for many projects.

Sutherland explained on the Oct. 26 episode of Unchained with Laura Shin that Section 6050I quickly evolved to become a crime-fighting tool in the drug war throughout the 1980s. He said, “This really is not so much about tax, it’s about crime-fighting.”

If 6050I is applied to digital assets transactions, businesses and many individuals who fail to report the digital assets sender’s information to the IRS would be considered felonious criminals. Banks and other financial institutions are exempt, however.

Sutherland wrote in a piece on DeCential explaining the ramifications in detail and concluded the amendment would be costly, unworkable and dangerous.

“The amendment to section 6050I is an affront to the rule of law and to the norms of democratic lawmaking. It was slipped quietly into a 2,700-page spending bill, allegedly as a tax measure to defray the bill’s trillion-dollar price tag even though section 6050I is in fact a costly criminal enforcement provision. The proposal deserves attention now, while there is still time to stop it.”

With just a 221-213 majority in the House of Representatives and a united Republican opposition, the Democrats need near unanimity on their own side to pass the legislation.

 

Updated: 11-6-2021

What To Do About The Looming Disaster For Crypto In 6050I

The latest from the Infrastructure bill plus recent SEC statements on enforcement.

House Passes $1T Infrastructure Bill With Crypto Tax For Biden’s Approval

The infrastructure bill was first proposed by the Biden administration aimed at primarily improving the national transport network and internet coverage.

The United States House of Representatives passed the $1.2 trillion bipartisan infrastructure bill which, if signed into law by President Joe Biden, would enforce new provisions in relation to crypto-tax reporting for all citizens.

The infrastructure bill was first proposed by the Biden administration aimed at primarily improving the national transport network and internet coverage.

However, the bill mandated stringent reporting requirements for the crypto community, requiring all digital asset transactions worth more than $10,000 to be reported to the IRS.

As Cointelegraph reported, the bill was first approved by the Senate on Aug. 10 with a 69–30 vote, which was met with a proposal for a compromise amendment by a group of six senators: Pat Toomey, Cynthia Lummis, Rob Portman, Mark Warner, Kyrsten Sinema and Ron Wyden. According to Toomey:

“This legislation imposes a badly flawed, and in some cases unworkable, cryptocurrency tax reporting mandate that threatens future technological innovation.”

Despite the lack of clarity in the bill’s verbatim, the infrastructure bill intends to treat the crypto community’s software developers, transaction validators and node operators similar to the brokers of the traditional institutions.

The House of Representatives passed the controversial infrastructure bill to President Biden after securing a win of 228–206 votes. In addition, the crypto community showed concerns over the vague description of the word “broker” that may consequently impose unrealistic tax reporting requirements for sub-communities such as the miners.

As a repercussion, the inability to disclose crypto-related earnings will be treated as a tax violation and felony.

Legal experts recommended amendments to the infrastructure bill that consider the failure to report digital asset transactions as a criminal offense.

Abraham Sutherland, a lecturer from the University of Virginia School of Law, cited concerns over the U.S. government’s decision to blanket term crypto sub-communities as brokers:

“It’s bad for all users of digital assets, but it’s especially bad for decentralized finance. The statute would not ban DeFi outright. Instead, it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply.”

 

House Approves $1 Trillion Infrastructure Bill, Sending To Biden’s Desk

The measure, months in the making, would fund roads, bridges, rail and expanded broadband access.

The House passed a roughly $1 trillion public-works bill, sending to President Biden’s desk a generational investment in roads, bridges and rail that had languished for several months as Democrats feuded over the terms of its approval.

Negotiated and approved by a bipartisan group of senators this summer, the bill reauthorizes existing federal infrastructure programs for five years and pours an additional $550 billion into water projects, expanding access to broadband internet and overhauling the electrical grid, among many other measures.

The measure passed 228-206, with 13 Republicans joining most Democrats to support the legislation. Six progressive Democrats voted against it.

A major piece of Mr. Biden’s economic agenda and his vision for making the U.S. more competitive internationally, its passage in the House hands him a bipartisan achievement that presidents of both parties have tried, and failed, to achieve for years.

His sagging poll numbers and Democrats’ recent loss in the gubernatorial race in Virginia had pushed Democrats to muscle the legislation through the finish line this week.

But the effort was circuitous and tortured for House Democrats, whose paper-thin majority repeatedly complicated leadership’s plans for the legislation.

Democrats began Friday planning to approve the infrastructure bill after passing the rest of the party’s priorities in a separate, roughly $2 trillion education, healthcare and climate package.

Progressive Democrats had demanded that the social-spending legislation first receive a vote in the House, hoping to ensure that centrists who support the public-works bill would also vote for the broader education, healthcare and climate measures.

That design fell apart on Friday, though, as centrist Democrats demanded more time to analyze the cost of the social-spending bill, prompting House Speaker Nancy Pelosi (D., Calif.) to change tack and bring up the infrastructure bill for a vote.

The sudden pivot surprised progressives, who initially signaled that they were prepared to vote against the public-works bill if it came up on Friday.

Mr. Biden lobbied the progressives to support the infrastructure bill and prodded the centrists to signal their public support for the education, healthcare and climate legislation.

A group of five centrists released a statement Friday night committing to supporting the social-spending bill after it received a full score from the Congressional Budget Office that was in line with White House estimates of its cost.

“We commit to voting for the Build Back Better Act, in its current form other than technical changes, as expeditiously as we receive fiscal information from the Congressional Budget Office—but in no event later than the week of November 15th,” the group said.

Mr. Biden also released a statement Friday night urging lawmakers to approve the infrastructure bill, assuring them that moderates would support the broader social-policy and climate bill. Democrats also unanimously approved a rule for debate on the broader social-spending measure early Saturday as part of the agreement.

“I am urging all members to vote for both the rule for consideration of the Build Back Better Act and final passage of the Bipartisan Infrastructure bill tonight,” Mr. Biden said, adding that was he confident the House would pass the social-spending legislation during the week of Nov. 15.

The statements were ultimately enough to secure the votes of progressives, who met for hours Friday afternoon and evening to chart their next steps.

“We will deliver,” said Rep. Ro Khanna (D., Calif.).

Mrs. Pelosi didn’t waver in her bid to pass the infrastructure bill on Friday, promising that she could overcome the initial progressive opposition to the vote.

She said the public-works measure would “create good-paying jobs across the country building the infrastructure of our country, with mass transit to help clear the air, with safer bridges for safety for the American people, for broadband to help people communicate better.”

“They are very important, very important to the success of our economy,” she added.

Democrats see both the infrastructure bill and the broader social-spending package as central to their efforts at fighting climate change.

The public-works legislation puts $65 billion toward improving the electrical grid and energy production, $50 billion toward making infrastructure more resilient to cyberattacks and natural disasters and roughly $7.5 billion toward building additional charging stations for electric vehicles.

While they have applauded those measures, progressives have said they are insufficient without the tax subsidies and other measures in the social-spending bill as they pushed for a simultaneous vote on the broader bill.

But the small set of centrist Democrats stuck to their own demand that the nonpartisan CBO render an official estimate of the cost of the legislation before it comes to the House floor. CBO found this summer that the infrastructure bill—financed by repurposing existing government funds, among other measures—would contribute $256 billion to the deficit over a decade.

Such an analysis can take weeks, pushing back Democrats’ timeline for approving legislation that is expected to also fund a universal prekindergarten program, expand healthcare subsidies and raise taxes on very high-income Americans and corporations, among other steps.

Once it passes the House, though, the social-spending bill would face changes in the Senate, where Democrats control a bare 50-50 majority. Republicans are expected to unanimously oppose it in both chambers.

“There is nothing here but partisan social spending. …. This bill will fundamentally change life in America for every citizen, and not in a good way,” said Rep. Michael Burgess (R., Texas).

Sen. Joe Manchin (D., W.Va.), a critical vote in the 50-50 Senate, has opposed a paid-leave measure that House Democrats added to the bill this week and raised broader questions about its impact on the deficit and inflation.

The legislation’s immigration measures could also change in the Senate. House Democrats have proposed shielding immigrants who came to the U.S. illegally from deportation for five years and provide a five-year, renewable work authorization as part of the bill.

That measure could face problems in the Senate’s rules. Democrats are pursuing the legislation through a budgetary maneuver that allows them to skirt the 60-vote threshold for most legislation in the Senate.

But that maneuver, called reconciliation, also places a set of rules on what kind of policies can be passed through the process, and Democrats have abandoned previous immigration proposals after they ran afoul of the Senate’s rules.

The House’s plan to raise the $10,000 cap on the state and local tax deduction to $80,000 for nine years also faces possible revisions in the Senate because of opposition from some lawmakers.

After the Senate finishes its work on the bill, a process that could take weeks, it would come back to the House for another vote, meaning Democrats could still be working on the legislation until the end of the year.

 

Updated: 11-8-2021

Buttigieg Says U.S. Will Use Infrastructure Bill To Address Racist Highway Design

Transportation Secretary Pete Buttigieg said Monday that his agency will use about $1 billion from President Joe Biden’s public works legislation to remedy racial inequities in U.S. highway design, such as roads that were built to separate predominantly minority neighborhoods from White communities.

The program, called “Reconnecting Communities,” in some cases will tear down or rebuild highways and overpasses, he said. Federal officials will consider local desires as they identify projects, he said at a White House briefing.

“It’s going to vary by community and we have to listen to the community,” Buttigieg said. “Sometimes it really is the case that an overpass went in a certain way that is so harmful that it’s got to come down or maybe be put underground. Other times maybe it’s not that way. Maybe the really important thing is to connect across, to add rather than subtract.”

Buttigieg described highways dividing neighborhoods and an underpass deliberately constructed “too low” for “a bus carrying mostly Black and Puerto Rican kids to a beach” in New York.

“That obviously reflects racism that went into those design choices,” he said. “I don’t think we have anything to lose by confronting that simple reality.”

The only specific example he cited was Interstate 81 in Syracuse, New York, where state and local officials already plan to demolish a decades-old elevated stretch of the highway that was built through a historically Black neighborhood on the city’s south side.

“We saw the local vision for how they want to get past those divisions,” Buttigieg said. “And those local idea are going to be taken very seriously as we try to meet the spirit of this law.”

 

Infrastructure Projects To Boost Sales and Prices, Industry Executives Say

Legislation’s full impact won’t be felt for months or longer, executives say, as money is allocated and projects are planned.

U.S. manufacturers said the new $1 trillion infrastructure bill will support years’ worth of public works projects that will create demand for maintenance equipment and construction supplies, and potentially push prices higher.

Manufacturers expect to also benefit from having refurbished and expanded ports, airports and roads in place, executives said, easing some long-running bottlenecks and helping companies move parts and products more efficiently.

At Stellar Industries in Garner, Iowa, President David Zrostlik said he anticipated infrastructure projects funded through the bill will boost orders for his company’s construction-equipment maintenance trucks. He said it would be difficult for Stellar to fill all of the expected orders in the short term, especially since his company’s backlog is already at eight months.

“It means we will just see this level of business continue on for months, if not years, going forward,” Mr. Zrostlik said.

Congress passed the bipartisan spending package late Friday, and President Biden is expected to sign the bill into law soon. The legislation directs tens of billions of dollars over the next five years or more to repair bridges, redesign intersections, expand rail service and upgrade airports and power lines, representing the largest federal infrastructure investment in more than a decade.

Manufacturers and construction companies are already struggling to meet increased demand this year as labor and part shortages delay output. Total construction spending and consumer purchases of goods both are running significantly higher than before the pandemic, according to federal data.

Industry executives said the projects funded by the new bill aren’t likely to get under way for several months or a year. That lag could give companies time to catch up with current backlogs created by supply-chain constraints and tight labor, they said.

Trimble Inc., which makes surveying equipment and construction software, said the bill would boost the company’s long-term outlook and start to affect results in 2023.

“It does take time,” Chief Executive Robert Painter said. “You move from feasibility to plan to design to an estimate to start.”

Kip Eideberg, the head of government relations for the Association of Equipment Manufacturers, said members of the industry group will start seeing increased orders from the law in the first quarter of 2023.

“Will this drive new demand for new equipment? Categorically, yes it will,” he said.

Factories will also be big users of the new infrastructure, Mr. Eideberg added, because they are reliant on global supply chains to both get components and reach customers. “The benefits for our industries are going to be state-of-the-art infrastructure that allows us to compete in a global economy,” he said.

Jim Glazer, chief executive of aerial lifting truck maker Elliott Equipment Co., said that new building projects could eventually reduce transportation costs. “Everything from the electrical grid, which needs improvement, to ports and roads and bridges,” he said.

FRP Holdings Inc. owns property in the U.S. that is mined for construction aggregates, like sand and gravel. Financial chief John Baker III told investors Thursday that he expects the infrastructure bill to lead to higher selling prices.

“Any additional demand, like the kind we see should this bill become law, would stretch supply when supply is already stretched pretty thin, which should lead to meaningful price increases,” Mr. Baker said.

Trinity Industries Inc. expects the infrastructure bill to increase purchases of the highway guardrails it makes, Chief Executive E. Jean Savage told investors Oct. 21. Typically, construction companies buy guardrail purchases close to when construction is set to begin, meaning that some orders will start sometime next year.

‘Will it have an impact? Yes, but it’s most likely at least six months to 12 months out,” she said. Trinity last week said it will sell its highway business to a private-equity firm.

Some manufacturers said the wait for new demand could be helpful as it’s already difficult to produce enough due to supply chain, labor and logistical constraints.

Stephen Bullock, president of curbing machine maker Power Curbers Cos., thinks the law could increase demand for his products by nearly one-third over the next three to five years.

He worries that supply chain and labor shortages will make it difficult for both manufacturers and construction companies to finish projects on time.

“Between supply chain issues and labor shortages, if it takes a year, that’s not necessarily a bad thing,” Mr. Bullock said.

 

Updated: 11-9-2021

How Cities Could Spend $1 Trillion On Infrastructure: Roads, Trains And Highway Exits

‘Our population centers are booming, but our infrastructure hasn’t kept up,’ says Colorado’s governor.

Dayton, Ohio, is looking at rebuilding roads. The Denver area needs to expand highway exits. And Austin, Texas, wants to expand public transportation.

Mayors and state officials across the U.S. are digging into the $1 trillion infrastructure bill approved by the House Friday and considering how they will aim to spend the funding.

“We’ve been waiting for an infrastructure package for a decade as mayors,” said Dayton Mayor Nan Whaley, a Democrat who leads the U.S. Conference of Mayors. For her city, the infrastructure bill would provide much-needed funding for road reconstruction and to upgrade and replace sewers and water lines, she said.

The legislation includes $110 billion in funding for roads, bridges and major projects, as well as $39 billion to modernize and make public transit more accessible. The measure also includes $73 billion to update and expand the power grid.

Another $55 billion will go toward clean drinking water, and $65 billion will go toward broadband infrastructure and development.

Colorado Gov. Jared Polis said his state needs the federal money to help fund a variety of projects, including a section of Interstate 70 that was damaged by mudslides during heavy rains in a canyon last summer.

The booming Denver area also needs funding for projects including expansion of exits along Interstate 270 to accommodate increased traffic, he said.

Colorado passed its own infrastructure bill last summer, which calls for about $5.3 billion in highway and other projects over the next decade through a mix of state and federal money—including from the national infrastructure measure.

“Our population centers are booming, but our infrastructure hasn’t kept up,” Mr. Polis, a Democrat, said.

Maryland will get $6 billion to improve transit systems, railways, clean water systems, roads, bridges and tunnels, said Gov. Larry Hogan, a Republican.

In Texas, where historic storms wreaked havoc on the state’s infrastructure, Houston Mayor Sylvester Turner said funds from the infrastructure bill are needed to help address problems including an overloaded power grid that failed last winter and wastewater systems that overflow during the city’s frequent downpours.

The Democratic mayor said that infrastructure money could also be used to help build overpasses at hundreds of train crossings where trains routinely stop and block streets in the city of 2.3 million. “Without the federal dollars, a lot of these matters will be simply on hold,” said Mr. Turner.

In fast-growing Austin, Mayor Steve Adler said his city of nearly one million needs federal help in improving its transportation infrastructure, including access to public transit. Voters there last year approved an urban rail system called Project Connect.

“We’ll need federal help, like that included in this infrastructure bill, for that project and for projects that support our growing airport, and help make our community safer through road safety and related environmental remediation projects,” said Mr. Adler, a Democrat.

New York state Sen. Tim Kennedy, a Democrat from Buffalo who chairs the chamber’s transportation committee, said several cities in the state are hoping to access funds for highway projects.

Federal highway funds are authorized by Congress to assist states in road and bridge projects. In Buffalo and Syracuse, there are local plans to remove highways that split apart urban neighborhoods, he said.

“It carved through the city like a scar,” he said of the Kensington Expressway in Buffalo. “These are generational projects that need to get done.”

Officials in smaller cities also are counting on the bill. In Prescott, Ariz., Mayor Greg Mengarelli said the Prescott Regional Airport, which serves a metro area of about 240,000 people, stands to receive as much as $5 million in federal funding from the bill over a five-year period.

“Our airport has been an economic driver for the Prescott region, and this level of infrastructure investment will help to ensure the continued safe and efficient operation of our airport for years to come,” said Mr. Mengarelli, a Republican.

In California, where a historic drought has depleted reservoirs, state Sen. Melissa Hurtado said infrastructure money is needed to help fund new places to store snowmelt from the local mountains and to repair canals, levees and other methods of conveyance, which are crumbling or in other disrepair.

Ms. Hurtado’s Central Valley district has been hit hard with water cutoffs to its big farming sector, and she said some small towns there face possible loss of drinking water due to the shortfall.

“If we don’t act now, it is going to be just catastrophic for mankind,” said Ms. Hurtado, a Democrat.

 

Updated: 11-12-2021

Biden Plan Funds New Bridges That Locals May Not Want

The most overburdened U.S. bridges are choke points that can hinder commerce. But proposals to fix them by building more and wider spans won’t always meet a friendly local reception.

Alabama officials planning a new bridge along the Gulf Coast won the largest highway construction grant awarded in 2019 by the U.S. government, but within months the project fell victim to residents’ objections to new tolls.

The scuttled expansion of an overcrowded stretch of I-10 across a bay in Mobile left the $125 million grant unused. It also highlighted a challenge for President Joe Biden’s infrastructure plan perhaps as great as getting it through a divided Congress:

Local objections based on politics, racial justice, environmentalism and impacts on residents can torpedo projects intended to upgrade even the most congested U.S. bridges.

These are the unsteady sands that await the $550 billion bipartisan infrastructure program passed by Congress, which proponents tout as the largest influx of U.S. bridge construction since the birth of the interstate highway system.

“The bigger you get, whether it’s a bridge or a tunnel, the more trouble you’re going to get,” said Jeff Davis, a senior fellow at the Eno Center for Transportation who is closely tracking infrastructure legislation.

Aging bridges across America create some of the interstate highway network’s worst choke points, causing congestion and hindering commerce, according to GPS-fed truck traffic data and interviews with transportation experts and public officials.

The infrastructure package will provide at least $40 billion for bridge work in coming years.

Eight of the 35 most choked U.S. highway locations before the pandemic in 2019 involved bridges, according to a Bloomberg News review of American Transportation Research Institute data. Of those, the worst offender is the George Washington Bridge over the Hudson River between New York and New Jersey, followed by the Brent Spence Bridge between Cincinnati and Kentucky.

The overall cost of congestion on the trucking industry alone was $74.5 billion in 2016, or the equivalent of more than 400,000 truckers sitting idle for an entire year, an ATRI study found.

Biden’s vow to fix “the ten most economically significant bridges in the country in need of reconstruction” creates a “paradox” for progressives, who in some cases are seeking less car-centric infrastructure rather than more, said Ben Crowther, of the Congress for the New Urbanism.

“There is this tension between the two,” Crowther said.

The greatest need for the nation’s large bridges isn’t structural repair; it’s relieving severe congestion on structures that can no longer keep up with traffic, hampering truck-borne commerce, clogging commuters and increasing vehicle emissions.

Many cities and states want to use infrastructure funding to help solve these issues, but community battles center on the best way to do that without adversely impacting residents and the environment, and how to pay for it.

Adding to the controversy is economic research showing that simply adding traffic capacity only induces more driving without relieving congestion.

“If we’re just thinking in our same model as before, just following the same routes that our interstates follow now, we’re not going to achieve anything other than what we have now, which is congestion and bottlenecks,” Crowther said. “You’re just going to cause more damage for the future that you need to repair.”

Another major concern stems from lingering resentment and mistrust over decisions decades ago that located bridge and highway projects through the heart of African-American neighborhoods. Many of the most congested bridges — including those in St. Louis, Cincinnati, Baton Rouge and elsewhere — have such a legacy.

Transportation Secretary Pete Buttigieg has emphasized that racial and economic impacts will be considered on new projects, adding a potential new layer of complexity to approvals. The infrastructure legislation includes another $1 billion in funding for what it calls “reconnecting communities,” which could include removing highways or finding ways to mitigate the impacts of bridges and highways.

The $40 billion in the infrastructure package combined with another $16 billion set aside for major projects that can also include bridges is far above the estimated $7 billion a year in federal funds currently used for bridge work by states, according to Department of Transportation estimates.

That will create powerful incentives for state and local officials to push forward projects that have languished — and to force discussions on tough issues, Carlos Monje, the DOT’s under secretary for policy, said in an interview.

“We know that all of these questions have to be answered at the local level, but what needs to come from Washington is more money,” Monje said. “And it has been for a real long time a significant barrier, that our programs weren’t robust enough.”

The double-deck, steel structure between Cincinnati and Covington, Kentucky, provides a glimpse into the challenges. The Brent Spence Bridge was the second-worst site for congestion of all bridges and highways last year, according to the ATRI.

But a multibillion-dollar proposal to add a new span nearby — which would be funded in part by adding tolls — has run into a buzz saw of opposition, especially from Covington where the bulk of the new structure’s impacts would be.

“The proposed design is unworkable and extremely damaging to the community of Covington,” Joseph Meyer, Covington’s mayor, said in an interview.

Some local activists suggest building a new highway south and east of the cities, which they say would relieve congestion on the bridge with the added benefit of unclogging other nearby highway choke points and reducing traffic in urban areas.

Structures such as the Brent Spence Bridge, which was completed in 1963, can no longer carry the traffic levels from surrounding roads and highways. In many cases, it’s not feasible to add lanes to such existing structures.

That is the case for several spans around New York City. They include the approach to the George Washington Bridge in New Jersey, the worst bottleneck in the nation for trucks in 2019 and 2020, and the Verrazzano-Narrows Bridge between Staten Island and Brooklyn, according to ATRI’s data.

Reconstructing the highways leading to the George Washington Bridge would be opposed by residents of Fort Lee, New Jersey, Mayor Mark Sokolich said, because there’s no way to widen the approach routes to the bridge without severe impacts on the homes and businesses stacked up next to them.

“My constituents would say it stinks,” Sokolich said.

But there are possible alternatives that would ease congestion without creating more traffic lanes. One is the Gateway project, which would add tunnels between New Jersey and New York to expand passenger rail routes.

Another is so-called congestion pricing, which would charge a fee to drive into parts of Manhattan to reduce overall vehicle traffic in the region.

The influx of money can be a catalyst to address thorny issues, the DOT’s Monje said. “There’s an opportunity here and a beachhead to really expand the thinking and incentivize and make sure that the dollars flow from these kind of decisions for people who are trying to do the right thing,” the DOT’s Monje said.

In Mobile, Alabama, the plan to build a new bridge fell apart due to local antipathy over tolls.

But state and local officials are still trying to salvage their $125 million federal grant, which expires next year if a project isn’t approved. The latest plan involves breaking the project into phases and trying to minimize the impact of tolls by lowering or eliminating them on cars, or maintaining toll-free alternate routes, according to local government records.

“Ultimately, we need to give people more affordable, safer and cleaner ways to get around,” the DOT’s Monje said. “Sometimes that’s going to be a bridge and sometimes it’s not.”

 

Updated: 11-15-2021

President Biden Signs Infrastructure Bill Containing Crypto Broker Reporting Requirement Into Law

Sen. Cynthia Lummis and others are now attempting to narrow the scope of the law’s crypto broker clause with a separate bill.

President Joe Biden signed into law Monday the $1 trillion bipartisan infrastructure bill, which contains a controversial cryptocurrency tax reporting requirement.

* The crypto industry was concerned about a tax reporting requirement within the bill that sought to expand the definition of a broker for Internal Revenue Service purposes. The bill would require all brokers to report transactions under the current tax code.

* Industry proponents worried the definition would be too broad, capturing entities such as miners and other parties that don’t actually facilitate transactions.

* Sen. Cynthia Lummis (R-Wyo.) and others are attempting to narrow the scope of the law’s crypto broker clause with a separate bill introduced Monday.

* Another provision opposed by the crypto industry essentially requires recipients of transactions over $10,000 to verify the sender’s personal information and record his or her Social Security number, the nature of the transaction and other information, and report the transaction to the government within 15 days.

* Some lawyers have pointed out that when applied to cryptocurrencies and other digital assets like non-fungible tokens (NFT), it would be nearly impossible to comply with the law.

 

Updated: 11-16-2021

Infrastructure Bill Can Still Be Remedied: DeFi Dev Turned Congress Candidate

Matt West, DeFi developer by night and a Democratic candidate by day, believes there is still time to remedy the anti-crypto provisions of the U.S. Infrastructure Bill.

The controversial United States Infrastructure Bill was signed into law by President Joe Biden on Monday, with the legislation passing without amendments made to the broad provisions that could impose stringent reporting requirements on crypto network validators and software developers.

However, decentralized finance strategist turned Democratic congressional candidate Matt West believes there is still time to push back.

Speaking to Cointelegraph, West said, “My understanding of this bill is that it has been signed, but it hasn’t taken effect yet.”

The crypto community has taken particular issue with section 6050II of the bipartisan legislation, which makes failing to report digital assets transactions a criminal offense.

West, who otherwise supports the bill, said that section 6050I doesn’t make “a whole lot of sense,” citing new rules that require NFT sellers to know the tax ID and social security number of potential buyers.

“All these very invasive details,” he said, adding that they are “really indicative of how people in the space are led in Congress are legislating on issues they don’t fully understand.”

West called on his fellow congresspeople from both major political parties to “educate themselves on the nuanced issues here that they might not be seeing” and consider regulation carefully.

“There’s a bunch of people right now in Congress who are trying to pass laws on things they don’t necessarily understand. And because of that, you see regulations that don’t really make sense.”

“Cryptocurrency should not be a partisan issue. It’s too big for that,” he added.

West announced last month on Oct. 12 that he would be running against Loretta Smith and Derry Jackson in the Democratic primary scheduled for May 17, 2022, for Oregon’s 6th Congressional District.

If elected, West said he would “fight for an amendment to another bill to undo the work that’s been consigned right now.”

In 2020, West entered the ETH Online Hackathon, and his team won the Yearn.finance award for its HEGIC token. He’s been a strategist at Yearn.finance ever since, working part-time during his off-hours while working full-time as an engineer at Intel. He has recently taken a break from Yearn to launch his campaign.

 

Updated: 11-17-2021

How Taxing Crypto Got Changed by Biden’s Infrastructure Law

Embedded in the infrastructure spending package signed into law by U.S. President Joe Biden was language increasing the tax reporting requirements for cryptocurrency transactions.

That change was heavily opposed by the digital currency industry, which has in its corner a bipartisan group of senators that still hopes to amend the law.

Regardless, more struggles are ahead as Washington grapples with how Bitcoin and other cryptocurrencies should be regulated and taxed.

1. What did the law change?

Starting in 2023, cryptocurrency brokers such as Coinbase will be required to record transactions, tracking them for customers and the IRS, similar to the way stock and bond brokers currently do via tax form 1099-B. They’ll have to disclose the names, addresses and phone numbers of their customers, the gross proceeds from sales and any capital gains or losses. Also, businesses that receive payments of $10,000 or more in crypto must report the identity of the sender to the government, mirroring a similar anti-money laundering rule for cash transactions of that amount.

2. What does this mean for taxpayers?

Potentially, not much. The Internal Revenue Service already treated virtual currencies as property, so taxes are owed when it is sold or exchanged, similar to a stock or bond. (If the asset is sold for less than the original purchase price, it creates a capital loss that can offset other gains.) Similarly, someone paid in cryptocurrency owes income taxes it. And the IRS had already started cracking down on people not reporting their crypto transactions. It recently added a question to the individual tax return, Form 1040, prompting people to report any receipts, sales or exchanges of virtual currencies.

3. What’s the point of requiring more reporting?

It’s supposed to bring in more tax revenue — about $28 billion over a decade, according to the Joint Committee on Taxation. It’s meant to address concerns about cryptocurrency transactions not being taxed because they occur outside the IRS’s view.

4. What’s controversial about the new requirements?

Crypto advocates say the language defining a crypto broker is far too broad, because it ropes in any entity that provides a service “effectuating” the transfer of digital assets. That language, they say, could mean that crypto miners — who provide the massive computing power needed to validate transactions — and software developers might be expected to report information that they can’t even access. Senator Cynthia Lummis, a Wyoming Republican, says she’s concerned this could stifle innovation.

5. How is Congress proposing to change the law?

Lummis and Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, have offered a bill that would narrow the definition of broker significantly. It would clarify that developers of blockchain technology (which enables verifying and recording transactions) and crypto wallet programs would not have to report transactions to the IRS. Senator Ted Cruz, a Texas Republican, has a bill that would repeal the crypto section from the infrastructure law entirely. These standalone bills come after several unsuccessful attempts to amend the legislation while it was being debated in the Senate.

 

Updated: 11-18-2021

US Lawmakers Introduce Bill To ‘Fix’ Crypto Reporting Requirement From Infrastructure Law

The bill proposes pushing back the mandated reporting requirements to 2026 as well as changing the definition of broker.

A bipartisan group of United States lawmakers has introduced legislation to change the tax reporting requirements that will go into effect due to the recently signed infrastructure bill.

House Representatives Patrick McHenry and Tim Ryan introduced the Keep Innovation in America Act, which would change the definition of a broker as defined in HR 3684, the bipartisan infrastructure bill signed into law by President Joe Biden on Monday.

The bill proposes pushing back the mandated reporting requirements — which includes that digital asset transactions worth more than $10,000 must be declared to the Internal Revenue Service — from 2024 to 2026.

In addition, the bill would exempt certain taxpayers from reporting digital asset transactions in cases where they have no reason to know information from wallet holders that would otherwise be required.

According to the bill, “miners and validators, hardware and software developers, and protocol developers” are not brokers.

“Consistent and accurate reporting on digital asset transactions is necessary,” states the Keep Innovation in America Act. “Congress must work to bring legal and regulatory certainty to the digital asset industry. Clear rules of the road fosters technology and innovation.”

McHenry Added:

“[The law] includes digital asset reporting requirements that threaten to push innovators and entrepreneurs overseas. […] We can fix these poorly constructed standards and ensure they are compatible with how this new technology actually works.”

The proposed legislation already has the support of Representatives Kevin Brady, Ro Khanna, Tom Emmer, Eric Swalwell, Warren Davidson, Darren Soto, Anthony Gonzalez and Ted Budd, in addition to crypto advocacy groups including Coin Center and the Blockchain Association.

However, certain senators have been attempting to create their own legislative path to amend the crypto language in the infrastructure law, with a proposal from Ron Wyden and Cynthia Lummis, as well as a separate bill from Ted Cruz, introduced this week.

The introduction of the Keep Innovation in America Act follows a group of Democratic lawmakers signing their names to a Tuesday letter for House Speaker Nancy Pelosi. The letter similarly urges revisions to the definition of a broker in the infrastructure law, raising concerns over the effect on the U.S. market and how the country will keep up with technological innovation.

On Wednesday, a bipartisan group of lawmakers met at a hearing of the Joint Economic Committee to discuss the role of digital assets in government. Tim Massad, former chair of the Commodity Futures Trading Commission, said at the gathering that the U.S. could introduce a central bank digital currency as one possible solution for improving the country’s payments systems.

 

Lawmakers Push Back On Crypto Provisions In Infrastructure Bill

The latest proposal from a group of House Democrats seeks to change how updates to the tax code affect crypto entities “who do not engage in brokerage services.”

Lawmakers from both sides of the aisle are fighting back against changes to tax reporting rules for crypto brokers and transactions over $10,000 in the newly passed infrastructure bill.

Ten United States Democratic Congresspeople led by Darren Soto called for revisions to the definition of a “broker” in the infrastructure bill that was passed into law on Monday.

The group issued an open letter, signed by Soto along with Representatives Ro Khanna, Stacey E. Plaskatt, Eric Swalwell, Tim Ryan, Susan Wild, Marc Veasy, Jake Auchincloss, Al Lawson and Charlie Crist, calling for updates to section 6045(c)(1) in the tax code under the Bipartisan Infrastructure Framework (BIF).

Experts warned that the contentious new rule could see miners, validators and wallet developers considered as brokers for tax purposes. The letter calls on House Speaker Nancy Pelosi to exclude this group on the grounds that it does not engage in brokerage services.

The letter also addresses concerns over negative market effects and how the U.S. will sustain its rate of technological innovation if the regulations remain unchanged.

“As it is written today, however, the BIF would increase uncertainty in the cryptocurrency industry, pick winners and losers, and thwart Internal Revenue Service (IRS) efforts to accurately tax cryptocurrencies, all while eroding our country’s competitive edge against other countries on the digital asset marketplace.”

Senators are also pushing to amend the tax reporting requirements in the BIF. As reported by Bloomberg, senators Ron Wyden and Cynthia Lummis submitted a bill proposal that they say protects American innovation, ensures Americans pay the taxes they owe, and “do not apply to individuals developing blockchain technology and wallets.”

Senator Ted Cruz also introduced legislation on Tuesday to amend the tax code. He calls the new reporting rules a “devastating attack” on the cryptocurrency industry.

His concerns echo some of those from the Democratic House Representatives that the current provision will stifle American innovation, and “endanger the privacy of many Americans.”

Senators as a whole are only now beginning to understand with greater depth how the cryptocurrency industry works. The U.S. Congress Joint Economic Committee held a Wednesday hearing titled “Demystifying Crypto: Digital Assets and the Role of Government.” At this hearing, they discussed the complicated tax entities that should govern centralized exchanges and agreed that privacy and security are top issues.

 

Updated: 1-25-2022

Tucked Inside Biden Infrastructure Bill: Unconstitutional Crypto Surveillance

Before U.S. President Joe Biden signed the Infrastructure Investment and Jobs Act into law in November, many groups spoke out against a provision that broadens the tax code’s definition of “broker.”

But there is another hidden cryptocurrency provision in this new law that amends part of the tax code in a way that will greatly expand financial surveillance, criminalize certain cryptocurrency transactions and, in my view, violate the Fourth Amendment of the U.S. Constitution.

This provision alters Section 6050i of the tax code, which requires businesses that receive more than $10,000 in cash to collect identity details of the person paying in cash and report the transaction to the government. Failure to comply can be a felony punishable by up to five years in prison.

The Infrastructure Investment and Jobs Act expanded 6050i to include anyone who, in the course of conducting business, receives over $10,000 in digital assets.

Currently, the U.S. government collects information from cryptocurrency exchanges and other institutions that serve as the on-ramps and off-ramps where people buy, sell, exchange and store cryptocurrency. The updated law will impose reporting requirements on many other participants in the cryptocurrency ecosystem – from developers to traders to miners to end users.

These participants will be required to collect sensitive identity details of counterparties, securely handle that sensitive information and turn it over to the government – or potentially face criminal penalties.

This law will greatly expand the government’s warrantless surveillance of sensitive financial information, including for transactions under $10,000 – despite the fact the law says it pertains only to transactions above that threshold.

That’s because of the nature of public blockchains: If the government knows the identity associated with a cryptocurrency wallet, then it knows the identity behind all transactions for that wallet, even when those transactions are far below $10,000.

This law violates the Fourth Amendment of the U.S. Constitution. The Fourth Amendment requires law enforcement to get a warrant supported by probable cause before conducting a search or seizure.

Yet, under the Bank Secrecy Act, the government engages in mass surveillance of bank customers without a warrant.

The government does this under the auspices of the third-party doctrine, which is the idea that people do not have a reasonable expectation of privacy in the data they share with a third party like a bank.

In conducting financial surveillance, the government relies on the U.S. Supreme Court’s 1976 decision in U.S. v. Miller that the Bank Secrecy Act (as it was implemented at the time) did not violate the Fourth Amendment because of the third-party doctrine.

I believe the Supreme Court will come to a different decision if there is a constitutional challenge to the new section 6050i, or, as I have repeatedly argued, any challenge to the mass surveillance rampant in today’s financial system.

The Supreme Court justice who authored Miller wrote in another case, Burrows v. Superior Court, that “financial transactions can reveal much about a person’s activities, associations and beliefs” and “[a]t some point, governmental intrusion upon these areas would implicate legitimate expectations of privacy.” That was written in the 1970s.

Furthermore, the Miller case was an “as-applied” challenge to the Bank Secrecy Act – meaning that, in making its decision, the Supreme Court was narrowly considering only how the Bank Secrecy Act was implemented at that time, not whether the entire statute is unconstitutional in light of how it could be implemented.

Since then, the government has greatly expanded its financial surveillance. And the updated section 6050i goes even beyond the U.S. government’s other warrantless financial surveillance.

In addition, since Miller, the Supreme Court has issued multiple strong pro-privacy decisions, chipping away at the third-party doctrine in the digital world.

For example, the Supreme Court held in Carpenter v. U.S. that law enforcement must get a warrant to obtain cell phone location information, even when that information is held by third parties (i.e., cell phone companies).

There, the Supreme Court said that “[e]xpectations of privacy in this age of digital data do not fit neatly into existing precedents.” The Court noted that the digital records at issue in that case provided “an all-encompassing record of the holder’s whereabouts” and “an intimate window into a person’s life, revealing not only particular movements, but through them [their] familial, political, professional, religious and sexual associations.”

Similarly, the information that could be gleaned from bank data in the 1970s is a world away from the intimate window into a person’s life provided by financial data today. Digital financial transactions are deeply personal and revealing.

Like the location records in Carpenter, financial records reveal familial, political, professional, religious and sexual associations, providing insight into the organizations you support, the people you send money to, the products and services you buy, the books you read. Indeed, today’s financial records often reveal your location, and location data is exactly what was at issue in Carpenter.

The Fourth Amendment balances the legitimate interests of law enforcement with the civil liberties of citizens by requiring the government to get a warrant before conducting searches. Requiring people to turn over information about financial transactions to the government by default, with no warrant or probable cause, is unconstitutional mass surveillance.

Financial privacy is not bad or illegal. To the contrary, it is essential for civil liberties. I often think of the striking photos of protesters from the Hong Kong protests waiting in long lines at subway stations.

In the pictures, protestors are waiting to purchase their tickets with cash so their electronic purchases don’t place them at the scene of the protest.

To me, these photos underscore the importance of financial privacy for civil liberties, and why, in the context of financial transactions, we must protect our Fourth Amendment rights.

 

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